RedPrairie to Buy JDA for $1.9 Billion
November 6, 2012 Alex Woodie
JDA Software, a publicly held developer of retail management and supply chain planning software, has agreed to be bought by RedPrairie, a privately held developer of supply chain execution and warehouse management software, for $1.9 billion. When fully merged, the new RedPrairie will have about $1 billion in annual revenue, and compete globally with Oracle and SAP. However, a wide mix of platforms used by both companies raises new questions on the long-term plan for JDA’s loyal IBM i customer base.
Rumors started swirling a week ago that JDA Software had hired JPMorgan Chase to handle JDA’s sale. The company had initially planned to delay announcing its third-quarter financial results and any news about a possible sale until today. But last Thursday, just as the Northeast and Wall Street were recovering from the punch in the gut that was Superstorm Sandy, JDA quietly announced its numbers and the deal with RedPrairie.
JDA says its board has approved an all-cash offer by an affiliate of RedPrairie for $45 per share, representing a 33 percent premium to JDA’s stock price on October 26, the day before rumors surfaced that JDA was exploring a sale. The transaction has a total value of about $1.9 billion (compared to JDA’s market capitalization of $1.46 billion on October 25), and is expected to be completed before the end of the year.
The combined company will be led by current JDA chairman and CEO Hamish Brewer, and include executives from both companies, although the board will be composed entirely of RedPrairie’s current board, plus Brewer. The new RedPrairie will have nearly $1 billion in revenue, nearly 5,000 employees and about 4,000 customers around the world; JDA had 2,700 customers, RedPrairie 1,400, and there’s probably some overlap.
Brewer says the deal will combine “highly complementary” product suites. “The combined company will have a unique ability to address our customers’ increasingly complex needs with a full spectrum of solutions for planning and execution across the entire value chain,” he says in a press release.
The heritage for Alpharetta, Georgia-based RedPrairie, which is owned by New Mountain Capital LLC, is in supply chain execution products. As such, it has developed warehouse and transportation management systems; workforce management and store operations software; and ecommerce software. Much of RedPrairie’s development over the last 10 years has been in Java.
Scottsdale, Arizona-based JDA has also embraced a Java development strategy for extending its heritage products, which includes the IBM i-based Merchandise Management System (MMS). However, it had a Windows .NET strategy before that. While JDA’s initial focus was development of ERP systems for retailers, it has widened its coverage considerably–to supply chain planning, replenishment planning, and store planning–through acquisitions of E3, Arthur, Intactix, Manugistics, and i2 Technologies.
In a FAQ posted to JDA’s website, JDA tells its customers no changes are currently planned for platform support at this time. “Customers will not experience any impact to their product support at this time. Once the transaction is finalized, senior management and the support teams from both companies will begin a comprehensive process regarding future customer support plans.”
In 2005, JDA pledged to support its IBM i products, including MMS and the E3 planning product, at least through 2015, as part of its Investment Protection Program. It doesn’t appear that JDA has revisited that topic since then.
However, 2015 is now just 26 short months away, and the several hundred users of the IBM i-based MMS and E3 products–who have been prickly to suggestions regarding migrating off the midrange server in the past–will undoubtedly want to know how the converged JDA-RedPrairie product roadmap will affect them.
In other news, JDA also announced its third quarter financial results. The company reported revenue of $164.5 million, down 5 percent from the same quarter a year ago. Adjusted EBITDA was $44.5 million in the third quarter 2012, compared to $52.9 million in the third quarter of 2011. JDA investors were able to sell their shares in a company with declining revenue and profitability at all-time highs for the stock, which is always a nice thing.