Oracle has offered to buy BEA Systems Inc., a well-known San Jose, Calif.-based provider of enterprise infrastructure software, for about $6.66 billion.
The database and business applications giant proposed the purchase in a letter sent to BEA's board of directors on Oct. 9. Oracle's offer of $17.00 per share for BEA represents a 25% premium over yesterday's $13.62 closing price.
"We believe our all-cash offer provides the best value for BEA's shareholders and the best home for BEA's employees and customers," Oracle president Charles Phillips said in a statement on Oracle's Web site. "This proposal is the culmination of repeated conversations with BEA's management over the last several years. We look forward to completing a friendly transaction as soon as possible."
If the deal goes through, Oracle says it will be committed to supporting BEA customers for years to come.
"The acquisition of BEA by Oracle will enable an increase in engineering resources that will in turn accelerate the development of our [Fusion Middleware suite]," Phillips wrote. "Both Oracle and BEA customers will benefit from this increase in engineering investment as they migrate to modern SOA technologies."
Oracle has purchased about 30 smaller software firms over the last four years in an effort to steal market share away from rivals SAP and Microsoft.
A $6.66 billion deal for BEA would represent Oracle's biggest acquisition since it acquired CRM giant Siebel Systems Inc. for $6 billion in early 2006. In March, Oracle acquired business intelligence and performance management software vendor Hyperion Corp. for just over $3 billion. Earlier this week, Oracle revealed plans to buy governance, risk and compliance software vendor LogicalApps for an undisclosed sum.
SAP also had big acquisition news this week. The German maker of enterprise resource planning software announced it will buy business intelligence stalwart Business Objects for $6.8 billion.
BEA makes middleware software, which is used to build application platforms. BEA products are also used for customer service operations, software provisioning, transaction processing and securities trading.
Oracle shares edged downward in premarket trading Friday following news of the deal.
Widening the gap
Oracle's purchase of BEA Systems would widen the gap between Oracle and SAP on the middleware front -- an area where Oracle is stronger -- and give Oracle an entry point to high-end IT shops that have built their own custom applications, said Ray Wang, a principal business applications analyst with Cambridge, Mass.-based Forrester Research Inc.
The deal would also put Oracle in a stronger position to do business with financial services and telecommunications firms -- two market segments where BEA has a strong foothold, he added.
"This is a hostile bid for the last remaining independent, major middleware platform provider," Wang said. "Forrester believes these middleware platforms are the focus of future ecosystems and are critical to future growth for [Oracle and SAP]. Those who have the best tools may win the largest share of the IT budget and partner ecosystem."
Wang said that SAP would stand to benefit more from a deal for BEA than Oracle.
"Many of the system integrators and customers we've talked to agree that the NetWeaver tool is one of the least robust among the app servers out there, despite the broad base that SAP has in the apps space," he said.
Furthermore, Oracle's acquisiton of BEA Systems would "level the playing field" between Oracle and other middleware providers, including IBM, Tibco and webMethods, according to Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm.
"With this purchase, which comes just days after SAP's bid for Business Objects, Oracle can now go head to head with other companies such as IBM and SAP in offering SOA infrastructures to the largest enterprises," Narter wrote in an email. "While BEA has proven viable as a stand alone company, its acquisition will add new and competitive products to the Oracle sales catalog, which will surely mean increased business."
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