The ongoing consolidation of the enterprise software market took a major step forward today with the announcement that Infor, an Atlanta-based company that has acquired 18 software providers since its founding in 2002, will buy SSA Global Technologies, Inc., which itself has acquired a dozen companies since 2001, in a deal valued at $1.6 billion.
The deal, which Infor and SSA officials expect to close sometime in the third quarter, pending SSA shareholder and regulatory approvals, will create the enterprise application market's third-largest company behind Oracle and market leader SAP. It would also return SSA, which went public about a year ago, to the status of a privately held business under Infor.
"This is a huge move," said SSA chairman and chief executive Mike Greenough, referring to the acquisition. "There are now two huge battleships and one huge destroyer coming together."
The price of $1.6 billion, which reflects an offering of $19.50 for each outstanding SSA share, was described as a "premium" over SSA's current stock performance. Infor will finance the purchase entirely through debt. Greenough, in a conference call this morning, said the price represented a 26% improvement over SSA's recent stock price and a 77% gain over the share price at the time of the company's initial public offering last year.
The two companies said that certain shareholders representing 84% of SSA's outstanding shares have already agreed to support the deal.
The combination of Infor and SSA Global would create a software company with more than $1.5 billion in revenue (Infor's revenue is $800 million while SSA's last full-year reported revenue was $711 million), $400 million in earnings before taxes, 6,800 employees, and 37,000 customers in 100 countries. It would also create a company with scores of application software products, including well over a dozen ERP products.
Infor chairman and CEO Jim Schaper noted, however, that even though Infor will now be regarded as the number-three applications vendor in terms of raw size, the market segments it competes in are different from those of Oracle and SAP.
"Tier-one decisions are made," he said. "I don't care if I'm number one or two. What's more compelling is having 40,000 customers."
Schaper also emphasized that the acquisition of SSA will be highly complementary. Infor, he said, has sold to manufacturing and distribution companies with revenue from $20 million to $1 billion, while SSA has focused on companies $1 billion to $2 billion in size. This revenue band -- $20 million to $2 billion -- more accurately defines Infor's competitive space going forward, he said.
Although both Infor and SSA are in many of the same discrete and process manufacturing segments, Schaper also said that the addition of SSA will enable Infor to add product offerings in specific market segments and micro-verticals such as complex and project manufacturing, warehouse management, transportation and logistics, as well as provide deeper penetration in geographic markets such as China, Japan, France, and the U.K.