Update: Oracle calls BEA's selling price 'impossibly high'

But acquisition target retorts that Oracle's offer remains too low

Oracle Corp. yesterday rejected BEA Systems Inc.'s proposed selling price of $21 per share, calling it an "impossibly high" cost for Oracle or any other company to pay.

In a letter to BEA's board, Oracle again urged the San Jose-based software vendor to accept its offer of $17 per share, an amount that Oracle said it is "unwilling to increase."

"The $21 per share price is a multiple of nearly eleven times BEA's last twelve months' reported maintenance revenues," wrote Oracle President Charles Phillips. "Nobody would seriously consider paying that kind of multiple for a software company with shrinking new license sales."

Phillips noted that Oracle was the only company making an offer for BEA. "Apparently no other companies think that BEA is worth $17 per share, let alone $21 per share," he wrote.

In response, BEA on Friday reiterated that it wouldn't accept Oracle's current acquisition bid. BEA also said it would allow an acceptance deadline of 5 p.m. PDT on Sunday that was set by Oracle to pass without taking any action on the offer.

In a statement that was the latest public salvo in the distinctly icy merger talks between the companies, William Klein, BEA's vice president of planning and development, told Phillips that the current offer was "unacceptable."

BEA's proposed per-share price would result in a total price tag of $8.3 billion for the company -- significantly more than Oracle's offer, which works out to $6.7 billion. BEA's stock was trading at about $16.80 per share as of midday Friday.

"As fiduciaries, our board cannot endorse a proposal that it has concluded significantly undervalues BEA," Klein said in the statement. "We therefore assume that your proposal will expire on Oct. 28."

Oracle officials couldn't immediately be reached for comment on BEA's response.

In the letter that Oracle sent to BEA on Thursday, it again urged the acquisition target to put the current offer to a shareholder vote.

Oracle also said that it had an obligation to its own shareholders to "exercise price discipline when evaluating acquisition opportunities." And it reminded BEA of its Sunday deadline for accepting the offer, after which it will "move on" and consider other acquisitions.

Oracle made its surprise bid for BEA on Oct. 12, hoping to strengthen its line of middleware products and grow its customer base. BEA, which had been under pressure from investor Carl Icahn to sell, quickly rejected the offer as too low and yesterday came back with its suggested higher price. Oracle's offer is not in the best interests of BEA shareholders, BEA said.

Copyright © 2007 IDG Communications, Inc.

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