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BEA sets buyout price at $21 a share

Oracle's offer of $17 per share? No thanks, BEA says again. This time, it's countering with what it sees as a better shareholder value.

BEA Systems said Thursday that it's willing to sit at the negotiating table with any potential buyers--if they're open to a price of $21 a share to start acquisition talks.

The announcement comes as the enterprise software maker is feeling pressure to enter merger talks with Oracle, which earlier this week gave BEA a Sunday deadline for its current buyout proposal. Oracle is offering $17 a share, or $6.7 billion, in cash for BEA.

"We continue to believe that Oracle's unsolicited proposal to acquire BEA at $17 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 per share," BEA stated in a release.

But the middleware maker noted: "Over the last several weeks, Oracle has repeatedly asked us for the price at which we would be willing to begin negotiations, and the (BEA) board has concluded, after consultation with its financial adviser Goldman Sachs, that it is prepared to authorize negotiations with third parties, including Oracle, at a price of $21 per share."

That would push Oracle's offer up by nearly 24 percent, making the deal worth $8.3 billion.

"What I find encouraging about BEA's announcement is it shows some willingness on (BEA's part) to sell itself," said Brendan Barnicle, an analyst at Pacific Crest Securities. "Maybe they'll ultimately meet in the middle, somewhere at $19 a share."

For a number of years, BEA's chief executive and co-founder, Alfred Chuang, has been perceived in the industry as reluctant to sell the company. And for a number of years, Oracle has viewed BEA as a possible acquisition candidate.

"Oracle could pay $21 a share, and it still would be (additive to its earnings). But based on Oracle's previous comments, they don't want to spend more than $17 a share, which is what you'd expect them to say," Barnicle said.

Prior to its announcement, BEA had been informally indicating to Wall Street that BEA's value should be viewed on par with the price SAP said it would pay for Business Objects.

"Business Objects, however, has had greater license growth than BEA, but you could argue that's because Business Objects sells applications and BEA is a platform play," Barnicle noted.

One analyst, Charles Di Bona of Sanford Bernstein, meanwhile, views BEA's demand of $21 a share too rich to justify, even for Oracle.

"I even have trouble with $17 a share. It's going to be difficult to make $17 (additive to earnings), unless you make a lot of adjustments," Di Bona said.

BEA stated that it is also requiring interested parties to provide a high degree of assurance that a deal would ultimately be sealed, as it seeks to avoid disruption to its business.

"The real question is whether BEA's announcement will shake another buyer out of the tree. I'm not convinced there is another player in the branches," Di Bona said. "If someone doesn't fall out of the branches, it'll take the competitive pressure off Oracle, and there'll be a lot of playing room."

One industry titan that is not expected to fall from the tree is SAP. Company CEO Henning Kagermann, in addition to a source familiar with the thinking of the supervisory board, said SAP is not interested in BEA.