BEA Systems, the business software company that had repeatedly rejected a takeover offer from its mighty rival Oracle, performed a U-turn – but the acquisition immediately became mired in accusations of insider trading.
Regulators are investigating suspicious trading in the options market on Tuesday, the day before BEA agreed to an $8.5bn (£4.3bn) cash bid from Oracle. The volume of trading in BEA call options was 13 times higher than average, as one or more investors placed bets on a big surge in the BEA share price over the next three days.
Yesterday morning, after the deal was announced, BEA shares surged 19 per cent. "It looks like someone had very, very good timing," said Michael McCarty, an options strategist at Meridian Equity Partners.
The Securities and Exchange Commission, which investigates suspicious trading, refused to comment. Regulators have been taking a keener interest in insider trading cases in recent years, and have this month turned to investigating the confidentiality procedures at investment banks. An academic study found that the trading arms of banks are making profitable bets on deals being done by other arms of the bank. Although the two sides are not meant to talk to each other, the trading arms are getting their bets right more often than mere coincidence would suggest. There was no suggestion yesterday that any of the advisers to the Oracle-BEA deal were involved in insider trading.
BEA makes middleware, the kind of software that underlies custom-built corporate software, and has been fighting to maintain market share against bigger rivals such as Oracle. In October, Oracle went public with a $17-a-share bid for the company, but BEA said at the time it would accept no less than $21.
In the end, with no other bidders emerging, BEA settled for $19.375. The acquisition gives Oracle "a leadership position at every level of the software stack", said Larry Ellison, the company's chief executive.Reuse content