Oracle offers $6.7bn for BEA

Software giant Oracle has made an offer for BEA Systems of $17 per share in cash, effectively valuing the company at $6.7bn.

The offer represents a 25 per cent premium over Thursday's closing stock price for BEA.

"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," said Charles Phillips, president of Oracle.

"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."

Analysts have said that although the acquisition is inevitable the offer is an expensive one.

"BEA was bound to be acquired sooner or later and Oracle has always been one of the best positioned to do so," commented Laurent Lachal, senior analyst at Ovum.

"The timing of the acquisition is interesting. Oracle has waited to be in a position of strength before acquiring it. It has spent the past three years positioning itself aggressively against BEA on the basis of the integration between its database and application server, and an aggressive pricing strategy. "

"The decision to wait is costly. Had it acquired in 2004, as it was considering, it would have picked up BEA's stock at its lowest, down at nearly $6 a share. It is now more than twice that amount."

Phillips added that Oracle intends "to protect the investment that customers have made in BEA's products for years to come", a statement that analysts believe wil be upheld.

"Oracle's claim that it will protect the investment may be one of the least contentious issues here. For a start, it's not in Oracle's interest to get customers to defect. But also, it can point to its record with PeopleSoft, where after a very contentious take-over that many customers opposed, Oracle has managed to hold onto and even in some cases enhance the user base for PeopleSoft products. Obviously, bringing the offer into the open does put a lot of pressure on BEA's board. We'll have to wait and see what their reaction will be," concluded Lachal.

The new follows on from SAP's recent acquisition of Business Objects, and if all goes according to plan Oracle will have upped its position against IBM, Microsoft and SAP in the service oriented architecture arena.