JDA® Software Group, Inc. (NASDAQ: JDAS)
and i2 Technologies, Inc. (NASDAQ: ITWO) today
announced the signing of a definitive merger agreement for JDA
Software to acquire i2 Technologies, Inc., a leading global
provider of supply chain solutions, for an enterprise value of
approximately $396 million. The combination of the two companies
creates a global leader in the market for supply chain planning and
optimization. On a pro-forma trailing 12-month basis, the combined
company has annual revenues of approximately $617 million,
including over $275 million of annual maintenance and recurring
subscription fees.
According to JDA Chief Executive Officer Hamish Brewer,
the i2 acquisition will firmly establish JDA as a leading
enterprise software company with a deep focus on supply chain
management and a full complement of managed and hosted services
offerings.
“Our strategic rationale for acquiring i2 is even more
compelling today than it was a year ago. The challenges of the
economic crisis have focused the market’s attention on the
disciplines of supply chain planning and JDA has established a
leading role in this active market. Integrating i2’s solutions and
expertise will only expand our opportunity to build substantial new
shareholder value over the coming years.”
“Over time we have come to know the i2 business very well and
based on our detailed diligence and proven track record for
delivering value, I am confident that we can reliably unlock the
sizable potential that exists within this company,” added
Brewer.
“This is a powerful combination,” said i2 Chairman, President
and CEO Jackson L. Wilson, Jr. “Our customers will be supported
by a team of supply chain professionals that is unmatched in the
industry. Innovation will accelerate. Our expanded geographic
footprint will enhance sales penetration and service delivery. This
is the right transaction for our customers, partners and
employees.”
Snapshot of the Combined Company
By combining JDA and i2, the resulting company will have
significantly improved operating leverage and a strong financial
position. The near-term operating synergies resulting from this
combination are expected to produce net annual cost savings of
approximately $20 million. As a result of the pending acquisition,
i2 has cancelled its previously announced conference call to
discuss their third quarter 2009 financial results.
“JDA is using a balanced combination of cash on hand, debt
financing and JDA common stock to finance the transaction. We
intend to access the high-yield loan market to finance
approximately $275 million of acquisition financing,” commented
Pete Hathaway, JDA’s Executive Vice President and Chief
Financial Officer. “The company’s pro-forma leverage is
anticipated to be modest and the combined cash flow from operations
will be significant.”
($ in Millions) JDAS
TTM ended
Sept. 30, 2009
ITWO
TTM ended
Sept. 30, 2009
Combined
Company
(Before Synergies)
Revenues: Software $ 94.5 $ 52.7 $ 147.2
Maintenance 176.4
76.8 253.2 Product Revenues
270.9 129.5 400.4
Service Revenues 114.0
102.3 216.3 Total
Revenues $
384.9 $
231.8 $
616.7 Operating Income $ 16.4 $ 40.8 $
57.2
Net Income $ 4.3 $ 45.8 $ 50.1
Adjusted EBITDA
(1) $ 97.6 $ 61.2 $ 158.8
Cash Flow from
Operations $ 56.9 $ 42.5 $ 99.4
Employees 1,798
1,172 2,970
Customers 5,900+ 400+ 6,000+
(1) See attached reconciliation of Non-GAAP measures of
performance.
Terms of the Transaction
A primary goal of this transaction is to provide a high degree
of completion certainty to the shareholders of both JDA and i2.
With this in mind, the acquisition will be completed following one
of the structures described below. JDA is pursuing the Intended
Structure in order to provide the mix of consideration described
below. Otherwise, JDA will complete the acquisition using the
Alternative Structure.
Intended Structure
As provided in the definitive merger agreement, JDA intends to
raise approximately $275 million of senior unsecured notes through
a best-efforts financing between the signing date and December 18,
2009. If JDA raises sufficient funds and satisfies other conditions
in the definitive merger agreement by December 18, 2009, each
issued and outstanding share of i2 common stock will be converted
into the right to receive approximately $12.70 in cash and 0.256x
shares of JDA common stock with a combined value equal to $18.00
per share based on JDA’s closing stock price on November 4,
2009.
Alternative Structure
If JDA does not raise sufficient funds and meet the conditions
necessary to complete the transaction under the Intended Structure,
then the parties will proceed with the Alternative Structure. Under
the Alternative Structure, each issued and outstanding share of i2
common stock will be converted into the right to receive
approximately $6.00 in cash and 0.580x shares of JDA common stock
with a combined value of $18.00 per share based on JDA’s stock
price on November 4, 2009. JDA has received a fully-underwritten
commitment from Wells Fargo Foothill and Wells Fargo Securities to
provide a $120 million term loan and a $20 million revolving credit
facility to finance the transaction under the Alternative
Structure.
Under either the Intended Structure or the Alternative
Structure, each issued and outstanding share of i2’s Series B
Convertible Preferred Stock will be converted into the right to
receive $1,100.00 per share in cash, and will receive all accrued
and unpaid dividends.
The transaction has an aggregate enterprise value of $396
million on a diluted basis and is expected under both transaction
structures to be accretive to JDA’s 2010 non-GAAP EPS. The
following table provides an overview of the net purchase price
(enterprise value) to acquire i2, excluding direct costs of the
acquisition:
($ in millions) Purchase of i2
common equity ($18/share) $ 434.4
Retirement of Series B
convertible preferred stock (1) 121.7 Gross
acquisition cost 556.1
Less: Available i2 cash balance at
closing (estimated) (160.0)
Net Purchase Price
= Enterprise value $
396.1
(1) Illustrative settlement value based on change of control
premium on face value.
Direct costs of the acquisition are currently estimated to range
from $32 million to $35 million and include financing-related
costs, investment-banker fees, legal costs and restructuring
costs.
JDA will use cash from financing sources (senior unsecured notes
or bank financing as appropriate), together with the companies’
combined cash balances at closing, to fund the cash obligations of
the merger agreement, related transaction expenses, and to provide
cash for the combined companies’ ongoing working capital and
general corporate needs.
The Board of Directors of each company has approved the
transaction. Consummation of the transaction, which is expected to
close in first quarter 2010, is subject to several closing
conditions, including the approval and adoption of the merger
agreement by i2’s stockholders, expiration or termination of the
applicable Hart-Scott-Rodino waiting periods and regulatory and
other customary conditions. If the transaction proceeds with the
Alternative Structure, approval by JDA shareholders will also be
required. The JDA Board of Directors will consider adding one
mutually agreeable i2 director to its board, and under the
Alternative Structure the appointment is required.
JDA has entered into voting agreements with all directors and
certain executive officers of i2, and with i2’s Series B
stockholder, pursuant to which such signatories have agreed to vote
in favor of the merger agreement and against any other proposal or
offer to acquire i2. The voting agreements restrict the transfer of
shares by the signatories, except under certain limited
conditions.
The definitive merger agreement provides for the following
termination fees: (i) $15 million payable to JDA if i2 terminates
the merger agreement to accept a superior proposal, changes its
recommendation and in certain other circumstances; (ii) $7 million
payable to i2 if approval by JDA stockholders is required but not
attained; and (iii) $30 million payable to i2 if JDA fails to close
the merger due to failure to obtain financing under certain
circumstances.
Goldman Sachs acted as exclusive financial advisor to JDA and
DLA Piper US LLP acted as JDA’s legal counsel. Thomas Wiesel
Partners acted as exclusive financial advisor to i2 and Munsch
Hardt Kopf & Harr, P.C. acted as i2’s legal counsel.
Investor Conference Call and Webcast Information for Today’s
Announcement
JDA will host an investor conference call and webcast today,
November 5, 2009 at 10:00 a.m. Eastern time to discuss the pending
acquisition of i2. To hear the audio portion of the call and for
investor question and answers at the end, dial (877) 757-0919
(United States/Canada) or (719) 234-7871 (International) and enter
participant passcode 873430.
To view the webcast of the call, go to the following Web page 10
minutes prior to the time of the conference call:
http://www.talkpoint.com/viewer/starthere.asp?Pres=128624. The
conference call recording will be available for replay two hours
after the call’s completion. To access the recording, dial (888)
348-4629 (United States/Canada) or (719) 884-8882 (International)
and enter replay pin number 873430.
Industry Analyst Conference Call and Webcast Information for
Today’s Announcement
JDA will host an industry analyst conference call and webcast
today, November 5, 2009 at 11:30 a.m. Eastern time to discuss the
pending acquisition of i2. To hear the audio portion of the call
and for questions and answers at the end, dial (866) 880-8920
(United States/Canada) or (706) 679-7356 (International). To view
the webcast of the call, go to the following Web page 10 minutes
prior to the time of the conference call:
https://www.livemeeting.com/cc/jda/join. – using Meeting ID:
JDA2009 and Entry Code: 9W7673.
About i2 Technologies, Inc. (Pre Acquisition)
Throughout its more than 20-year history of innovation and value
delivery, i2 has dedicated itself to building successful customer
partnerships. As a full-service supply chain company, i2 is
uniquely positioned to help its clients achieve world-class
business results through a combination of consulting, technology,
and managed services. i2 solutions are pervasive in a wide
cross-section of industries. Learn more at www.i2.com. i2 is a
registered trademark of i2 Technologies US, Inc. and i2
Technologies, Inc.
About JDA Software Group, Inc. (Pre Acquisition)
JDA® Software Group, Inc. (NASDAQ: JDAS) is the world’s leading
supply chain solutions provider, helping companies optimize
operations and improve profitability. JDA drives business
efficiency for its global customer base of more than 5,800
retailers, manufacturers, wholesaler-distributors and services
industries companies through deep domain expertise and innovative
solutions. JDA's combination of unmatched services, together with
its integrated yet modular solutions for merchandising, supply
chain planning and execution and revenue management, leverage the
strong heritage and knowledge capital of market leaders including
Manugistics, E3, Intactix and Arthur. When supply chain results
matter, companies turn to JDA. For more information about JDA,
visit www.jda.com or contact us at info@jda.com or call
+1.800.479.7382 / +1.480.308.3000.
“Safe Harbor” Statement under
the U.S. Private Securities Litigation Reform Act of
1995
This press release contains forward-looking statements that are
made in reliance upon the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The forward-looking
statements contained herein include statements about the
consummation of the pending merger of JDA Software Group, Inc.
(“JDA”) and i2 Technologies, Inc. (“i2”), future financial and
operating results of the combined company and benefits of the
pending merger. Factors that could cause actual results to differ
materially from those described herein include: (a) JDA’s ability
to leverage the i2 products to enable it to further expand its
position in the supply chain market; (b) JDA’s ability to
successfully integrate and market the i2 products; (c) JDA’s and
i2’s ability to obtain regulatory approvals; and (d) JDA’s and i2’
assumptions regarding the future financial and operating results of
the combined company if JDA and i2 successfully complete the
merger. Additional information relating to the uncertainty
affecting the businesses of JDA and i2 as well as certain risk
associated with the pending merger between JDA and i2 will be
contained in the respective filings with the SEC, including the
Proxy Statement referred to below. Neither JDA nor i2 is under any
obligation to (and expressly disclaims any such obligation to)
update or alter its forward-looking statements, whether as a result
of new information, future events or otherwise.
In addition to the specific risks identified in the proceeding
paragraph, mergers involve a number of special risks, including
diversion of management’s attention to the assimilation of the
technology and personnel of acquired businesses, costs related to
the merger, the integration of acquired products, technologies and
employees into JDA’s business and product offerings, and the risk
that the merger is not consummated. Achieving the anticipated
benefits of the pending merger will depend, in part, upon whether
the integration of the acquired products, technology, or employees
is accomplished in an efficient and effective manner, and there can
be no assurance that this will occur. The difficulties of such
integration may be increased by the necessity of coordinating
geographically disparate organizations, the complexity of the
technologies being integrated, and the necessity of integrating
personnel with disparate business backgrounds and combining
different corporate cultures. The inability of management to
successfully integrate the business of the two companies, and any
related diversion of management’s attention, could have a material
adverse effect on the combined company’s business, operating
results and financial condition.
Caution Required by Certain
SEC Rules
In connection with the proposed transaction, JDA will file with
the Securities and Exchange Commission (the “SEC”) a registration
statement on Form S-4 that will include a joint proxy statement of
JDA and i2 (if a meeting of JDA stockholders is held in connection
with the Merger) or a proxy statement of i2 (if no meeting of JDA
stockholders is held) that in either case also constitutes a
prospectus of JDA. JDA (if a meeting of JDA stockholders is held)
and i2 will mail a proxy statement/prospectus to their respective
stockholders, and each will be filing other documents regarding the
proposed transaction with the SEC as well. BEFORE MAKING ANY VOTING
OR INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY
OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. Investors and security holders may
obtain free copies of this document (when it is available) and
other documents filed with the SEC at the SEC’s web site at
www.sec.gov. In addition, investors and security holders may obtain
free copies of the documents filed with the SEC by going to i2’s
Investor Relations page on its corporate website at www.i2.com or
to JDA’s corporate website at www.jda.com on its investor relations
page.
JDA, i2, and their respective directors and executive officers,
may be deemed to be participants in the solicitation of proxies
from the stockholders of i2 and JDA in connection with the
transaction described herein. Information regarding i2’s directors
and executive officers is set forth in i2’s proxy statement for its
2009 Annual Meeting of Stockholders, which was filed with the SEC
on April 28, 2009 and Annual Report on Form 10-K filed with the SEC
on March 12, 2009. These documents are available free of charge at
the SEC’s web site at www.sec.gov. i2’s filings are available free
of charge on i2’s corporate website at www.i2.com on its investor
relations page or by telephone as listed above. Information
regarding JDA’s directors and executive officers is set forth in
JDA’s proxy statement for its 2009 Annual Meeting of Stockholders,
which was filed with the SEC on April 7, 2009 and Annual Report on
Form 10-K filed with the SEC on March 13, 2009. These documents are
available free of charge at the SEC’s web site at www.sec.gov or at
JDA’s corporate website at www.jda.com on its investor relations
page. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by securities holdings or otherwise, will be contained
in the proxy statement/prospectus and other relevant materials to
be filed with the SEC when they become available.
NON-GAAP MEASURES OF
PERFORMANCE
(in millions)
JDAS
TTM Ended
Sept. 30, 2009
ITWO
TTM Ended
Sept. 30, 2009
Combined
Company
(Before Synergies)
Non-GAAP Operating Income and Adjusted
EBITDA
Operating Income (GAAP BASIS) $ 16.4 $ 40.8 $ 57.2
Adjustments for non-GAAP measures of performance: Add
back amortization of software technology 4.0
--
4.0 Add back amortization of intangibles 24.0
--
24.0
Add back restructuring charges and
adjustments to acquisition-related reserves
11.1
3.8
14.9 Add back stock-based compensation 7.6 12.2 19.8 Add back costs
of abandoned acquisition
25.0
--
25.0 Adjusted non-GAAP Operating
Income 88.1 56.8 144.9 Add back depreciation
9.5 4.4 13.9
Adjusted EBITDA (Earnings before interest, taxes,
depreciation and amortization) $
97.6 $
61.2 $
158.8
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