Infor Raises More Money, Finally Completes Lawson Transaction
April 9, 2012 Alex Woodie
Infor last week announced that it has fulfilled all of the financial requirements to finalize the acquisition of Lawson Software, which up to this point has been an Infor “affiliate” tucked away in an Infor subsidiary. While the $1.83 billion deal has been “done” since last July, when Infor officially announced the acquisition was complete, there were still some small details related to paying off Lawson’s old debt.
Infor made its first unsolicited bid to buy Lawson (then a public company) for $11.25 per share back in March 2011, and the boards of the two companies came to terms on a merger agreement in late April 2011. The deal was officially “done” (lowercase “d”) in July 2011, when Lawson stockholders approved the merger.
But the deal wasn’t quite finalized. There were Lawson’s bondholders to deal with, who collectively held more than $550 million in private notes. In the meantime, the Lawson business was relegated to affiliate status as a subsidiary of SoftBrands, a company Infor bought in 2009.
Then last month, the financial and legal wheels began turning again to (finally) finalize the deal and make Lawson a true member of the Infor family. It’s unclear why it had taken so long, but here are some of the machinations that went into the making of the deal.
On March 8, Lawson Software made two announcements. On the one hand, it offered to purchase its outstanding 11.5 percent senior notes due in 2018 at a price equal to 101 percent of their value. The offer was made as part of the “change of control provisions” of the terms of the merger agreement dated July 5, 2011, and would be valid through April 4.
At the same time, Lawson issued a “consent solicitation” of its bondholders that was aimed at getting them to approve a change to the original July 5, 2011 merger agreement (the “indenture”). Bondholders who gave their consent would be paid $3.75 per $1,000 in notes that they held. This deal was good through March 21 of this year, which was subsequently extended to March 27.
The bondholders could choose only one of these options. They could sell their 11.5 percent notes back to Lawson, or they could hold onto their notes and consent to the changes in the terms of the agreement. The option with the most votes would be executed by Lawson.
On March 28, Lawson announced that it had received enough consents to validate the changes. The company said that the holders of about $462 million in aggregate principal amount (or approximately 83 percent of the total) of the outstanding notes had given their consent. The next day, Lawson announced the termination of its offer to buy the 11.5 percent notes, since it had received consent from the bondholders.
Meanwhile, on March 30, Golden Gate Capital and Summit Partners–the two private equity firms that own Infor–announced that Lawson (identified as a subsidiary of GGC Software Holdings) would sell $1.015 billion in new senior notes, paying 9 percent and due in 2019. It would also sell €250 million in notes paying 10 percent, also due in 2019. The sale terminated on April 5; it’s not clear how much of the new debt was sold.
All told, Infor says it has raised more than $1 billion in equity over the past year, including direct investments from Golden Gate Capital and Summit Partners. Infor said it plans to use revenue from the new corporate bonds to refinance existing debt, to pay back the 3.5 percent from Lawson’s consent solicitation offer, to pay costs and expenses, and for general corporate expenses.
At the same time, Infor refinanced its old debt. The company reduced its total debt load by $600 million, and got a lower interest rate on its existing debt, which now has an average maturity date of 2018. The company also announced that it’s now generating $2.8 billion in revenue annually, with a gross profit margin of 28 percent, which should give it plenty of cash for additional investment (and maybe a resurgence of M&A activity).
So what were the changes that were made in connection with the consent solicitation? It’s unclear exactly what this changes, since the nitty gritty details of the original agreement aren’t easily accessible. But Lawson did give us some details of how the complicated financial transaction was finally structured. Here’s what Lawson said:
“In connection with the Contribution Agreement, Infor Global Solutions Parent, Ltd., a Cayman Islands exempted company (“Infor”), and Softbrands Holdings, LLC, a Delaware limited liability company and the indirect owner of 100 percent of the outstanding capital stock of Lawson (“Softbrands”) will enter into a series of reorganization transactions that will result in the creation of a new Cayman Islands exempted company (“ComboCo”) and the contribution of 100 percent of the outstanding capital stock of Infor Global Solutions Intermediate Holdings Limited to ComboCo (such contribution, the “Infor Contribution”).” (As you can tell from the all the capital letters, this was written by and for lawyers.)
In any event, the deal is now Done (with a capital “D”), and now Infor and a fully integrated Lawson can get on with the business of making and selling ERP software.
Infor CEO Charles Phillips says: “The new financing and finalized business combination represent a strategic milestone that sets Infor on a clear path of long-term growth and sustained financial strength.”
The one wildcard in all this is how the private equity investments affect a possible initial public offering (IPO) of stock. Infor was well on the way to an IPO a few years back, and most likely would have done one but for the Great Recession. With some money to play with in the bank through private notes, Infor seems to be saying that it would rather use this approach to fund its on-going battle against other ERP vendors like Oracle, SAP, and Microsoft, without doing all the painful things that public companies must do to raise cash. But on the other hand, the payoff from a big IPO would give Golden Gate and Summit Partner a handsome short term payout and a graceful exit to their investment. Plus, there’s the possibility of long-term benefits to being public if Infor can demonstrate disciplined and profitable business execution to investors, which seems to be its message these days.
It’s a gamble either way, and it will be particularly interesting to see how Infor plays it later this year, following the Facebook IPO on the NASDAQ and the official opening of the new Infor headquarters not far from Wall Street in New York City. The stars could line up nicely for an Infor IPO.