Infor to Buy SSA Global for $1.36 Billion

Published: May 26, 2006

by Alex Woodie

Two of the largest vendors of OS/400 ERP software announced plans to merge Monday, creating what will be the third largest ERP vendor in the world. If it clears regulatory hurdles and is approved by shareholders, which looks likely, Infor's $1.36-billion bid for SSA Global will create a company with 37,000 customers, nearly 7,000 employees, and annual revenues of $1.6 billion. It would also create the biggest software vendor dedicated to iSeries development, and the largest enterprise software company outside of SAP and Oracle.

"This is a great day for us, and yet another milestone in the evolution of Infor," said Jim Schaper, Infor's president and CEO, yesterday in his opening remarks of a press conference announcing the planned acquisition of all SSA Global's outstanding stock for $19.50 per share, which has been approved by the boards of both companies, and is backed by 84 percent of SSA Global's shareholders. If all goes as planned, the acquisition will be complete in three to four months.

The combined company will provide an alternative to SAP and Oracle ERP products, Schaper says. SAP, which had ERP software revenues of $9.4 billion in 2004, is the largest ERP software vendor in the world, according to AMR Research, which is due to publish its account of the 2005 ERP market soon. Oracle, which had about $5.3 billion in ERP-related revenues in 2004 (including revenue from PeopleSoft, which it had not yet acquired), is currently the second largest. Lawson Software and Intentia, which recently merged, were previously the eighth- and ninth-largest ERP vendors, according to AMR, now will be the fourth or fifth largest, with annual revenues somewhere around $800 million. Whether Microsoft's Business Solutions group, which also has annual revenues in the neighborhood of $800 million, is number four or five will have to wait until AMR's report.

SSA Global and Infor are very similar companies, in many respects. They both develop ERP software that historically have run on the AS/400, iSeries, and, now, System i5 platforms, and they both count companies in the manufacturing and distribution industries as their primary customer bases. They've both targeted struggling software companies for buy-outs, and executed numerous acquisitions over the past several years, with SSA Global buying Infinium, Baan, CA's interBiz unit (PRMS), Ironside Technologies, and Marcam to boost its existing BPCS business, and Infor buying MAPICS, Geac, Lilly Software Associates, Daly.Commerce, BRAIN, and several other companies.

The focus on iSeries development at both companies makes the combined Infor-SSA Global by far the biggest independent software vendor actively developing for the OS/400 platform. "We gain leverage, strategic development on the iSeries platform, as well as applications that run on that iSeries platform. We have and will continue to invest significant amount of research dollars for the iSeries platform," Schaper said. "We are clearly now IBM's largest active ISV for their iSeries."

With all those acquisitions comes challenges, and both SSA Global and Infor have struggled with the issue of keeping existing customers happy by continuing to maintain the numerous and older ERP products they've acquired, while at the same time gently nudging customers to upgrade to newer products and architectures, which is necessary to continue growth. Both companies have a Java-centric service oriented architecture (SOA) development strategy, and have long-range plans to eventually merge their disparate products onto a common code base. Both companies have also made commitments to never sunset a product (except where a platform has been killed off by its owner, such as Hewlett-Packard's HP3000 server platform).

The companies are also located in the iSeries hotspots of Chicago (SSA Global) and Atlanta (Infor). Last but not least, executives with both Infor and SSA Global have ties to Geac, one of the original purveyors of ERP consolidation that is now in vogue, and which Infor recently gobbled up for $1 billion.

While the companies had obvious similarities, and competed for some of the same accounts, the overlap may not be as great as it would appear on first glace, according Schaper.

"We have minimal product overlap," Schaper said. For example, Infor didn't really have much in the areas of warehouse management systems (WMS), logistics, and supply chain management, whereas SSA Global has good solutions in these areas. Similarly, SSA Global had better offerings in the areas of asset management and product lifecycle management (PLM), and the combined company will benefit from that. The companies targeted different customers, Schaper said, with Infor targeting small and mid size businesses with between $20 million to $1 billion in revenues, whereas SSA Global had the most success at companies with $1 billion to $2 billion in revenues.

Merger discussions between the two companies were fast-tracked, and the decision to join forces was made in a matter of weeks, Schaper said. In fact, it may have never happened. "My immediate reaction [upon hearing of the plan] was, 'I don't think so, this was not a merger we should go after,'" Schaper said. "But the more I looked at it, the more I realized it was an acquisition incredibly complementary to our strategy, and industry-changing."

Later in the call, Schaper clarified his early resistance to the idea as "more emotional" than "anchored in reality."

"Mike Greenough [SSA Global president, chairman, and CEO] and I have known each other for a few years now, and we each trace our lineage to Geac," Schaper explained. "We didn't understand what they were doing, and they didn't understand what we were doing. We had competed on some of the same accounts, and you love to hate the guy you compete with. [After the first meeting we] walked away with 'Man, this is sweet.' . . . The fabric of their company is not that dissimilar from ours."

Greenough heralded the acquisition as the right move for SSA Global. "In a rapidly consolidating marketplace we have seen that size and scale matter," he stated in a press release. "This transaction brings value to all of our key stakeholders … our investors, our customers, and our employees."

The combined company will be privately held, and will be the fourth public-to-private transaction in recent years for Infor. SSA Global has been a publicly traded company for just a year, and had its IPO in May 2005, when its stock was offered for $11 per share. The share price topped out near $20 in December, before falling to the $15-$16 range in early May. Cerberus Associates, with more than 43 million shares, and General Atlantic, with nearly 16 million shares, hold the bulk of SSA Global's nearly 70 million outstanding shares. Company insiders, including Greenough, who holds options on more than 3 million shares, control nearly 27 percent of the outstanding shares.