JDA Software Group, the Scottsdale-based firm that develops software to help retailers manage their operations, said Monday it will acquire Manugistics Group, a Maryland-based producer of supply chain software, for $211 million in cash.
The Scottsdale-based company also said it will receive an investment of $50 million from Thoma Cressey Equity Partners, a private equity firm with experience in enterprise software investments, to help finance the transaction. The investment in the form of convertible preferred stock is contingent on the merger deal closing.
Finally, the Scottsdale company announced its firstquarter earnings Monday, reporting a profit of $487,000, or 2 cents a share, on revenue of $47.9 million for the quarter ended March 31. That compares with earnings of $703,000 on revenue of $50.3 million in the same quarter a year ago.
Chief executive Hamish Brewer called JDA’s firstquarter earnings report “a disappointing start to 2006, with a significant number of deals failing to close in our projected time frame.”
JDA shares fell more than 10 percent in value in afterhours trading Monday following the earnings release.
By purchasing the smaller Manugistics, JDA said it will be able to offer software for the complete supply chain, including manufacturers, wholesalers, distributors and retailers.
“This deal is as close to a perfect match as you can get for an acquisition of this size,” Brewer said. Based on the latest fiscal year results, the combined company would have had annual revenue of more than $390 million, he said.
The company expects that synergies will result in cost savings of $25 million to $30 million annually. Among the savings could be jobs cuts, combining of offices and a general reduction in redundant administrative expenses, said Maureen Tuskai, senior director of corporation communications.
“The deal is pending and we anticipate it will close in late June to mid-July,” she said. “At that point we will announce decisions regarding the retention of Manugistics employees.” She said the senior executive team at JDA will remain in place, and the headquarters of the combined company will remain in Scottsdale. It’s possible the Scottsdale operations could expand as the two companies are merged, she said.
“After extensive due diligence, we believe that merging with JDA is the best path forward for all of our stakeholders,” said Manugistics CEO Joe Cowan. “By joining with JDA we can ensure that our customers will be able to count on a supply chain leader with the financial strength to extend and enhance our . . . services globally.” Two lenders, Citigroup and UBS Investment Bank, are financing a portion of the purchase price, said Kris Magnuson, JDA’s chief financial officer.