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BEA Systems is facing the big squeeze. On one side, activist investor Carl Icahn owns 13 per cent and is pushing for a sale. Given that he bought into the software company at around $13 a share only a few months ago, even Oracle’s opening shot of $17 looks attractive.

On the other side, Larry Ellison’s Oracle could be embarking on a bear hug. It has now let its original bid lapse, in the face of BEA opposition. But it has not gone away. First, BEA’s middleware has long made sense as a way to bolster Oracle’s product set. Second, Oracle has demonstrated it can bid aggressively for software companies, such as PeopleSoft and Siebel Systems, and generate big cost savings while hanging on to their customers. BEA would be a continuation of that strategy.

Meanwhile, BEA faces the same challenge as PeopleSoft. If Oracle’s approach turns into a long bear hug, there is a risk that BEA customers will simply wait to sign new licence deals until the ownership question is cleared up. That could harm BEA’s results, softening it up for Mr Ellison. And BEA has the extra problem that, because of the options backdating scandal it is delinquent on its filings and hence unable to release financial information that could show the business is really worth more.

In the absence of clear rival bidders, and with its hands tied behind its back on releasing financial statements, BEA’s board has limited options to force Oracle higher. But it is right to try. Mr Ellison has shown in the past how much he is willing to go above his opening bids, while still making them a success. BEA’s claim that it will only talk at $21 makes it a hostage to fortune. But at least it might buy it some time to be able to tell the world how the business is really performing.

Copyright The Financial Times Limited 2017. All rights reserved.

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