Retail application specialist JDA provides demand chain management software and services covering areas such as replenishment optimization and revenue management, complementing Manugistics’ supply chain and revenue management software. Together, they intend to form a $390 million revenue company, with a 5,550-strong customer base, providing software and services to manufacturers, wholesalers, distributors, and retailers.
The deal is valued at $211 million, with JDA offering Manugistics stockholders $2.50 per share in cash. Both companies have agreed the deal but it is subject to shareholder and approval processes. On completion of the transaction, which is expected in the second or third quarter this year, private equity investor Thoma Cressey Equity Partners will invest $50 million in JDA Software in the form of convertible preferred stock, based on what it said is JDA’s track record of making converting acquisitions into profitable operations.
JDA’s share price tumbled 11% recently when it announced a 31% drop in quarterly profit to $487,000, a decline in year-on-year revenue because deals that had slipped from Q4 2005 also failed to close in Q1 2006, and were joined by several new deals that were expected to close in the first quarter but didn’t. Revenue fell 4.8% to $47.9 million. License revenue plunged 30% to $7.1 million.
Manugistics has been in a weakened state for several years and an acquisition has been on the cards for some time, although it managed to release fourth-quarter prelims for the period ending February 28, 2006 that showed a improvement over the year-ago quarter, including an expected net profit of $2.5 million to $3.5 million on revenue in the range of $44 million to $46.5 million. In the same quarter last year, the company posted a net loss of $17.2 million on revenue of $45.2 million.
JDA expects savings of $25 million to $30 million in the 12 months following completion of the transaction.
Along with i2 Technologies, Manugistics had the SCM market pretty well tied up until around 2000 when customers and prospects starting balking at the cost and complexity of their respective platforms, which ran on top of third-party ERP implementations, and produced a questionable return on investment.
At the same time, SAP and Oracle started to seriously undermine the SCM specialists by offering their own SCM solutions. Another serious problem arose when organizations demonstrated a preference for manageable SCE applications that could deliver more immediate costs benefits than the complex SCP components where Manugistics and i2 had extensive expertise.
Manugistics shifted focus, offering revenue management and optimization technologies for use in demand-driven supply chains alongside its SCM applications but failed to make a full recovery. Under JDA’s wing, it should benefit from JDA’s stronger balance sheet and the increased vertical focus.
