Hoping Jon & Kate Can Come to Terms Like JDA & i2

Many people are aware of a reality show on television titled “Jon & Kate Plus 8”, which features a couple that is separated and ready to get divorced. Occasionally couples have disagreements and need to get away from each other to sort things out then come back to the table with new perspectives.  That’s what JDA and i2 have done with their deal from last year. JDA plans (once again) to acquire i2 Technologies. This time around, the offer is for $396 million (USD). Last year a similar JDA and i2 technologies deal soured due to JDA's proposal to renegotiate the initial agreement of $346 million. Maybe it was good to break up, and then make up in the hopes of getting a better deal. Who thought the software industry would see such drama?

Last year, the i2 board of directors didn't think JDA's revised proposal was in the best interests of i2's stockholders. This year, JDA went back to the table with i2. The companies reevaluated the deal so that both organizations would benefit and become leaders in the supply chain space.

In an industry analyst call, JDA's chief financial officer (CFO), Pete Hathaway, made it clear that JDA plans to finance approximately $275 million of the acquisition. The rest of the transaction will be a combination of cash on hand and JDA common stock trading.

This time around, both parties agreed on a deal much greater in value than the one last year. A key difference this time is that they've put in place a structured transactional plan to make sure the deal comes to completion. The question pops up why go back and make up? There are multiple reasons.

First, i2 has a much better balance sheet than last year (meaning less debt).

Second, i2 has become a more service-focused firm, which aligns well with JDA's strategies. In the past, JDA acquired other companies to build its scale, expand its solution suite, and provide an enriched customer experience across vertical industries (manufacturing to retail to consumer goods). This latest announcement follows that pattern.

Finally, the change in CEOs at i2 made the organization move in a precise direction by offering focused software as a service (SaaS) and bringing innovation back into the equation. In other words, i2 undertook a serious diet regime to become more attractive to potential suitors.

All this is great but how does a user of supply chain software benefit from this deal. The following list includes some of the things JDA and i2 customers can look forward to:

  • There were will be a harmonized solution offering for manufacturing  that will  integrate both organizations products

  • A combined JDA and i2 will be able to offer expertise in the supply chain domain for a variety of vertical industries.

  • The new organization will provide customers with enhanced innovations, focused on specific industries i.e. retail, consumer goods, manufacturing and wholesale.

  • Capabilities in the areas of planning and optimization will be enriched from manufacturing to distribution.

  • JDA customers will now be able get retail focused software with i2 manufacturing-centric capabilities, all packaged together.

The market focus for JDA will remain in manufacturing (process and discrete); wholesale, retail, consumer goods and distribution. By acquiring i2, JDA will be able to enhance its product and service offerings and will be able to compete with leaders like SAP and Oracle. With this deal, JDA’s comprehensive suite will be able to manage the entire life cycle of its customers’ product from the manufacturing stage to its final destination. Nevertheless, JDA is missing a piece of the supply chain puzzle: a warehouse management system (WMS). Will our principle analyst, P.J. Jakovljevic's prediction that Manhattan suite will be the next acquisition target for JDA come true?
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