According to JDA chief executive officer Hamish Brewer, the i2 acquisition completes the picture for JDA in the supply chain planning and optimization market.
"By acquiring i2 we double our addressable market in manufacturing to include discrete manufacturing, complementing our current market leadership in process manufacturing and strengthening our retail and transportation management presence. A major player in the supply chain space for more than 20 years, i2's world-class customers and employees are the perfect match for JDA. With the experience gained from the successful acquisition of Manugistics in 2006, the addition of i2 is comparatively an incremental and logical step for JDA," said Brewer. "We are confident in our abilities to execute and deliver on projected synergies creating significant incremental shareholder value."
"In an industry that continues to consolidate, scale matters. In that regard, the combination of these two companies will create one of the world's strongest, best-of-breed software solution providers focused on the global supply chain," commented Dr. Pallab Chatterjee, i2 CEO. "The combination of i2 and JDA increases the opportunity for expanded expertise, accelerated innovation and even greater value delivery through the joining of some of the best solutions and brightest minds in the industry."
Snapshot of Combined Company
By combining JDA and i2, the resulting company will have significantly improved operating leverage and a strong financial position. The near-term cost synergies identified in operations, general, administrative and infrastructure resulting from this combination are expected to produce annual cost savings of approximately $20 million. As a result of the pending Merger, i2 is withdrawing its previously provided outlook for third quarter 2008.
"In order to avoid equity dilution and maximize our shareholder value, JDA will finance the acquisition using debt. Credit Suisse and Wachovia will be financing the deal," said Kristen Magnuson, JDA's executive vice president and chief financial officer. "Consistent with our strategy after the Manugistics acquisition, we will use our significantly expanded cash flow from operations to de-lever as quickly as possible."
Terms of the Transaction
Under the terms of the merger agreement, each issued and outstanding share of i2's common stock will be converted into the right to receive $14.86 per share in cash and each issued and outstanding share of i2's Series B Convertible Preferred Stock will be converted into the right to receive $1,095.3679 per share in cash plus all accrued and unpaid dividends (the "merger"). In addition, upon consummation of the merger the vesting of each outstanding option and restricted stock award for common stock of i2 will accelerate in full and the holders of such equity awards will be entitled to receive $14.86 per share less the exercise price of such equity awards, if any.
The following table summarizes the estimated cash to be expended to acquire i2 excluding direct costs of the acquisition:
Direct costs of the acquisition are currently estimated to be $45 million and include OID and debt issuance costs, investment banker fees, legal costs and change-in-control payments.
Consummation of the merger, which is expected to close in fourth quarter 2008, is subject to several closing conditions, including the approval and adoption of the merger agreement by i2's stockholders, the amendment of i2's convertible note indenture, expiration or termination of the applicable Hart-Scott-Rodino waiting periods and regulatory and other customary conditions. It will also be necessary to complete JDA's debt financing arrangements prior to completing the proposed Merger. There can be no assurance that the Merger will be consummated. If i2 or JDA terminates the transaction under certain circumstances, i2 will be required to pay JDA a non-refundable termination fee of $15 million or JDA will be required to pay i2 a nonrefundable termination fee of $20 million.
