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January 16, 2008

Oracle Set to Acquire BEA Systems

By Susan J. Campbell, TMCnet Contributing Editor


Oracle (News - Alert) Corporation and BEA Systems have announced they have entered into a definitive agreement, providing for Oracle’s acquisition of all outstanding shares of BEA (News - Alert) for $19.75 per share in cash. The offer is presented at a value of roughly $8.5 billion, or $7.2 billion net of BEA’s cash on hand of $1.3 billion.
 
According to Oracle president and CFO Safra Catz, this deal is expected to be accretive to Oracle’s earning by at least 1-2 cents on a non-GAAP basis in its first full year after closing.
 
“The addition of BEA products and technology will significantly enhance and extend Oracle’s Fusion middleware software suite,” said Oracle CEO Larry Ellison (News - Alert). “Oracle Fusion middleware has an open “hot-pluggable” architecture that allows customers the option of coupling BEA’s WebLogic Java Server to virtually all the components of the Fusion software suite. That’s just one example of how customers can choose among Oracle and BEA middleware products, knowing that those products will gracefully interoperate and be supported for years to come.”
 
BEA’s Board of Directors has spent several months conferring with financial and legal counsel to ensure it can appropriately maximize stockholder value. The agreement to sell the company to Oracle is the culmination of those discussions.
 
“I am confident our innovative products, talented employees and worldwide customer base will be key contributors to the success of the combined company over the long term,” said Alfred Chuang, BEA’s chairman and CEO. “We look forward to working with Oracle toward a successful completion of the transaction.”
 
The merger of the two businesses, in fact, is something joint customers of Oracle and BEA have been hinting at for more than three years.
 
“BEA is a pioneer in middleware, and this combination recognizes the innovation and customer success the company has achieved,” said Oracle president Charles Phillips. This transaction will accelerate the adoption of Java-based middleware technologies and SOA; advance innovation in enterprise applications infrastructure software; extend our strategic relationships with customers and partners; and increase our penetration in key regions like China.”
 
This deal is expected to be particularly beneficial for Oracle, which can gain best-of-breed functionality in the middle layer of the Oracle Fusion platform. Bart Narter, senior analyst with Celent, a Boston-based financial research and consulting firm, highlighted that Oracle has been lagging in this area. Yet, where Oracle can’t build, they can buy. 

“Oracle did indeed come through as the most appropriate buyer for BEA,” Narter suggested. “This purchase enables the company to go head to head with other companies such as IBM (News - Alert) and SAP in offering SOA infrastructures to the largest enterprises.”

Narter added that the move makes sense for Oracle, noting that BEA has proven successful as a standalone business, but will add substantially to the Oracle product set and increase its competitive presence.
 
The transaction was unanimously approved by the Board of Directors of BEA Systems. The anticipated close of the transaction, which is subject to BEA stockholder approval, is mid-2008.

Oracle is definitely known for its ability to build a strong portfolio and it is likely that this latest move will add value where the company has been lacking in certain competitive situations. As such, Oracle will continue its work towards earning the reputation of that formidable competitor that it has been striving to attain.
 
Susan J. Campbell is a contributing editor for TMC (News - Alert) and has also written for eastbiz.com. To see more of her articles, please visit her columnist page.
 
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