Earlier today, RedPrairie said it had made an agreement with JDA Software Group (News - Alert) to buy the company for fully $1.9 billion in cash outright, paying $45 a share. Considering that the share price jumped fully 17 percent in afternoon trading to reach $44.80, it's clear that the market expects the deal to go through as planned. But what does the acquisition of JDA Software Group do for RedPrairie?
The deal between the two companies is expected to be closed by the end of the year, which isn't exactly a mean feat given that there are only two months left to 2012. JDA Software Group's third-quarter net income was $11.1 million--26 cents per diluted share--which was down just over a third, 34 percent, from the same time in 2011. However, given that the combined company will have a total annual revenue in excess of a billion dollars, it's worth taking notice of. The combined company will be led by JDA Software Group's CEO Hanish Brewer, while RedPrairie's CEO, Michael Mayoras, will retain a seat on the board.
RedPrairie is a maker of business software in general, based in Atlanta, Georgia, so seeing them get into JDA Software Group, a company with a focus on supply-chain management software, makes a note of sense. But RedPrairie didn't exactly buy JDA Software Group at fire-sale prices; they paid a 33 percent premium to get the company. JDA Software's income was down this quarter over last, so what prompted RedPrairie to pay more for it? This has actually spawned some investigations as well, as Branham Law LLP has embarked on one related to the sale of JDA Software Group to RedPrairie.
A statement release from the company said this: "JDA's heritage of pioneering market-leading supply chain planning, merchandising and pricing solutions is a perfect strategic fit with RedPrairie's heritage in warehousing, workforce management, store operations and e-commerce." There's nothing out of line about a statement like that; supply chain management is a growing concern for lots of businesses, especially those looking to save money by preventing waste in the supply chain. RedPrairie being able to offer supply chain management in a bundle with their current offerings would likely make their software a lot more valuable, especially to businesses who'd rather have an all-in-one approach with fewer licenses needing purchased in the process.
So it's clear that RedPrairie and JDA Software Group would make a good fit. Whether or not they made a good enough fit for RedPrairie to pay such a substantial premium is unclear, but the combination of the two should make a formidable overall software offering that brings a lot of new features to businesses and keeps costs down on several fronts.
Edited by Rich Steeves