Proving the Business Case for the Internet of Things

JDA says no to Honeywell takeover thanks to Blackstone investment

Steve Rogerson
August 23, 2016
 
Blackstone and New Mountain Capital are pumping $570m equity into supply chain software company JDA Software, which it hopes will see off a takeover bid by Honeywell.
 
The capital will be used to fuel the Arizona company’s product innovation and growth plans to deliver next generation cloud-based services and accelerate opportunities for current product development and enhancements.
 
Honeywell was widely reported last week to be preparing a $3bn takeover of JDA Software. However, this financing will give Blackstone a 40 per cent stake in the company, a preferred route for majority stakeholder New Mountain Capital (NMC).
 
With this strategic investment, JDA will be well-positioned to continue building on its portfolio of supply chain and omni-channel retail products. The equity investment is expected to be completed before the end of the year, pending customary closing conditions.
 
“This is a very exciting day for JDA and a testament to the terrific work of our associates and our 4000 loyal global customers,” said Baljit Dail, chairman and CEO of JDA. “This investment will accelerate our future growth plans and vision for the business. It not only reaffirms our vision, financial performance and innovation track record, but also our reputation as the market leader in our space and our unique ability to enable customers to capture opportunities presented by today’s digital transformation.”
 
He said the investment would accelerate the development of its SaaS-based offerings and allow it to develop innovative new products on the Google cloud platform while enhancing its current large R&D investment in existing products.
 
“No one spends more on supply chain-focused R&D than JDA, and we look forward to continuing to innovate for customers through our JDA Labs and our best-in-class product development teams,” he said.
 
The equity investment will have no cash interest costs for JDA and will be used to retire existing debt and reduce JDA’s interest expense by $70m per year. The remaining debt will have no operating covenants and the first maturity will not be until the end of 2023. NMC, which has been the company’s majority shareholder since JDA’s merger with RedPrairie in 2012, will be investing in the equity alongside Blackstone, and will remain as the company’s majority shareholder post-investment.
 
“We are thrilled to partner with New Mountain Capital to make this strategic investment in JDA,” said Viral Patel, managing director at Blackstone. “We are confident that the company is primed for accelerating growth in the years ahead.”
 
This investment will help accelerate the current growth trajectory as JDA closed the first half of 2016 with its highest year-over-year growth in software revenue since NMC merged the company with RedPrairie in 2012. In the second quarter of 2016, JDA posted overall revenue growth of seven per cent versus the prior year (eight per cent in constant currency), with software revenue growth of 62 per cent and 44 per cent growth in software-as-a-service (SaaS) revenue.
 
“Blackstone has strong expertise and history in the software space and, after lengthy due diligence, we are highly confident in the strategic direction and management at JDA,” said Martin Brand, senior managing director at Blackstone. “JDA is the proven leader in supply chain software, has a strong vision for the future, and is uniquely positioned to make the strategic investments that will expand its technological and market share leadership in the years ahead.”
 
JDA counts more than 4000 manufacturing, third-party logistics, wholesale distribution and retail customers among its global customer base including 78 of the top 100 retailers, 78 of the top 100 consumer goods manufacturers, eight of the top ten global 3PLs and 20 of the Gartner Supply Chain Top 25 for 2016 list.
 
“We thank JDA’s management for the outstanding job they have done over the past two years as JDA has transformed itself and refocused its commitment to being customer-centric,” said Pete Masucci, managing director of NMC. “We are excited to be a part of the major success that we believe JDA can achieve in the years ahead. We are pleased to have Blackstone as our shareholder-partner to help us achieve these goals and we’ll work together with JDA to grow the core business, while launching new initiatives and offerings that support JDA’s long-term strategy and vision for delivering a seamless supply chain to its customers.”
 
Earlier this year, JDA announced the general availability of JDA Retail.me, which is the first JDA SaaS system built on the Google cloud platform and is a result of JDA’s strategic collaboration with Google.
 
JDA’s future innovation is driven in large part through JDA Labs, a dedicated research and development group within JDA committed to accelerating technology innovation by identifying, developing and deploying disruptive capabilities that can transform the supply chain and retail markets. As a company, JDA holds more than 400 patents granted and pending, and has filed 28 patent applications in the past 18 months.