American Shipper

NEWS FLASH: JDA gets $570m in private equity funds to ward off Honeywell interest

The supply chain software provider has been the rumored target of industrial conglomerate Honeywell, but instead gets additional capital from Blackstone and majority owner New Mountain Capital.

   The supply chain solutions provider JDA Software Group said Friday it has completed an agreement with private equity groups Blackstone and New Mountain Capital for $570 million to stave off reported acquisition interest from industrial manufacturer Honeywell.
   The cash investment will allow Scottsdale, Ariz.-based JDA to pay off short term debt, with the company saying it will save $70 million per year in interest. Those savings will be used to “fuel JDA’s product innovation and growth plans,” the company said.
   The new equity investment is expected to be completed by the beginning of the fourth quarter.
   New Mountain Capital is the existing majority shareholder of JDA (and will remain so) and facilitated the merger with former supply chain software rival Red Prairie in 2012, a move that took JDA private.
   Blackstone is a well known diversified private equity group that has experience investing in the logistics and software industries.
   The news can be interpreted as a statement of confidence in JDA’s market leading position in several supply chain technology categories, as well as its ability to innovate. The company had spent the decade up to 2012 rolling up several transportation planning, execution and warehousing vendors to create an end-to-end tool that allowed it to effectively compete with market leaders SAP and Oracle and domestic supply chain software provider Manhattan Associates.
   JDA is known for its robust optimization capability and comprehensive solutions set, but it has faced increasing competition from upstarts in the planning and TMS space in recent years as companies have started gravitating toward more cloud-based, multi-tenant software. JDA can deploy its solution in the cloud, but does not provide multi-tenant solutions.
   That is still seen by some as an advantage, as customers (especially large, global companies with complex supply chain requirements) can heavily tailor JDA software to meet their specific needs.
   More recently, JDA has been tightly focused on helping customers determine how to manage inventory and fulfill orders in an environment where consumers can buy from multiple channels and receive their goods at multiple locations.
   JDA Chairman and CEO Bal Dail said the investment will allow JDA to build its capability as a software-as-a-service (SaaS) provider and in the cloud.
   “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. “This investment will accelerate the development of our SaaS-based solutions and allow us to develop innovative new solutions on Google Cloud Platform while enhancing our current large R&D investment in our 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.”
   The new equity investment will have no cash interest costs for JDA, the company said, and the remaining debt will have no operating covenants, with the first maturity not occurring until the end of 2023.
   In the first half of 2016, JDA has seen 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 had revenue growth of 7 percent versus the prior year, with software revenue growth of 62 percent and 44 percent growth in SaaS-based revenue.
   JDA has more than 4,000 global customers, including 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, and eight of the top 10 global 3PLs.