In a letter to BEA late Tuesday night, Oracle President Charles Phillips rejected, with barely restrained incredulity, BEA’s proposed acquisition price of $21 per share. “We believe that your counterproposal at $21 per share price is an impossibly high price for Oracle or any other potential acquirer,” Phillips wrote. “At $21 per share, the BEA board is asking for an 80% premium to BEA’s stock price before the appearance of activist shareholders who are pushing the BEA board to sell the company. The $21 per share price is a multiple of nearly 11 times BEA’s last 12 months reported maintenance revenues. Nobody would seriously consider paying that kind of multiple for a software company with shrinking new license sales. Furthermore, no other company has come forward to bid for BEA. Our proposal at $17 per share is the only offer. Apparently no other companies think that BEA is worth $17 per share, let alone $21 per share. Accordingly, we repeat our proposal to purchase BEA at $17 per share, a price that we are unwilling to increase. We do not believe BEA is worth more than that and we have an obligation to our own shareholders to exercise price discipline when evaluating acquisition opportunities.”

“Nobody would seriously consider paying that kind of multiple.” Suffice to say, that little barb did not go over well at BEA, which rejected Oracle’s $6.7 billion takeover offer a third time this morning. “As fiduciaries, our board cannot endorse a proposal that it has concluded significantly undervalues BEA,” William Klein, BEA’s vice president of business planning and development, said in a letter to Phillips. “We therefore assume that your proposal will expire on Oct. 28.”

You have to take a broader view and realize this is an industry like any other–telecom, railroads. They went through consolidation. Why shouldn’t the computer industry be any different? This shouldn’t have been a surprise to anybody. But it seemed to be, and a lot of people thought I was nuts when I said these things. And that’s why we’re out there alone as a consolidator.”

–Oracle CEO Larry Ellison, Forbes magazine, July 2006

Will BEA Systems go down in history as the place where the Ellisonian consolidation wave sweeping the business-software market finally broke and rolled back? Not likely, but at the moment it’s doing a passable job of holding it back. This week the company rejected Oracle’s $17-per-share, unsolicited takeover offer for the second time, refusing even to meet with the company to discuss it.

And so Oracle is turning up the heat a bit. In a letter to BEA’s board, Oracle President Charles Phillips said it will walk away from its proposal if BEA doesn’t accept it or put it before shareholders for a vote.

Dear Members of the Board of Directors:

“Last night we were told by Bill Klein, Vice President-Business Planning and Development (speaking on behalf of the board), that BEA’s board again rejected our proposed price of $17 per share in cash. The board has refused to meet with us since we made our Oct. 9 proposal.
Oracle urges the BEA board of directors to let BEA’s shareholders decide: sign an acquisition agreement with Oracle and allow the shareholders to vote. Oracle believes that our $17 per share price is generous and there are no offers for BEA above $17 per share. $17 per share represents:

• a 21% premium to BEA’s closing price of $14.05 on the date before we
  made our proposal;

• a 31.5% premium to $12.93, the 52-week average before our proposal;
• a 44% premium to $11.77, BEA’s stock price on the date immediately
  prior to the date that activist shareholders disclosed their position
  in BEA; and

• a price higher than BEA’s five-year high before our proposal.

“Oracle has no interest in a long, drawn-out process to acquire BEA. If the BEA board refuses to execute an acquisition agreement and refuses to let their shareholders vote, then our $17-per-share proposal to acquire BEA will expire at 5 p.m. PDT, on Sunday, Oct. 28.

Sincerely,

ORACLE CORPORATION

Interesting move, eh? More so given its impact on BEA’s share price today. Prior to Oracle’s offer, BEA was trading at $14.05 per share. After it, the stock hit $18.58. This morning, it’s trading at $17.98–down 3.28% on fears that Oracle will rescind its offer.