Greed Is Good

Oracle Offer Could Spark Bidding War for BEA Systems

It didn’t take long for yet another M&A shoe to drop. While the software world was still digesting SAP’s $6.7 billion friendly offer to buy Business Objects, Oracle this morning put up $6.66 billion to buy BEA Systems.

Oracle has flirted with the idea of taking over BEA for years, but the smaller company has never shown much interest in the marriage. It’s not at all clear that BEA management will accept the offer. But with billionaire financier and corporate activist Carl Icahn now holding 13% or so the company’s outstanding shares, there’s suddenly an enormous amount of pressure to capitulate. (note: shortly after I posted, BEA rejected the offer saying, it “significantly undervalues”

the company.)

It’s a rich offer. Oracle’s said it will pay $17 a share, a 25% premium to BEA’s closing price Thursday of $13.62. Investors quickly bid the stock up well past the offering price, apparently thinking the offer could trigger a bidding for BEA, a leading seller of middleware.

Indeed, Oracle stole Retek out from under SAP’s nose in 2005, winning a bidding war. Wall Street is speculating that SAP might attempt to turn the tables, or perhaps, Hewlett-Packard, which has significantly beefed up its software division, could go for it. Cowen analyst Peter Goldmacher summed it up nicely, headlining his quick note to investors “The Game is Afoot.” He then wrote: Oracle doesn’t need BEA, but it’s better if SAP doesn’t have it.”

Well, that’s a lot of money for bragging rights, but in this league, you can’t rule it out.

In any case, Icahn will clean up. Depending on the price he paid for shares, he could make a profit of well over $100 million. This could be tough on BEA employees (as could the takeover of Business Objects) but as far as Wall Street is concerned, “Greed is Good.”