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Oracle offers $6.7 billion for BEA Systems

08:17 AM PDT on Friday, October 12, 2007

Associated Press

SAN FRANCISCO - Pouncing on an opportunity to add another weapon in an increasingly bitter business software battle, Oracle Corp. has offered to buy struggling rival BEA Systems Inc. for $6.7 billion in its latest shot aimed at another industry leader, SAP AG.

Oracle unveiled its $17-per-share cash offer Friday, less than a month after activist investor Carl Icahn announced he had bought a large stake in BEA in hopes of forcing a sale of the troubled software maker.

The billionaire now owns a 13.2 percent stake in BEA, giving Oracle a potentially pivotal ally in its latest effort to acquire the maker of so-called middleware — computer coding that is commonly used on the Internet to make applications interact more smoothly with information stored in databases.

Redwood Shores-based Oracle has been stalking San Jose-based BEA for years, but has been consistently rebuffed in its overtures.

But now BEA appears to be backed into the corner.

Besides facing pressure to sell from the tenacious Icahn, BEA also has been dealing with an accounting mess tied to its mishandling of past stock option grants that has prevented it from meeting regulatory deadlines to file its quarterly and annual financial reports. The delinquency has threatened BEA's listing on the Nasdaq Stock Market and contributed to a sharp decline in its shares.

Oracle's offer, representing a 25 percent premium over BEA's closing stock price Thursday, provided an immediate lift. BEA shares soared $4.48, or 33 percent, to $18.10 in morning trading Friday, reflecting investors' expectations that the company will be sold to Oracle or possibly another suitor.

"We look forward to completing a friendly transaction as soon as possible," Oracle President Charles Phillips said.

A call to BEA for comment early Friday wasn't immediately returned.

Oracle has shown it won't take no for an answer in the past. In 2003, Oracle launched a hostile takeover bid for PeopleSoft Inc. and then spent the next 18 months overcoming its rival's staunch resistance before completing the $11.1 billion acquisition.

That began the biggest shopping spree in industry history as part of a strategy mapped out by Oracle's flamboyant chief executive, Larry Ellison. Convinced that more business software customers wanted a one-stop shop to buy all their technology, Ellison set out to create one by devouring Oracle's smaller rivals.

Oracle has already spent about $25 billion on 30 acquisitions during the past three years in an expansion aimed at surpassing Germany-based SAP in the sales of business applications software, which automates a wide range of administrative tasks.

SAP initially derided Oracle's acquisition strategy as misguided, but earlier this week joined the fray by agreeing to pay $7 billion for Business Objects SA, a maker of software that helps companies analyze their internal deal. That deal countered Oracle's $3.3 billion purchase of Hyperion Solutions earlier this year.

In another sign that SAP is taking the Oracle threat seriously, the company has acknowledged that one of its subsidiaries infiltrated Oracle's computers to help customers maintain their software. Oracle is suing SAP in federal court, alleging its rival's behavior broke laws protecting intellectual property.

Although SAP remains the largest business software maker, Oracle's expansion has been paying off handsomely for shareholders. The company earned a record $4.3 billion in its last fiscal year and its stock price has climbed by more than 60 percent since 2004, creating more than $40 billion in shareholder wealth.

Oracle shares fell a penny to $22.44 in morning trading Friday.