JDA Software to Acquire Manugistics

The company gobbles up the ailing supply chain management software provider for $211 million in cash.

The once high-flying supply chain management software provider Manugistics has succumbed to consolidation.

Scottsdale, Ariz.-based JDA Software Group announced April 24 that it is acquiring SCM stalwart Manugistics for $211 million in cash, or $2.50 a share.

By combining the two companies, JDA plans to establish itself as a leading, vertically focused global supply chain software provider for manufacturers, wholesalers, distributors and retailers.

"No other software company will be able to offer a similar breadth and depth of solutions to the very large, vertically focused demand chain market," said JDA CEO Hamish Brewer, in a statement. "This deal is as close to a perfect match as you can get for an acquisition of this size. Only JDA can bring the product, market and industry leadership that will position Manugistics for a new era of growth."

Pending a successful acquisition of Manugistics—the deal is expected to close during the second or third quarter this year—venture capitalist Thomas Cressey has agreed to invest $50 million in JDA software to help it along its path.

Manugistics, founded in 1986 in Rockville, Md., has been on the ropes for several years. Throughout most of its history it was cited by analysts as a leader in the development of the supply chain planning market. But as that market shifted to a more complex model in the late 1990s, Manugistics ceded its lead to i2 Technologies and never regained its hold. (Following JDAs acquisition announcement, i2 announced free integration services of Manugistics applications to the i2 Agile Business Process Platform.)

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In 2004 AMR Research listed Manugistics as the seventh-largest SCM software provider.

"After extensive due diligence, we believe that merging with JDA is the best path forward for all our stakeholders," said Manugistics CEO Joe Cowan, in a statement.

The combined JDA and Manugistics company will have annual revenue of more than $390 million with more than $170 million in annual maintenance revenue, according to JDA officials—an earnings spike that could put JDA in place as the worlds fourth-largest player in the SCM market—particularly in the retail sector, according to AMR.

"With this acquisition, JDA could become a more serious enterprise suite contender in the hot retail software market, but its not a certainty," said AMR analyst Lora Cecere, who co-wrote an April 25 research note with Robert Graf, Mark Hillman and Greg Aimi. "With a joint installed based of 5,500 customers, the purchase of Manugistics assets for demand planning, replenishment, price optimization, and transportation planning have a complementary and competitive advantage."

That said, JDA needs a "quick and clear" integration road map that takes into account Manugistics functionality around transportation management, demand management (from its Talus Solutions acquisition in 2000) and replenishment software, according to AMR.

JDA also needs to clarify its architectural strategy.

"JDA is currently working with a few retail clients on a long-overdue effort to port its products, written mostly as [IBM] AS/400 applications, onto an integrated Microsoft .Net platform," said Cecere. "Numerous obstacles have delayed general availability."

The acquisition of Manugistics, which has its WebWorks architecture based on J2EE, will bring JDA another option (but one thats based on J2EE and not .Net).

Manugistics shares 150 joint customers with JDA.

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