Oracle Wins Over BEA, Agrees to $8.5 Billion Purchase

Oracle Corp., the world's third- biggest software maker, agreed to buy BEA Systems Inc. for $8.5 billion in cash after a three-month fight, capitulating to the board's demands for a higher price.

BEA investors will receive $19.38 a share, 24 percent more than yesterday's close, Oracle said today in a statement. BEA, the maker of software that lets programs share information, rejected an unsolicited bid of $17 from the company in October and asked for $21, which Oracle called impossibly high.

The purchase, Oracle's largest in three years, brings Chief Executive Officer Larry Ellison's acquisitions to more than $33 billion and marks a reversal from last month, when Oracle said a friendly deal couldn't be done with the current board. Ellison is counting on BEA will help him maintain the pace of sales amid slowing growth in technology spending.

It is a lot more than what they initially offered, said Edward Lewis, a partner at Atlantic Equities LLP in London, in an interview. BEA managing to flush out a higher offer from Oracle is obviously proof that their strategy worked.

The deal is a victory for billionaire investor activist Carl Icahn, who pressed BEA's board to agree to a takeover. Icahn, the company's biggest shareholder with about a 13 percent stake, had sued in Delaware demanding that shareholders gain the right to vote in a sale.

Icahn supports Redwood City, California-based Oracle's offer, according to a statement released today. He didn't immediately return a call seeking further comment.

Oracle fell 4 cents to $21.27 at 10:54 a.m. New York time in trading on the Nasdaq Stock Market. BEA, based in San Jose, California, rose $2.97, or 19 percent, to $18.55.

Earnings Boost

Buying BEA, led by co-founder Alfred Chuang, will help Oracle challenge International Business Machines Corp. for the market lead in middleware, which helps different types of programs share information. Ellison said in October the company aims to beat IBM in middleware sales.

Middleware requires a highly specialized, technically sophisticated sales force, Ellison said today in a conference call. It's difficult to obtain that kind of talent.

The transaction should add as much as 2 cents to per-share profit, excluding some items, in the first full year after its completion, Oracle said. The company expects to finish the purchase by mid-year. Goldman Sachs Group Inc. advised BEA on the deal.

In November, BEA corrected 10 years of results to account for backdated options grants and severance contracts. The restatements allowed the company to file its first full quarterly report since August 2006. BEA earlier said investors would see it was worth more than the Oracle offer once the full report came out.

Other Purchases

Oracle's last major acquisition, the $3.3 billion takeover of Hyperion Solutions Corp., was almost a year ago, so its sales growth was at a risk of slowing, Atlantic's Lewis said.

This purchase allows them to make the next couple of quarters and to fuel their growth on BEA's very strong installed-customer-base maintenance revenues, said Richard Williams, an analyst at Cross Research in Livingston, New Jersey.

Researcher Gartner Inc. predicted in October that global technology spending will climb 5.5 percent this year, compared with a projected 8 percent increase for 2007, as companies tighten budgets to cope with slowing economic growth.

Oracle, traditionally a provider of database software before its expansion spree, trails Microsoft Corp. and IBM in worldwide software sales. Its acquisitions, starting with the $10.3 billion hostile takeover of PeopleSoft Inc. in January 2005, helped Ellison offer applications in new markets and more programs for organizing documents and analyzing data.