Scottsdale-Based JDA Software to Buy i2 Technologies for $346 Million - PhoenixCEOCFO.com

Scottsdale-Based JDA Software to Buy i2 Technologies for $346 Million

Scottsdale-based JDA Software, a provider of supply chain software, purchased Dallas-based i2 technologies, another supply chain software provider, for $346 million. The acquisition of i2 is JDA's 11th acquisition in 10 years. The acquisition, which is set to close in the fourth quarter, will create an entity with $635 million in annual revenues and more than 6,000 customers, the company said. The company's stock closed at $18 at the end of August 2008, the middle of its 52-week range.

The purchase increases JDA's market in retail and transportation management and industries that build individual items such as automobiles or appliances. JDA has offerings for process manufacturing for the production of chemicals, foods or beverages. JDA's customers include Procter & Gamble and the Kohl's department store chain. i2 has customers such as IBM and Bell Helicopter.

Ben Worthen wrote in his Wall Street Journal blog that companies like JDA and i2 are known as "best-of-breed" software companies which specialized in certain areas such as supply chain management to give companies a competitive advantage. The challenge with this type of software is to make it work with the companies' other software programs.

The integration problems caused a number of companies to work with larger software programs such as SAP or Oracle that could do many, but not all of the same functions but was fully integrated. In addition, "best-of-breed" software is coming under attack from new software companies that have products that are accessible on the internet which don't require a buying a lot of expensive computers.

JDA offered $14.86 a share, a 5 percent premium to i2's closing stock price of $14.16 on August 8th. Ben Worthen noted that JDA's largest shareholder is a private equity firm and calls the i2 deal "straight out of the private-equity playbook." JDA is borrowing from Credit Suisse and Wachovia to fund the purchase.

John Laub is the President of the Phoenix CEO-CFO Group.

1. "JDA Software Group to Acquire i2 Technologies. Acquisition Combines Two Industry Leaders Resulting in One of the Most Comprehensive Global Supply Chain Management Offerings." JDA Company Press Release. August 11, 2008.

2. "The End of Best-of-Breed. JDA Software Agreed to Buy i2 Technologies, One of the Last Best-of-Breed Software Companies to be Acquired." Ben Worthen. Wall Street Journal Blog. August 12, 2008.

3. "JDA Software To Pay $346 Million For i2 Technologies." InformationWeek. Paul McDougall. August 11, 2008.