February 8, 2001 -- In a move that should serve to broaden its operations from auction services to a more complete B2B enabler, FreeMarkets today announced that it has signed a definitive agreement to acquire privately held Adexa, Inc., a provider of collaborative commerce solutions. According to FreeMarkets, the acquisition of Adexa will allow companies to manage their direct materials from end to end, using the combined company's solutions to source and operate their supply chains.
Under the terms of the agreement, FreeMarkets will issue a total of 17.25 million shares and options in exchange for all of the outstanding shares and options of Adexa. This represents an aggregate purchase price of approximately $340 million, based on FreeMarkets' closing price on February 7, 2001. Adexa had over $50 million in revenues in 2000.
We believe that the combination of FreeMarkets and Adexa will provide the first end-to-end e-commerce solution for direct materials, said FreeMarkets' chairman and CEO Glen Meakem. The combined company will offer customers the ability to identify, select and collaborate with trading partners in their own private marketplaces, with exchanges, or through the FreeMarkets B2B Global Marketplace.
For such a large undertaking, FreeMarkets' acquisition might be overshadowed by the addition of Ray Lane, the opinionated e-business sage, to FreeMarkets' board of directors. Formerly of Oracle and now a general partner at venture capital firm Kleiner Perkins Caufield & Byers, Lane could be a PR tonic for a company that has seen its stock continue to slump despite beating analyst estimates for Q4 2000.
Of his new position, and FreeMarkets' acquisition, Lane said, I am very pleased to be joining the FreeMarkets board at such an exciting time, and look forward to working with Glen Meakem and the outstanding FreeMarkets' leadership team. The recently announced acquisition of Adexa is a compelling strategic move by FreeMarkets and underscores the company's commitment to enhance the competitiveness of major global enterprises.
We are very excited to join the FreeMarkets team, said Adexa founder, president and CEO Cyrus Hadavi, who will become vice chairman of FreeMarkets upon consummation of the transaction. By joining FreeMarkets, we can provide an industry-leading set of solutions and unique domain knowledge of direct materials in key economic sectors ranging from high technology to automotive.
FreeMarkets' solutions enable global management of direct materials, which represent more than 60 percent of all materials purchased by manufacturers. According to a recent report by Forrester Research, purchasing executives plan to buy almost 50 percent of their direct materials online by 2002. And the same percentage of manufacturers expect to use an online marketplace solution to optimize production schedules with suppliers. Additionally, AMR Research forecasts that the market for traditional supply chain planning management software will reach $9.5 billion by 2002, and Information Week expects the market for collaborative commerce applications to exceed $6 billion in the same period.