After a small one month battle with an offer at $17 for share last October, Oracle Corporation and BEA Systems announced today they have entered into a definitive agreement under which Oracle will acquire all outstanding shares of BEA for $19.375 per share in cash. The offer is valued at approximately $8.5 billion, or $7.2 billion net of BEA’s cash on hand of $1.3 billion. It seems that the will of certain BEA investors to make a substantial gain and the fact that Oracle proposed a better price allowed finally the deal to be concluded, even if BEA board previously asked for $21. The current stock market situation is different from last October and this could be financially a good deal for BEA shareholders, also because it seems that nobody was ready to pay more than the previous Oracle offer.
What benefits could Oracle achieve with this deal? Technically, it will acquire Web server and transaction monitoring software expertise. Even if Oracle has already its own set of products competing with BEA Systems, its technical reputation is a little bit lower in this area. Combined market share put Oracle in the number one position in the middleware market. However, Oracle will have to play it tactfully to keep the core technical team behind BEA products. Financially, the acquisition could provide additional revenues, a strategy Oracle has followed these past years with PeopleSoft and other targets. In this area, Oracle seems to transform itself in a Computer Associates-like company, more driven by financial interests than technical capabilities.
In the winners side of this situation, we could certainly find IBM and Red Hat’s JBoss, as uncertainty about the future of a product is always a strong topic that buyers will consider when the look for their Web server. Also some companies do not like to have too much of their software infrastructure locked to a single supplier. Losers will be BEA Systems customers, because a change of ownership always rise questions on the future roadmap of the products and the availability of knowledgeable people to provide some support. This is mainly true for BEA’s Tuxedo transaction processing product, an old software that doesn’t seem to fit into Oracle product portfolio.