October 23, 2007 / 1:20 PM / 12 years ago

Oracle sets Sunday deadline for BEA bid

BOSTON (Reuters) - BEA Systems Inc BEAS.O shares fell 4 percent on Tuesday on concerns a $6.7 billion takeover bid by Oracle Corp ORCL.O will fall through after both sides refused to budge from their positions.

Oracle President Charles Phillips speaks during a news conference in Mumbai January 10, 2006. Oracle on Tuesday set a Sunday deadline for BEA to accept its $17-per- share offer. REUTERS/Punit Paranjpe

Oracle set a Sunday deadline for BEA to accept its $17-per- share offer, but BEA responded by saying it had no intention of coming to the negotiating table unless Oracle raised its bid.

While BEA is still under pressure from activist shareholder Carl Icahn to find a higher offer, analysts said that was looking increasingly unlikely.

“While a deal is still possible, there is also a chance that it will fall apart altogether,” said Frederic Ruffy, an analyst at California-based options education firm Optionetics.

BEA shares fell 72 cents to $17.87. They had surged 38 percent to $18.82 on the day Oracle made its offer, igniting hopes of a bidding war with International Business Machines Corp (IBM.N), SAP AG (SAPG.DE) and Hewlett-Packard Co (HPQ.N).

None of them have bid for BEA, which sells middleware, or programs that help connect business computer systems. SAP has said it is not interested. HP and IBM have declined comment.

WR Hambrecht & Co analyst Robert Stimson expects Oracle could eventually win out because after Sunday’s deadline passes, BEA’s investment bank, Goldman Sachs, will likely shop the software maker to others.

“But in the end, Oracle comes in and says we can pay the most,” he speculated.

Linda Varoli, vice president of research with Wall Street Access, agreed.

“It may be over in the near term, but it doesn’t mean their interest is over,” she said.

LETTER TO BOARD

Oracle President Charles Phillips said in a letter to BEA’s board released on Tuesday morning that he believed his company’s offer was generous and there would be no other offers above $17 per share — a 21 percent premium to BEA’s closing price the day before the proposal.

“Oracle has no interest in a long, drawn-out process to acquire BEA,” Phillips wrote, urging the BEA board to let shareholders vote on the proposal.

Oracle said its officials might meet with Icahn and other BEA shareholders to discuss their bid.

So far Icahn has not embraced Oracle’s offer. BEA’s biggest shareholder and a vocal critic of the company’s management has said he was pleased by Oracle’s interest, but its price was too low.

Analysts said BEA shares could fall below $17 on Monday if Oracle’s deadline passes without the two sides reaching some sort of compromise.

That boosted trading activity in BEA options as investors sought to use them to hedge positions in the stock.

“A lot of people were buying BEA puts, most likely to protect their long stock positions,” said William Lefkowitz, an options strategist at brokerage firm vFinance Investments in New York.

Oracle’s offer for BEA represents what would be its biggest acquisition since it bought Siebel Systems for about $6 billion in January 2006.

A BEA spokesman declined to say how much Oracle needed to raise its offer to get talks going.

Oracle shares rose 1.18 percent to $21.45.

Additional reporting by Svea Herbst in Boston, Jonathan Keehner and Megan Davies in New York and Doris Frankel in Chicago

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