SEC filing details Icahn's matchmaking role in Oracle-BEA deal

As Microsoft makes a buyout play for a reluctant Yahoo, the software giant may want to enlist the help of billionaire investor Carl Icahn.

The shareholder activist apparently played matchmaker extraordinaire in Oracle's $8.5 billion buyout bid for BEA Systems, according to BEA Systems' Securities and Exchange Commission filing on Thursday.

The SEC filing, which provides a behind-the-scenes look at the merger, not only gives a glimpse of Icahn's active matchmaking role between Oracle and BEA, but also the middleware software maker's efforts to find other suitors.

For those who were wondering whether there was ever anyone else except Oracle who was interested in doing something with BEA, the answer is a sort of "yes," according to the filing:

Between the time Oracle made its initial $17-a-share offer in October and through January, when BEA agreed to Oracle's higher offer, the list of potential interested "strategic partners" dropped from three to none.

"From time to time during the period from October 2007 until January 2008, BEA and its advisors held exploratory discussions with ten potential strategic partners regarding a possible transaction with BEA. These exploratory conversations led to in-person meetings between management of BEA and three potential strategic partners," BEA said in its filing. "By early January of 2008, of the three potential strategic partners with whom BEA had in-person meetings since October 2007, two had indicated they did not wish to continue discussions. The one potential strategic partner with whom conversations were ongoing expressed an interest in a possible strategic investment or commercial agreement, but stated that it was unwilling to contemplate an acquisition of BEA in the near term."

Meanwhile, Icahn was standing by and pushing BEA to the dance floor, where Oracle was ready to do the waltz.

BEA, after initially rejecting Oracle's $17-a-share offer because it undervalued the company, had a discussion the following day with its advisors to figure out the right value that would be needed to kick off talks, according to the filing. And Icahn played a big role in prompting such action, according to the filing.

"On October 24, 2007, at the direction of the board, representatives of Goldman Sachs had discussions with Mr. Icahn and certain of his associates, in which Mr. Icahn recommended that the BEA board of directors exempt Oracle's $17-per-share offer from BEA's stockholder rights plan if the offer were supported by a majority of the shares. Mr. Icahn also stated that he intended to make a public announcement the following day regarding his recommendation.

"The BEA board of directors met telephonically and representatives of Goldman Sachs described the conversations that had occurred between them and Mr. Icahn. Representatives of Goldman Sachs stated to the board that they and BEA's other advisors had discussed Mr. Icahn's recommendation and statement that he would make a public announcement, and recommended to the board that it consider whether it should make an announcement that evening regarding the price at which the board would be prepared to discuss a sale of BEA.

"Discussion ensued regarding financial analyses, synergies expected by BEA's management to be achievable with various acquirers, other strategic options and related matters, and after thorough consideration and discussion, the board unanimously determined that it would be prepared to discuss the sale of BEA at a price of $21.00 in cash per share."

Roughly two weeks later, BEA announced it entered into a confidentiality agreement with Icahn, in which BEA's largest investor would be able to review certain financial data of the company. BEA's chief executive, Alfred Chuang, also addressed with Icahn such topics as BEA's strategic options and tactical issues.

That apparently wasn't lost on Oracle's president, Charles Phillips. The next day, Phillips was on the phone with Icahn.

"On November 7, 2007, Mr. Phillips telephoned Mr. Klein to discuss the nondisclosure agreement BEA had entered with Mr. Icahn and inquired how to recommence discussions with BEA regarding an acquisition. Mr. Klein reiterated the board's conclusion that the $17 proposal substantially undervalued BEA and that it was prepared to authorize negotiations at $21 per share on reasonable and customary terms. "

Towards the end of November, Icahn offered his New York offices as a meeting place for Oracle and BEA, with the hope of the two companies could "move forward toward an acceptable transaction."

But BEA said thanks, but no thanks. Instead, they asked Oracle to prepare a markup of a proposed merger agreement and send it to their attorneys.

While that was underway, Icahn had not been idle.

"On January 11, 2008, Mr. Icahn called a representative of Goldman Sachs and conveyed that, as a result of the discussions and negotiations that had occurred between Mr. Icahn and Oracle, Oracle would be prepared to pay $19.375 per BEA share and to include a $500 million reverse termination fee in the event regulatory approval was not received. Based on those terms, Mr. Icahn stated that he would agree to vote in favor of a transaction, and that he would be prepared to announce publicly his support of such an offer by Oracle."

Five days later, BEA Systems announces its merger with Oracle.

And the sales price? $19.375 per share.