The $1.9 billion deal creates a new source of e-commerce and supply chain technology.
RedPrairie Corp., a provider of e-commerce technology and web-based systems for managing stores, supply chains and warehouses, will merge with JDA Software Group Inc.
JDA complements RedPrairie’s offerings with web-based systems that help retailers manage supply chains, merchandising and product pricing, the companies said today. In a transaction estimated at $1.9 billion, investors associated with RedPrairie are making a cash offer for the common stock of publicly held JDA.
The merger, which is expected to be complete by the end of this year, will establish a new contender in the business of providing “retail enterprise software” used to manage multiple operations ranging from e-commerce sites and store systems to supply chain and inventory warehouses, industry analysts say. “It creates a major player in the retail enterprise software space” that will compete with companies such as Oracle Corp., SAP AG and Epicor Software Corp., says Paula Rosenblum, managing partner of research and advisory firm Retail Systems Research.
Rosenblum adds that RedPrairie and JDA have some overlap in their technology offerings, including workforce management and the management of orders across multiple distribution centers. But she says the combined company will offer such combinations as using JDA’s merchandise management and product pricing applications with RedPrairie’s warehouse management systems.
Ian Hobkirk, managing director of consultants Commonwealth Supply Chain Advisors, adds that a combined RedPrairie and JDA has the potential to be a “true game changer” by bringing together two established suites of retail operations and supply chain technology applications. “The resulting entity ,” he wrote in a blog post on the merger, “will be something the industry hasn’t seen before: a ‘super best-of-breed’ provider pairing JDA’s expertise in supply chain planning, merchandising and pricing with RedPrairie’s supply chain execution strengths [in] warehouse management and store operations.”
RedPrairie is a privately held company owned by private equity firm New Mountain Capital, which acquired it in 2010. The publicly traded JDA reported revenue of $164.5 million for the third quarter ended Sept. 30, down 5.0% from the year-earlier period. Net income for the quarter decreased about 39% to $11.1 million from $18.3 million. For the nine months ended Sept. 30, JDA said revenue declined 2.0% year over year to $495.5 million from $506.1 million, as net income fell 66.7% to approximately $26.4 million from $79.1 million.
Under terms of the merger agreement, JDA CEO Hamish Brewer will lead the new company, which has yet to be named, as CEO. RedPrairie CEO Michael Mayoras, currently on the board of RedPrairie, will also serve on the board of the combined company.
Among the focus areas of the new company will be helping retailers to manage their inventory and customer orders to better serve consumers shopping on mobile devices as well as desktops and in stores, Mayoras says. “This merger establishes a company perfectly suited to meet the evolving demands of the ‘always-on’ mobile consumer,” he says.
As with many mergers of technologies by combined companies, however, RedPrairie and JDA have their work cut out for them, Rosenblum says. “There is a lot of integration work to be done,” she says. “But in a year, the new company could be an interesting new contender.”
Once that integration is in place, “retailers stand to gain the most,” Hobkirk says. “Many of them are already using JDA applications for demand planning, merchandising and store replenishment. These applications would, in theory, be much more closely linked with execution applications like warehouse management, transportation management and store operations for greater responsiveness to changes in the demand plan.”