Infor Makes a $1.83 Billion Bid for Lawson
March 14, 2011 Timothy Prickett Morgan
With rumors going around early last week that it had hired Barclays Capital to advise it on its options, midrange application software supplier Lawson Software finally fessed up that late on Friday night that something was indeed afoot. The Barclays Capital rumor had caused an 18 percent run-up in the company’s stock and that was because everyone figured that it was because the software maker was looking at buying something or selling itself.
As it turns out, it was the latter, not the former. In a statement released at 9:30 p.m. Eastern on Friday, Lawson said that it had received an unsolicited takeover offer from rival midrange application software provider Infor and its primary private equity backer, Golden Gate Capital. Infor and Golden Gate offered $11.25 a share to acquire all of Lawson’s outstanding stock, including the 10.8 percent stake that activist investor Carl Icahn owns. Oddly enough, that’s less money than Lawson was actually worth when its shares closed on Friday, at $11.55 per share. Which is why Lawson should have said something was up as soon as it received the offer.
That $11.55 per share stock value gave Lawson a market capitalization of $1.88 billion as the market closed on Friday. The company had $288.3 million in cash and equivalents and $10.2 million in restricted cash on the books in the quarter ended last November, as well as $228.1 million in long-term debt. When you do the math, that gives Lawson a so-called “enterprise valuation” of $1.95 billion. So it looks to me that Wall Street got a little ahead of the $1.83 billion that Infor and Golden Gate are offering,
It’s not clear when Lawson received the takeover offer from Infor and Golden Gate, but on February 25, the company made an 8K filing with the Securities and Exchange Commission that it had submitted and received approval granting confidential treatment for some information. That information, whatever it is, was kept out of its 8K filing on December 6, 2010, and can be kept under wraps until December 1, 2013, according to that filing.
The move on Lawson follows three important things. First, the recovery in the financial sector that has made private equity firms like Golden Gate (presumably) flush with cash and credit again. Second, Infor’s hiring of ERP software analyst Bruce Richardson, formerly of AMR Research, as its chief strategy officer in January 2010. Richardson has also been acting as a strategic advisor to Golden Gate, and last January I said the fact that Richardson was working for Infor and Golden Gate to help them compete with SAP, Oracle, Microsoft, Lawson Software, Sage Software. Or acquire one of them. Then, last November, Infor snapped up Charles Phillips, a former Morgan Stanley software analyst and for many years the co-president of Oracle, as its new CEO, bumping Jim Schaper up to chairman of the company. Phillips is no stranger to software acquisitions and figuring out how to squeeze profits and growth out of vast installed bases of software users.
The wonder is what took Infor so long to make its move, and it might have something to do with talking to Carl Icahn and sorting it all out first. But that is just a guess on my part. Phillips didn’t officially start until December 1, 2010.
The question now is will Infor use Lawson as a means of backing into going public, or will it try to take Lawson private, squeeze all the cost synergies out of the combined companies, and then do an initial public offering in a year or two? Or will the whole shebang be gussied up real quick for a software-envious Hewlett-Packard to snap up quick? There are lots and lots of possibilities, including even IBM buying up Infor, Lawson, or the two combined to take control of a vast midrange software base before Oracle or HP get their greedy little red or gray hands on these assets.
The statement from Lawson didn’t say much, and Infor and Golden Gate have been mum on the subject. Lawson said it received the offer and had indeed retained Barclays Capital to have it sort the offer out as well as consider “other possible strategic alternatives.” The company said it had made no decision on the Infor-Golden Gate offer and said it would not make any comment until a deal is done or dead, adding that it “remains fully committed to its current strategic plan.”
Infor is privately held and is an amalgam of so many companies it is hard to list them all. The company generates around $2.2 billion a year in revenues and unknown but presumed profits; the company has 8,000 employees, and over 70,000 customers worldwide. About 15,000 of those customers are running applications on the OS/400 and i platforms. Lawson has around 4,500 customers and 3,900 employees; it generated $745.1 million in revenues and $25.9 million in net income in its trailing four quarters. So the combination would bring Infor to around $3 billion in sales and 75,000 customers worldwide.
for Lawson Software:
for Infor and Golden Gate Capital