BEA: We're worth $21 a share

BEA Systems' board of directors says it will negotiate with Oracle--or other third parties--with opening bids at $21 a share, $4 a share higher than Oracle's current offer.

For those keeping score at home. Oracle made its offer Oct. 9 and the two have been volleying letters ever since.

In a statement Thursday BEA said:

“We continue to believe that Oracle’s unsolicited proposal to acquire BEA at $17.00 per share significantly undervalues BEA, and is therefore not in the best interests of BEA shareholders. Accordingly, we will continue to vigorously oppose a sale to Oracle at $17.00 per share. Over the last several weeks, Oracle has repeatedly asked us for the price at which we would be willing to begin negotiations, and the Board has concluded, after consultation with its financial advisor Goldman Sachs, that it is prepared to authorize negotiations with third parties including Oracle at a price of $21.00 per share. The Board has authorized its legal counsel, Wachtell Lipton Rosen & Katz, to deliver today to any such third parties a draft merger agreement that it is prepared to sign that will be in customary form and provide for an appropriately high degree of certainty of closing."

That response raises some interesting questions:

• Will Oracle bid at $21 a share? That sum is the maximum Oracle would go according to Wall Street analysts.
• If Oracle walks does BEA have another party?
• Will this game of merger chicken backfire?

BEA is playing a dangerous game--especially if you believe no other company wants it at that price. BEA may be a leading middleware company, but the writing is on the wall: Girth wins in enterprise software. Oracle and BEA makes sense. HP and IBM could also be buyers. But it's a small list of buyers. If BEA stays independent it's likely to get run over. The ball's in Oracle's court: Buy BEA at an elevated price. Or try and run it over.