Private equity firm Golden Gate Capital has agreed to buy business software maker Geac Computer Corp. Ltd. for around US$1 billion. Golden Gate Capital plans to break Geac into pieces, with Geac's ERP (enterprise resource planning) software changing hands and becoming the property of another Golden Gate Capital-funded company, Infor Global Solutions.
San Francisco-based Golden Gate Capital will pay $11.10 per share for Geac. The companies expect the deal to close in early 2006.
Geac, based in Markham, Ontario, bills its products as "software for the CFO." The company had income of $77 million last year on revenue of $444.4 million, mostly from the enterprise applications business. That business drove 80 percent of Geac's revenue last year, the company said in its annual report. The software Infor is acquiring makes up about a quarter of Geac's revenue, according to Infor President and Chief Operating Officer Ken Walters.
Infor is becoming a formidable player in the ERP market with a portfolio built through acquisitions. The private company, with headquarters in Alpharetta, Georgia, focuses tightly on the midmarket manufacturing and distribution industry, selling mainly to customers with less than $250 million in annual revenue. The software lines it will pick up from Geac include System21, RatioPlan, Runtime and Streamline. Infor will have revenue this year of more than $700 million, Walters said.
Before Geac, Infor's largest acquisition was its purchase earlier this year of Mapics Inc., for around $350 million in stock. Infor has 2,300 employees worldwide and 18,000 customers.
Golden Gate Capital plans to form two new business groups around Geac's remaining assets, which will be held by a new company with a chief executive office to be named prior to the transaction's closing. A financial applications unit will focus on Geac's Enterprise Server, SmartStream, Anael, Extensity and Comshare products, while an industry-specific applications group concentrates on serving industries, including libraries, local governments and restaurants.
Before accepting Golden Gate's offer, Geac's management team spoke with two dozen potential suitors, Geac Chief Executive Officer Charles Jones said in a conference call with analysts.
"This should be good news for customers," Jones said, pointing to Golden Gate's deep pockets and the resources it has to back Geac's technology. "Golden Gate is committed to continuing the vital support of Geac's products."
Geac's fate illustrates that simply gobbling up lots of applications with lucrative maintenance revenue streams won't be enough to ensure vendor viability, AMR Research Inc.'s analysts wrote in a note on the deal.
"[Geac] lagged behind most vendors in technology innovation and deep verticalization for the customers it served. In its model, its only way to sustain and grow margins was to continue on the acquisition trail. But the continued consolidation in the software market made those acquisitions more difficult -- particularly at the price points it was willing to pay," AMR Research analysts wrote. -- IDG News Service