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Oracle: 'Any fresh BEA bid would be lower'
$17 per share now seems too much, says Larry Ellison...

By Dawn Kawamoto

Published: Friday 16 November 2007

If Oracle renews its bid for rival BEA Systems, it would be at a price below its initial offer of $17 a share, the company has said.

Larry Ellison, Oracle's CEO, said the initial $6.7bn - or $17 per share - offer for BEA seems overpriced these days.

Ellison said: "If we made another offer, the price would be lower, they have done enough things now… and we'll have to see all the data… that clearly, the $17 price seems too high now."

Two weeks ago, BEA's board approved a change-in-control severance plan that covers all full-time employees and part-time employees who work 20 hours or more per week, according to a filing with the US Securities and Exchange Commission.

The plan, which calls for a lump sum payment of three months to one year of severance for employees who are terminated within a year after a merger, could drive up the costs for a potential acquirer.

Oracle had withdrawn its buyout offer late last month, after BEA rejected it, citing a desire for a $21 buyout offer from Oracle, or any third-party, to start negotiations.

Ellison said: "If their goal was to stay independent, they are doing a good job. We were the only buyer then and I think what they will succeed in doing is going from one buyer to none."

Shares of BEA fell three per cent to $16.87, in early-morning trading, after having closed at $17.40 on Wednesday.

Ellison also noted that Oracle's middleware business is growing rapidly on its own.

A BEA acquisition would help Oracle achieve its scale faster, rather than taking the slower process of trying to woo over BEAs customers to its middleware.

Ellison said: "The reasons we wanted BEA had nothing to do with [its] technology. It had everything to do with scaling up."

He added by gaining economies of scale, Oracle could "make a lot of money" and a buyout of BEA at $17 per share would greatly add to its profits.

While BEA holds out for a higher price, it has yet to be seen whether Carl Icahn, BEA's largest shareholder, holds a similar view on the company's valuation estimate.

Two weeks ago, BEA shared its non-public financial information with Icahn in an effort to convince him that Oracle's offer of $17 undervalued the company. Icahn, who initially demanded BEA accept the highest bid it receives and filed a lawsuit to force a BEA shareholder meeting, has remained quiet since reviewing the financials.

Dawn Kawamoto writes for CNET News.com