$6.66B for BEA: Larry goes Shopping

Oracle has made a $17 per share offer to buy BEA. This putting a somewhat theatrical "number of the beast" valuation on BEA. Yesterday the stock was sitting at $13 and this morning it is at 18 and change representing a 30% jump.

Obviously the crazy dude over at BEA is going to put up at least a simulacrum of a fight. Thinking of it, I expect Alfred "I am compensating for..." to put a heartfelt final battle into this, he has probably already super-glued his naked chest to the BEA boardroom table. It is going to get nasty and he will be dragged out kicking and screaming. Alfred will mumble something about not wanting to be Larry's power point bitch, or waxing his boat, or some other non-sense. But Larry is going to make sushi of that board and will feed it to the koi fish he has in his compound and cost more per head than Alfred's car... This one is going to be funny to watch. Pass the popcorn please.

First, because of ICahn's shareholder activism, the case has been made, quite publicly that BEAS will deliver more value to shareholders by being acquired than by themselves. 52wk stock price range on that puppy is $10/$17 so $18 sounds damn good. I can't wait for the first official communication from BEA!

Additionally, truth be told, the combination just makes sense from most angles I can think of. Product wise, this acquisition probably puts Oracle as market leader in terms of marketshare by a comfortable margin. By consolidating BEA and ORA's market share they are leapfrogging both IBM's websphere and RedHat's JBoss.

From an financial standpoint, Oracle grows by executing correctly on their strategic acquisitions. They have a track record here, they deliver consistent 30% growth on a behemoth of a company by not screwing up what they buy.

From a operations standpoint, executing on this one is fairly straightforward for them. The sales models are the same, the business models are the same, pretty much everything but development can go, extracting immediate EBITDA anywhere from 30% to 60% depending on how far they want to cut it. In that sense, even though ORA stock is down 2% on the news, this one may make complete numbers sense.

Something tells me that BEA's software talent and product lines are too much of an asset and Oracle is too experienced at acquisition and integration for them to kill off BEA's product operations to the benefit of the Fusion middleware division quite yet. Integrations risks are then mostly linked to product integration. It is going to take some time to merge those two beasts called Fusion and Weblogic. The product future of this company clouded by the dark side is.

So who gains? well obviously Icahn and co and its 12% stake in BEAS are pocketing the full 30% acquisition premium, which is a cool $200m. Not bad, take the money. The shareholders gain, Oracle gains. Ironically IBM and RedHat will see positive windfall from this move in the short term. Customers that were on the fence with BEA renewals and don't like the idea of Oracle controlling too much of their account are going to be persuaded to move. From what I hear from the field, there were already plenty of BEA replacement opportunities for JBoss and this will probably help. Now is the time to systematically go after BEAS installed base both end-user and channel.