Oracle Sees No Friendly Deal With BEA

Shares of BEA Systems (BEAS) are down 1.4% in pre-market trading after Oracle (ORCL) CFO Safra Catz said on Oracle's FQ2 earnings call Wednesday night he sees little chance the company's now-expired $17/share bid for BEA will result in a deal."Over the last few weeks, we’ve been in contact with their bankers and lawyers and as a result of those discussions we’ve concluded that no friendly deal can be done with the current BEA board at a price and term acceptable to Oracle," Catz said. Questioned by Credit Suisse analyst Jason Maynard, "Help me out there -- with the $17 proposal, I don’t quite understand why there can’t be a friendly transaction with the current board. What’s the backdrop on that situation?" Catz responded, "You know, Jason, you’d really have to ask them. We’ve been out there with our offer and it does not seem like that is possible with this current board." BEA's overall option implied volatility of 54 is above its 26-week average of 41 according to Track Data, suggesting larger price risk.

Oracle's $17/share bid expired at the end of October, to the disappointment of activist BEA shareholder Carl Icahn. BEA said it felt the offer undervalued the company, but said it would sell itself for $21/share, a price Oracle called "impossibly high" (BEA to Icahn: We'll Sell, But Not for $17/Share).

On Monday, Law.com reported plaintiffs suing BEA in an options backdating suit claimed that when BEA's board rejected Oracle's $6.7 billion bid, its directors failed to properly weigh the offer because options backdating had clouded BEA's true value, without explaining in what way backdating options would prevent the board from assessing the company's true value.

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