Update: BEA counters Oracle offer: $21 a share sounds better

BEA Systems' board of directors has named an acquisition price to competitor and suitor Oracle: $21 a share, $4 more than Oracle's initial offer.

"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," the company said in a statement Thursday.

Oracle on Tuesday set a deadline of Sunday for BEA to accept its "generous" original bid, which totals about $6.7 billion. The company also indicated it had no interest in a protracted merger battle.

But BEA declared Thursday that the company's existing assets and future business prospects dictate a significantly higher sale price. The company said it has customers for its array of enterprise software among 75 percent of the Fortune Global 500, along with $1 billion in cash reserves and no debt.

At $21 per share, BEA would cost Oracle about $8.3 billion. BEA's stock was trading at $17.60 a share midday Thursday.

BEA said it arrived at the $21-per-share figure after talking to its financial advisor, Goldman Sachs. The company said it has authorized its attorneys to give a draft merger agreement to third parties willing to meet the price. The agreement would "provide for an appropriately high degree of certainty of closing," BEA said.

A successful purchase of BEA would significantly increase Oracle's standing in the middleware space. While some BEA assets would help round out Oracle's offerings, the companies overlap in key categories such as Web servers and ESB products.

David O'Connell, a senior analyst with Nucleus Research in Wellesley, Mass., said there is a major upside for Oracle in buying BEA, even at a higher price. "Is [BEA] worth Oracle paying a lot for? Yeah," O'Connell said. Oracle would gain BEA's customer base and technologies, a collective boon for Oracle's Fusion middleware and SOA offerings, the analyst noted.

Some have questioned the eventual fate of certain BEA technologies following a merger. But O'Connell said he does not expect major disruptions for existing customers. "My sense is they want to use Fusion to let people continue using those applications," he said. "That's what SOA and integration is all about."

An Oracle spokeswoman declined to comment on BEA's statement.

This story was updated on Oct. 25, 2007.