JDA Software Group Inc. (Nasdaq:JDAS) and QRS Corporation (Nasdaq: QRSI) has announced a definitive agreement for JDA to acquire QRS, a leading provider of collaborative commerce solutions with more than 10,0001 retail and manufacturing customers. Under the terms of the all-stock transaction, QRS shareholders will receive 0.50 of a share of JDA common stock for each share of QRS common stock. By combining the two companies, JDA will significantly enhance its position in the global field of demand chain solutions providers, and will be uniquely positioned to deliver data rich software, best practice processes, trading community enablement and industry expertise. Based on the 12 month period ending
This acquisition delivers on three compelling fronts, stated Hamish Brewer, JDAs CEO and president. First, JDA is now faced with a world of new opportunities. QRS offers one of the worlds leading trading and product information management networks. We intend to seamlessly merge this data with existing JDA products to provide a new class of applications that are inherently data-rich, collaborative and connected. Second, our shared customer base provides a wealth of cross-selling opportunities. And finally, this acquisition will establish a new business model combining high margin software licenses with stable, recurring revenues. We also expect to realize cost savings ranging from $20 to $25 million that will drive earnings.
Added Brewer, QRS transaction services and rich data set including product, transaction and market data from the store floor brings real-time information from across the demand chain to our PortfolioEnabled software. For the first time, our customers will be able to rely on one company -JDA - to combine external data with internal enterprise and customer data to ensure the most effective, knowledge-based decision making.
Two and half years ago, QRS outlined a three-part strategy to turn around its business and achieve market leadership. We achieved the first phase of strengthening the companys financial performance, commented Liz Fetter, president and CEO of QRS. The second phase of our plan was to drive operational efficiencies and improve the performance of our core business while introducing new collaborative solutions to drive future growth. With the successful introduction of our new product information management solutions, we are pleased with our progress on phase two.
The third and final phase of our vision for the company was to become a market leader in collaborative commerce solutions for the global demand chain trading community, and we have continued to actively evaluate the best path to achieve this goal, both organically and strategically. We believe the agreement were announcing today is the best way for QRS to achieve the leadership we have sought for the company, our customers and our shareholders, continued Fetter.
Combined Company to Capitalize on Product Information and Global Data Synchronization Opportunities
JDAs plans for its tenth acquisition are also motivated by the unrivaled success that QRS has achieved driving the North American general merchandise and apparel (GMA) industry to new levels of efficiency. QRS provides the leading electronic product catalogue in
With advancements in radio frequency identification (RFID) and other collaborative initiatives, the industry is heeding the call for increased efficiency and accuracy in the exchange and update of item and supply chain information, explained Brewer. While QRS is the de facto standard for data synchronization in the U.S. GMA industry, we see a huge growth opportunity in other world regions and market segments, in particular food and consumer packaged goods. In this era of technology vendor consolidation, our global resources and extensive client relationships will position us to be the preferred solutions provider for these untapped markets that will soon require interoperability and compliance with shared global standards.
Terms of Agreement
Under the agreement, QRS will be merged with a wholly-owned subsidiary of JDA. QRS stockholders will own approximately 20 percent of the outstanding capital stock of the combined company. Based on the latest closing price of JDA stock, the transaction is valued at approximately $100 million and is expected to be accretive to JDAs FY 2005 earnings. Direct costs of the acquisition and the costs of the ensuing integration of the two organizations are expected to total $15 to $17 million. All directors and executive officers of the two companies have signed an agreement to vote in favor of the transaction, which is expected to be tax-free to QRS stockholders. Completion of the merger, which is expected to close in the third or fourth quarter of calendar year 2004, is subject to the approval of JDA and QRS stockholders, expiration or termination of the applicable Hart-Scott-Rodino waiting periods, and other regulatory and customary conditions. As provided in the merger agreement, JDA will be adding one board member from the board of QRS, who will be identified before the joint proxy is sent to stockholders.
Citigroup Global Markets Inc. is acting as financial advisor to JDA, and Wachovia Securities is acting as financial advisor to CVP2 with regard to the transaction.
Snapshot of Combined Company
By combining JDA and QRS, the resulting company will have significantly improved operating leverage with a strong financial position. Based upon QRS results for the quarter ending
As you review the prospects for our combined business, it should be noted that we expect continued decline in the existing EDI-VAN component of the QRS business, which represents roughly $66 million in revenues over the past 12 months, commented Kris Magnuson, executive vice president and CFO of JDA. We factored this into our decision making and believe that the overall transaction will be substantially accretive to JDA in 2005 and beyond.
The synergies in selling, general and administrative infrastructure between the combined organizations are expected to produce annual cost savings ranging from $20 to $25 million dollars within the first 18 months after closing.
With 33 offices spanning every major global market to service customers in over 60 nations, JDAs global sales and delivery infrastructure is perfectly positioned for another successful acquisition. Upon completion of the acquisition, the current JDA senior management team, led by CEO Brewer, will be joined by the following executives from QRS:
James G. Rowley, who currently serves as QRS senior vice president, global engineering, support & technology and chief technology officer, will join JDA as senior vice president of operations, and become part of JDAs Product Strategy Council.
Ray Rike, who currently serves as QRS senior vice president, worldwide sales and field operations, will join JDA as senior vice president, collaborative solutions.