Oracle and BEA Systems found themselves in disagreement over the fairness of a $17 a share offer that Oracle made to acquire its smaller rival Friday.
Oracle said it remained "committed to its proposed price of $17 per share'' in response to a statement from BEA, which said its board had concluded that the unsolicited takeover bid "significantly under-values BEA."
Oracle said that BEA canceled a meeting scheduled for Friday and declined attempts to reschedule. The company also said it was prepared to go ahead immediately with a process that would lead to a friendly transaction.
Oracle made a $6.66 billion unsolicited offer to buy BEA, which is under pressure from activist shareholder Carl Icahn to put itself up for sale.
Shares in BEA jumped some 33 percent, more than $1 above Oracle's offer price, suggesting investors think a rival bid will emerge.
"It is apparent to our board...that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated," William Klein, BEA's vice president of business planning and development wrote in the rejection letter.
Analysts have said that International Business Machines, Microsoft, CAand Hewlett-Packardare also potential suitors for BEA, which sells software that helps business computer systems communicate with each other.
Icahn, who first reported an ownership stake in BEA in mid-August, has acquired more than a 13 percent voting stake in BEA, saying its stock is undervalued and that the company would be better off as part of a larger business.
In an interview on CNBC, Icahn said he is glad Oracle made the bid, and he sees Hewlett-Packard and IBM as other potential bidders.
"I was a bit surprised, but this will be coming more and more," Icahn told CNBC in a telephone interview. "I do think there will be other synergistic bidders. I was very surprised, I really was, that there was going to be a bear hug in this one."
So far BEA Chief Executive Alfred Chuang has rebuffed Icahn's proposal. Company officials have said that BEA doesn't intend to put itself up for sale.
Oracle said it delivered a letter to the board of BEA on Oct. 9, offering $17 per share in cash for the company. The price represents a 25 percent premium over BEA's closing stock price on Thursday.
"This proposal is the culmination of repeated conversations with BEA's management over the last several years," said Oracle President Charles Phillips in a statement. "We look forward to completing a friendly transaction as soon as possible."
BEA officials were not immediately available for comment.
Oracle said its bid for BEA was aimed at bolstering its line of middleware, or programs that large businesses use to help manage their computer networks.
The deal comes a week after Oracle's German rival SAPoffered 4.8 billion euros ($6.8 billion) for Business Objects, raising expectations for further consolidation in the software industry.
"I think its a good transaction for both firms. It's not terribly surprising. I think the valuation is fair," said Needham analyst Richard Davis.
"One of the problems BEA had was they would compete with IBM, and IBM would walk in and bundle services, hardware and software ... they can in effect underprice their total package relative to BEA," said Davis.
Oracle has spent the last several years buying up other specialty software makers, in an effort to compete with Microsoft and SAP.
The proposed deal is Oracle's biggest since it bought Siebel Systems for about $6 billion in early 2006. Earlier this year it bought Hyperion Solutions for more than $3 billion.
Cognos, a $3.7 billion company based in Ottawa, and MicroStrategy, a $1 billion company based in McLean, Va., are also seen as attractive takeover targets in the industry.
Microsoft and Hewlett-Packard have been mentioned as possible suitors for Cognos. MicroStrategy, whose software runs within Microsoft's Office system, is seen a likely target for Microsoft.