RedPrairie is merging with fellow supply-chain software vendor JDA in a deal worth roughly $1.9 billion, the companies announced Thursday, just days after reports surfaced that JDA had put itself up for sale. The deal is expected to close this year.
Analysts had speculated about a number of potential suitors for JDA, including IBM and Oracle, but RedPrairie's emergence as the buyer could be surprising to some.
The combined company will have annual revenue of more than $1 billion, according to a statement. "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," the companies said in a statement. "This unique combination will provide retailers and manufacturers with extraordinary capabilities to meet the needs of hyper-connected, mobile consumers."
JDA CEO Hamish Brewer is planned to become CEO of the combined company after the merger is complete, with RedPrairie CEO Michael Mayoras taking a seat on the board, according to a statement.
RedPrairie is owned by private equity fund New Mountain Capital. In a letter to customers released Thursday, Brewer sought to calm JDA customer fears of what may be to come now that JDA is going private.
"NMC has a proven track record of successfully growing software businesses through investment and acquisition," he said. "In 2010, NMC acquired RedPrairie and since that time RedPrairie has grown substantially."
"There are many similarities between the JDA and RedPrairie corporate cultures including a rich heritage in the industry," the companies said in a FAQ document. "And, both have long been committed to providing their customers with innovative, best-in-class products, support and service. This dedication drives both companies' culture."
It's not clear whether any other parties will attempt to make a counter bid for JDA now that New Mountain's intentions are known. Platform vendors such as Oracle and SAP, for example, may have little interest given their already substantial supply-chain software portfolios.
"This deal, if consummated, provides significant implications for both management of the combined companies and for the supply chain best-of-breed technology market as a whole," wrote analyst Bob Ferrari of the Ferrari Consulting and Research Group on his Supply Chain Matters blog Thursday. "In today's new normal of highly dynamic global supply chains, where time is ever more critical, supply chain planning and execution processes have been compelled to morph as one contiguous process. This announcement is a significant testimonial to that trend."
The pending merger is "going to up the stakes for the rest of the [supply-chain] players, especially the smaller ones that remain," Ferrari said in an interview Thursday.
"Putting these two companies together is not going to be an easy feat," Ferrari added. "These are two very interesting companies, and each have some innovation to offer."
How development teams are combined and product road maps are affect both have "big question marks" on them right now, he said. Both customer bases should "sit tight and wait to see what comes about," Ferrari said.
