newsworthy
A SALE OF SUPPLY CHAIN SOFTWARE FIRM
JDA Software Group Inc. to Honeywell International
Inc.—or anyone else—appears to be off the table.
Private equity firm New Mountain Capital,
JDA’s parent, said Aug. 19 it has joined with The
Blackstone Group, the private equity and investment banking giant, to invest nearly $570 million
in Scottsdale, Ariz.-based JDA, which provides software services to support supply chain planning,
merchandising, and pricing, all critical areas that are
needed in order to master omnichannel fulfillment.
Blackstone, which will invest most of the total amount,
will receive a guaranteed 7.5-percent return, according
to BG Strategic Advisors (BGSA), a Palm Beach, Fla.-based logistics mergers and acquisitions consultancy.
New Mountain will use the funds to pay down about
one-quarter of JDA’s $2 billion debt load, which would
reduce JDA’s annual interest expense by $70 million,
according to BGSA estimates.
The Blackstone investment signals that New
Mountain believes JDA is today a more valuable property remaining under its umbrella than as a saleable asset.
Honeywell, the Morris Plains, N.J.-based conglomerate,
was rumored to be readying a $3 billion offer for JDA,
which included an assumption of JDA’s debt. Honeywell
has claimed a growing position in the warehouse and
distribution category with the acquisitions of equipment
maker Intermec Inc. and material handling automation specialist Intelligrated Systems Corp. Honeywell’s
rumored bid for JDA was about $1.1 billion more than
New Mountain paid for the company in 2012.
Honeywell declined comment on the New Mountain-
Blackstone announcement. In an Aug. 19 conference call
with analysts, JDA Chairman and CEO Bal Dail declined
comment on the Honeywell rumors. “JDA has had a
number of discussions with many different firms, and
the Blackstone/New Mountain outcome in my book,
from my perspective, is the best outcome,” Dail said.
Benjamin Gordon, BGSA’s founder and managing
partner, said New Mountain could have sold JDA
to several suitors, including Honeywell. Instead, New
Mountain concluded that it would make more money
if it doubled down, brought in Blackstone, paid down
debt, and focused on growing the business.
“DOING HONEYWELL A FAVOR”
Dwight Klappich, a vice president and supply chain specialist at the Stamford, Conn.-based consultancy Gartner
Inc., said New Mountain might be doing Honeywell a
favor by declining to sell. “The track record of industrial
companies buying into the business application space
has been atrocious,” Klappich said. That’s because most
software used by industrial businesses focuses on “
operational technology,” which is the domain of engineers,
and not information technology, which is the purview of
IT departments, Klappich said. “They are not the same,
and success in one has no influence on success in the
other,” he said.
Despite that, industrial companies enamored with the
idea of “software” and its growing importance in their
business conclude that all software applications are the
same and can be effectively executed in a uniform manner, he said.
The Aug. 19 announcement should compel Honeywell
to reconsider its strategic direction in the p. 19 I M
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Blackstone’s investment in JDA
sends “no sale” signal to Honeywell,
other suitors
