Geac Computer Corp., a developer of enterprise resource planning and other software, said today that it has agreed to be acquired for $1 billion by the private equity firm that also backs Infor Global Solutions (Alpharetta, GA), a software company that has acquired more than a dozen applications providers in the past two years.
During a conference call today, Geac president and chief executive Charles S. Jones said that more than 25 companies had bid for Geac, with five entering a "confidentiality" stage in the process. The winning bidder was Golden Gate Capital, a San Francisco-based private equity firm that has funded Infor and several other software companies.
The price for Geac, which claims that 18,500 organizations use its various software product lines, is $11.10 per share, or $1 billion, a 27% premium over the $8.77 share price as of last Friday. The deal requires regulatory approval as well as an affirmative vote by two-thirds of Geac shareholders. Geac is based in Markham, Ontario, Canada.
Jones said there were a number of reasons for the sale to Golden Gate. He cited the all-cash nature of the acquisition, the premium over the share price and industry consolidation. He said that in order for Geac to continue to grow it would have had to acquire additional companies.
Judy Sweeney, a research director at AMR Research, said the acquisition part of Geac's strategy was becoming problematic. "The whole Geac model was built on acquisition," Sweeny said in an interview. "They were finding it harder and harder, and they were watching revenues decline. They still had cash in the bank and wanted to cash out at a premium rather than wait."
In its first fiscal quarter 2006, Geac had revenues of $103.7 million, down from $106.9 million in the like 2005 fiscal period. Net income was $11.3 million, down from $13.5 million. At the end of the first quarter, Geac had $192 million in cash, which will be used to help finance the acquisition by Golden Gate.
Upon completion of the acquisition, which Geac said it expects in the first quarter of calendar 2006, some Geac products will be transferred to Infor, and the rest of the company will be reorganized into two separate Golden Gate Capital portfolio units.
Infor will acquire five ERP product lines. They are: System21, which is designed for the mid-market; RatioPlan, a German ERP product; Streamline, a Microsoft technology-based product for the small and medium-size market; Runtime, an IBM iSeries-based line, and Management Data, described as a services offering.
Geac's financial applications as well as its industry-specific software products will be organized as two business groups under a new Golden Gate company preliminarily called NEWCO. One unit will house financial applications, including Geac's Enterprise Server, SmartStream, Anael, Extensity and Comshare products. The other will handle Geac's products for local government, restaurants and libraries, among others.
Infor, which has acquired such companies as Brain, Lilly and MAPICS, stands to add between 1,800 and 2,000 customers as a result of the acquisition, said Infor president and chief operating officer Ken Walters. Infor, which closed its fiscal year on May 30 with $360 million in revenue, currently has about 17,500 customers.
In an interview, Walters said that the addition of Geac's product lines supports Infor's vertical market strategy in manufacturing and distribution. "We will be very consistent with what we've done in the past," Walters said. "We will continue to support and develop the Geac products and look at ways to leverage them in geographies and vertical markets."
Walters also said he was particularly excited about the addition of the Runtime iSeries-based product, which provides ERP as well as product lifecycle management and product data management capabilities to the apparel industry. The Runtime product line, he said, integrates with Geac's System21 line and also is a fit with a segment of the former Brain customer base.
Walters estimated that the addition of the Geac products will result in Infor having about a $300 million business in iSeries-related software, which will be a challenge to such other iSeries software competitors as SSA Global and Oracle. "We are going to rival anyone for the top," he said.
Infor will also look at ways to leverage the Geac products with Corestone, its standards-based development and integration environmentannounced in June. Walters said he would announce "a clear product roadmap" for the Geac products after the acquisition is completed.