Oracle Issues Takeover Ultimatum to BEA’s Board

In a calculated move that intensifies the friction between the boards of directors of the two companies, Oracle sent a public letter to BEA’s board today threatening to rescind its $17-per-share takeover offer by Sunday unless BEA agrees to tentatively accept the proposal and put it to a shareholder vote.

Oracle’s is using a classic tactic from the threadbare playbook of  hostile takeovers. As you will recall, Oracle knows a thing or two about hostile takeovers, having successfully executed one in its protracted staredown of the board of directors at PeopleSoft.

Despite Oracle’s protestations that it has no intention of waging a prolonged battle of attrition to acquire BEA, one has to wonder. Oracle might not want to take that long, ugly path — who does? — but it might tolerate such as course of action if Larry Ellison and his lieutenants are convinced BEA is of strategic importance and cannot be allowed to fall into other’s hands.

Oracle clearly feels there’s a weakness in the solidarity of the BEA board that it can exploit. Perhaps that’s true, but from this vantage point I think CEO and Chairman Alfred S. Chuang has enough support to dig in his heels and resist Oracle’s bully-boy gambit.

So, presuming that BEA’s board does not capitulate by Sunday, what happens next? Will Oracle walk away? In the short term, I don’t think it has a choice in the matter. Oracle would lose credibility if it continued to pursue BEA after having its ultimatum rejected. Larry Ellison wouldn’t want to look weak.

Still, in the unlikely event that BEA should find another suitor, now or a few months from now, don’t be surprised to see Oracle make a counterbid.

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