RedPrairie Corp.'s $1.9 billion all-cash purchase of JDA Software Group Inc. combines two providers of complementary software that will help users improve their competitiveness in the multichannel retail space, the chiefs of the two firms said today.
The acquisition, announced Nov.1, merges two big players in enterprise software and services with a combined $1 billion in annual revenue. The new entity's goal is to build a one-stop supply chain technology shop for retailers and manufacturers working across various platforms, especially the fast-growing market for mobile communications.
Speaking the following day to reporters, RedPrairie CEO Mike Mayoras said, "Our companies have amassed a massive amount of domain knowledge. There will be an enormous opportunity to talk to our customers about the entire ecosystem that serves the customer—how to help cost-optimize, generate revenue, or create competitive advantage." In addition, he said, "We will offer all of the components that make the shift to multichannel retail possible."
Hamish Brewer, president and CEO of JDA, said that as retailers and their suppliers expand into multiple consumer channels, the demands of managing supply chains become more complex.
"Consumers now have multiple ways to purchase. The supply chain necessary to support that has to be far more responsive than the traditional supply chain," Brewer said.
The merged entity will be run by Brewer. Mayoras will remain on the new company's board of directors. The transaction, which is subject to regulatory and JDA shareholder approval, is expected to close by year's end.
RedPrairie's strength lies in supporting operations in the warehousing, workforce management, store operations, and e-commerce categories. JDA's forte is providing solutions to enhance supply chain planning, merchandising, and pricing. JDA also has a strong position in "cloud" computing, where users can access data from web-based servers at anytime and from virtually any location.
RedPrairie and JDA executives hailed the transaction as a blending of companies with complementary supply chain software capabilities. "The market leaders in supply chain planning are not also the market leaders in supply chain execution," Brewer said. "We're going to change that."
ANALYSTS SEE PROS AND CONS
Steve Banker, an analyst with ARC Advisory Group, said the new company should gain from
increased cross-selling opportunities because of the two firms' complementary product sets. Because
both vendors provide transportation management software (TMS), Banker said, he expects that eventually
one of the two TMS solutions—likely JDA's—would be "sold in the market."
C. Dwight Klappich, an analyst at Gartner Inc., said there are synergies in integrating a strong planning-systems vendor like JDA with a strong execution-systems vendor like RedPrairie. However, both software providers lack a common platform that, in Klappich's view, each individual company "was struggling to achieve before the merger."
A common application platform provides a foundation for a single user interface and a single set of master data. This enables seamless process and data synchronization. Brewer said during the press conference that the two companies would spend the coming year creating a "roadmap" for migrating most of their products onto a common platform architecture.
Klappich said the merger "creates an even larger and fragmented application portfolio." Still, he said, the combined company would have the scale to expand into overseas markets now dominated by giants like Oracle Corp. and the German developer SAP.
Banker said that although the new entity would be able to offer more types of applications, it would still be missing a critical piece of software known as "demand-signal repository," which retailers use to more accurately align store-level inventory with consumer demand.
RedPrairie and JDA customers should have little to fear about the deal's impact on their operations, in Klappich's view. "I expect little or no effect on existing customers in the near term," he said, "and both companies have been pretty good at protecting existing customers long-term by not forcing migrations or stopping support on legacy products."
The acquisition of Scottsdale, Ariz.-based JDA promises a big payday for its shareholders. At a price equal to $45 a share, the transaction values JDA at a 33-percent premium to the stock's closing price on Oct. 26.
Privately held RedPrairie is owned by New Mountain Capital LLC, a New York-based public equity, private equity, and credit capital firm.
