Deal breaker: Credit crunch smashes i2-JDA merger
By Manufacturing Business Technology Staff -- Manufacturing Business Technology, 12/8/2008 1:37:00 PM
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It appears that the global credit crunch has killed JDA Software’s plan to acquire supply chain management software specialist i2 Technologies.
In announcing the proposed $346 million acquisition in August, CEOs of both companies said the deal would create one of the world’s strongest best-of-breed supply chain software suppliers.
In early November, however, JDA asked to negotiate a lower price, stating that because of the recent financial crisis, “available credit terms would result in unacceptable risks and costs to the combined company.”
That didn’t fly with i2 management, which argued that the deal was not tied to JDA’s ability to obtain favorable financing. If JDA didn’t agree to the original terms, i2 management said it would exercise its right to terminate the deal and collect a $20 million termination fee.
On December 4, i2 announced its intent to terminate the deal and said it expected JDA to pay the $20 million within three business days.
While it seems clear this deal is dead, the question now becomes: what does i2 do next? This former industry heavyweight has struggled to stay afloat since the dot-com crash. Most of the companies it competed with in the supply chain management space have either been acquired by other companies or decided to operate as smaller niche players focusing on solving specific supply chain problems.
In a statement announcing the end of the agreement with JDA, Jackson L. Wilson Jr., executive chairman of the i2 board, said the company is in a strong cash position.
CEO Dr. Pallab Chatterjee said, "In these difficult economic times, supply chain management is crucial to efficient business operations. So today, more than ever, businesses need the technology and expertise of i2.” That may be true, but will customers have enough faith in i2’s ability to survive long term to continue purchasing its solutions?
