To some in the supply chain, it may come as no surprise that two of its biggest software service providers— Alpharetta, Ga.-based RedPrairie Corp. and Scottsdale, Ariz.-based JDA Software Group Inc.—entered a merger agreement to supply a combined solutions and services portfolio to retailers and manufacturers. Each company in their own regard addresses the needs and issues of professionals in the space of transportation, logistics and distribution, to name a few—albeit from different strategies (RedPrairie’s in warehousing, workforce management and store operations whilst JDA pioneered a focus in the areas of supply chain planning, merchandising and pricing solutions). But together, both vendors provide a stronger approach to address the changing business models that retailers, suppliers and manufacturers face as a result of the “always connected consumer.”
“Supply chain planning belongs together with supply chain execution—you don’t have to be a genius to figure that out,” said Hamish Brewer, President and Chief Executive Officer, JDA Software, who will lead the combined companies as CEO following the completion of the transaction, scheduled to close in December. “The situation in the market today is that the market leaders in planning are not the same companies as the market leaders in execution. And we’re going to change that.”
With both companies long-term heritage in e-commerce, perhaps the more pertinent factor to the decision behind the merger is in regards to the developed industry focus on consumer commerce with multi-channel. Hamish referenced JDA’s retail customers’ focus not only on their business reinvention strategies but the importance to stay relevant in a time of “connecting, online consumers who have the world at their disposal on their smartphone.”
“The business models have to change, the ability to respond to consumer demand has to change and the business agility has to change,” Brewer confirmed. “And although retailers are feeling the grunt of this today, the reality is that one step behind them are their suppliers and manufacturers because they need to be in locked step with the retailers. The retailers are not going to be able to provide the services they need if the manufacturers can’t service them.”
“This transaction is a combination that has made sense for a very long time,” said Michael Mayoras, Chief Executive Officer, RedPrairie. “It creates this fantastic blend of organizations that both in their own rights have been working for a very long time to improve supply chain science and to extend the idea of supply chain management throughout the organization. Our two companies rarely compete against each other. Therefore, when you think about the combination of talent operationally and from an engineering perspective, we’ve both amassed an enormous amount in our domain knowledge in our respective portions of the value proposition. And because of that, there is clearly expertise on both sides that is required in the go-forward company.”
Under the terms of the merger agreement, entities affiliated with RedPrairie will effect a cash tender offer to acquire all outstanding shares of JDA common stock for $45 per share, which represents a $1.9 billion transaction as a result of the combined company. The $45 per share offer price represents a 33 percent premium to JDA’s stock price on October 26, 2012; and also represents a 16 percent premium to JDA’s all-time high stock price. The transaction, approved by the Board of Directors of JDA, will be funded with committed debt financing from Credit Suisse. New Mountain Capital will also contribute the current equity capital of RedPrairie and commit additional new cash to fund the transaction.