Special Report: Oracle v BEA - here we go again!

Oracle is on the acquisition trail once more. This time, application server firm BEA Systems is in its sights.

By Stuart Lauchlan, news and analysis editor

Here we go again! Another Oracle hostile takeover bid; another target company in the line of fire; more protests from the chosen victim that it will fight off its predator. It’s PeopleSoft all over again!

To recap, Oracle last week finally made a bid for application server firm BEA Systems, long rumoured to be a likely takeover candidate for the acquisitive database firm. It made a generous offer by anyone’s standards: $6.7bn for the firm - a 25 percent premium over BEA's 12 October closing price.

But the bid was rejected by the BEA board of directors, putting it on a war footing with Oracle and opening itself up to counter-bids from other firms now that it is presumed to be in play.

"Both Oracle and BEA customers will benefit from this increase in engineering investment as they migrate to modern SOA technologies." Charles Phillips, co-president, Oracle

This has been a long time coming. Three years ago, an internal document from the software group surfaced in court. It listed eight rivals Oracle wanted to acquire - one of them was BEA.

But BEA chief executive Alfred Chuang hasn't been interested in entertaining Oracle’s advances to date. The balance of things may have shifted however with the arrival of shareholder activist Carl Icahn, who pushed for a sale. Icahn has made public a letter to Chuang in which he describes himself "pleased" as BEA's "largest stockholder" with Oracle's offer - although he keep his options open by adding that he thinks BEA is worth even more. He goes on to urge Chuang to leverge the interest and momentum caused by the Oracle bid to put BEA out for sale to the highest credible bidder.

Over in the Oracle camp, the so-called friendly offer has quickly turned hostile. In a repeat of the tactics used during the long battle for PeopleSoft, Oracle released a letter from its president Charles Phillips to Chuang suggesting Oracle believed it had a deal and had expected to meet with BEA management Friday morning to reach an agreement by Monday. Phillips described the proposal as "the culmination of repeated conversations with BEA's management over the last several years."

He said: "We have made a serious proposal including a substantial premium for BEA. Both Oracle and BEA customers will benefit from this increase in engineering investment as they migrate to modern SOA technologies."

A lot at stake

There’s a lot at stake. An Oracle bolstered by the acquisition of BEA would be propelled into the first tier of middleware manufacturers and would have a top-to-bottom suite of business-software products because it already has a big share of the database market and a growing suite of applications.

Adding BEA's WebLogic platform and the tools and portal technology associated with it would bolster Oracle's own Fusion middleware products for SOA. With WebLogic in the hands of Oracle's aggressive sales organisation, it might be in the position to challenge IBM's WebSphere for SOA market dominance.

BEA vice president Bill Klein said that there never had been an agreement to meet and commence a "process" that could have led to a deal by today, as Phillips claimed. "We did not agree to meet this morning to commence a process, and we did not agree to your proposal that the process result in a definitive agreement by Monday," responded Klein.

"We did not say there is 'no process' with Oracle that would result in a friendly deal. We did say that BEA is worth substantially more to Oracle, to others and, importantly, to BEA shareholders than is reflected by Oracle's $17 price. The trading market today validates our judgment. We did say, and we will repeat here, that we will not engage in any process that would be open-ended or harmful to our shareholders' interest."

There remains the possibilty of a ‘white knight’ bidder for BEA, possibly HP or IBM. But one rumoured contender has ruled itself out in the shape of SAP. CEO Henning Kagermann told The Financial Times he wouldn't bid for BEA because of its market "overlap with SAP." He said: “We believe in complementary deals. We're not interested in a classic consolidating of markets."

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