The two companies have signed a definitive agreement under which privately held Infor, whose primary backer is Golden Gate Capital, will pay SSA shareholders $19.50 per share, in a deal that it expected to close in the third quarter.
The proposed transaction has been approved by SSA’s Special Committee of independent directors, as well as its board of directors. Although it is subject to customary closing conditions, including SSA shareholder approval, owners of 84% of SSA’s outstanding shares have agreed to support the merger. SSA’s share price rose 22% following the news of the acquisition.
The combined business will generate approximately $1.6bn in annual revenue, which would make it the third largest enterprise applications player after SAP and Oracle and roughly double the size of the other contenders for the slot, Lawson and CDC Software.
Infor has become a significant force in the industry by assembling and innovating market-specific, best-in-class enterprise software solutions, which provides customers with a flexible choice in the market, said Infor chairman and CEO Jim Schaper.
According to SSA CEO Mike Greenough, the decision was a strategic matter not a financial one. In a consolidating market, scalability is very, very important, he said during a conference call to discuss the acquisition.
Responding to a question over whether SSA was pushed into the deal by a large shareholder he said: It was a strategic decision driven by the office of the chairman and CEO and was unanimously endorsed by the board, but it was initiated at the behest of the management team.
SSA posted second-quarter 2006 results in March that showed a slow-up in its growth rate with revenue rising just 6% to $187.9m, including license revenue of $56.8m up 11%. Net income fell from $8m to $6.6m.
The organic growth rate was 7%, excluding the effects of the Epiphany purchase and after normalization for foreign exchange equalization. The rate of growth was well below that of Oracle Corp and SAP AG.
Addressing a suggestion that SSA had been overvalued, Greenough and Schaper stressed that looking at GAAP net revenue was not an appropriate way to value a company as it obscured the real picture, especially where there were acquisitions had to be taken into account, and that EBITDA, revenue, and the ability to generate business were more meaningful ways of valuing a business.
I believe we paid an appropriate price and are comfortable with it or we would not have done it, said Schaper.
Infor provides enterprise business applications including supply chain planning, enterprise asset management, relationship management, demand management, ERP, warehouse management, and business intelligence to select verticals within the manufacturing and distribution industries. Thanks to a series of acquisitions funded by primary backer Golden Gate Capital, has amassed 24,700 customers in over 100 countries.
Geac was the most recent vendor to come under Golden Gate/Infor ownership. Golden Gate’s strategy is to buy struggling companies, take them into private ownership where appropriate, and merge them other vendors within its portfolio in order to simulate growth. Infor is the leading technology company under Golden Gate, becoming home to most of the technology-based acquisitions.
SSA Global was a failing ERP vendor who was taken into private ownership in order to give it the opportunity to stabilize. Greenough spearheaded a successful recovery program based on growth by acquisition and took the company public again in spring 2005 although the IPO was disappointing. The company will turn full circle when it goes back in private ownership under Infor.
SSA’s portfolio both complements and compete with Infor’s as it offers extended ERP applications including corporate performance management, customer relationship management, product lifecycle management, supply chain management and supplier relationship management, to the manufacturing, distribution, retail, services and public sector verticals.
Infor plans to publish as detailed three year roadmap shortly after the acquisition closes but emphasized that it would continue to support the SSA portfolio. We have every intention, as historically we have done, to continue to support and evolve the products SSA brings to the table and the products Infor has. SSA won plaudits for its promise never to sunset a product while there were customers willing to pay maintenance for it.
