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BEA Falls to Oracle After All

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What Oracle wants Oracle gets.

It said this morning that it had reached a compromise price with BEA and that the acquisition would go through after all, having been resisted by BEA, demanded by the dangerous Carl Icahn, BEA’s biggest stockholder, and walked away from by Oracle.

Oracle is going to pay $19.375 a share, less than the $21 that BEA wanted but more than the $17 Oracle put on the table back in October.

That works out to $8.5 billion, less the $1.3 billion that BEA has in the bank, as Oracle pointed out, for a grand total of $7.2 billion cash to be paid for by a combination of cash on hand and a short-term loan.

Oracle has $8.4 billion in the bank so the financing’s no problem.

Its original bid valued BEA at roughly $6.66 billion.

The conference call this morning added nothing in the way of back story or color. Oracle would take no questions.

BEA CEO and co-founder Alfred Chung said the BEA board – which Icahn accused of rejecting Oracle’s initial offer to entrench itself – “unanimously” decided Oracle’s sweetened deal was the “best way to maximize shareholder value.”

BEA looked for alternatives and found none. The sweetener is a significant premium to the $13 or $14 range BEA was trading in when Oracle first entered the scene and a 24% premium to BEA’s closing price Tuesday of $15.58.

Icahn issued a statement saying, “This transaction is an excellent example of the great results that can be achieved for all constituencies when the shareholder activist is able to work cooperatively with management.”

Evidently him and his 13% stake in BEA played a role in persuading BEA to accept less than it wanted. He had threatened a proxy fight.

The deal is expected to close by mid-year and Oracle projects that BEA will add one to two cents to its non-GAAP earnings in the first full-year after the close.

It is still unclear exactly how BEA will be integrated but Oracle CEO Larry Ellison described it as a “third major sales force.”

Ellison declared the deal a “great day for the Java community.”

Scale, he said, was critical to middleware and he cast the Oracle-BEA combination as a stronger Java/SOA alternative to Microsoft and .NET.

BEA’s widgetry is supposed to “significantly enhance and extend Oracle’s Fusion middleware,” bringing in complementary messaging and transaction processing as well as increased vertical business such as BEA’s telco play and deeper penetration in regions like China.

Ellison sees it as strengthening his position as a strategic software vendor up against “IBM, SAP, Sun, Microsoft and open source.”

Ironically, Oracle’s on-again off-again best friend Sun this morning bought MySQL for $1 billion, positioning Sun as a direct competitor to Oracle’s core database business.

Even though MySQL is not the one-for-one Oracle replacement that, say, EnterpriseDB is, it will be the first time an open source database has had the leverage of a major industry player to use as a springboard.

 

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