Privately owned Trilogy Inc, which provides product configuration and pricing software, has come forward with an unsolicited offer of $4 per share in cash for Selectica. The Selectica board of directors is considering its response. The proposal is based on the assumption that Selectica’s potential acquisition of contract management vendor I-Many Inc, which was announced in December 2004, will not go ahead.
All three are involved in aspects of the pricing, configuration, and contract management market. Forrester analysts predict contract management will undergo rapid growth in 2005, anticipating 40% growth compared to 2003. This comes on top of 30% growth between 2002 and 2003.
The increase in demand is a result of organizations’ requirement to manage contract creation, negotiation, and compliance on an enterprise basis to comply with regulations like SOX, as well as realizing savings hidden in contacts with customers, or managing licensees of intellectual property.
On December 3, 2004 Selectica announced its intention to acquire I-Many for $1.55 per share in cash. The move was unanimously approved by the board and was expected to close in the first quarter 2005 subject to shareholder approval.
However, on January 6, Selectica’s largest shareholder Diker Management LLC, which owns 19.4% of the shares, revealed that it would be voting against the proposal because among other reasons, the $1.55 offer undervalued the company. With the offer in disarray, Trilogy took advantage of the opportunity to grow its market share through the well-trodden acquisition route.
The Selectica/I-Many proposal has not had a straightforward history. In June 2004 I-Many had a total of five suitors, including Selectica. Four were public companies interested in the whole operation, one was a private equity house, which was interested in its health and life sciences line of business, and offered $20.25m.
With a minimum starting price for serious negotiations for the whole company coming in at $50m, the field was whittled down to Selectica and one of the other public companies, but only Selectica put in a formal offer, tied to an exclusive period of negotiation.
During negotiations, the price point was raised from an initial offer of $1.50 to $1.55 per share and the agreement to merge was announced on December 3.
Both proposals are in a state of flux. Selectica has not withdrawn from the I-Many acquisition and is considering its response to the Trilogy offer. Selectica was scheduled to present its quarterly results on January 20, an event that occurred after we went to press, where further progress could be announced. In its latest quarter, ending September 2004, Selectica showed an increased loss of $4.1m on falling revenue of $7.2m.
