Supply Chain Software Firms JDA Rebuffs Honeywell Takeover

It looks like supply chain software firm JDA will be able to hold off an acquisition attempt by Honeywell International. The firm announced Friday it was able to secure $570 million from Blackstone Group, an equity investment fund.

Industrial conglomerate Honeywell International was reportedly close to sealing a $3 billion deal this week to acquire JDA.  New Mountain Capital, the majority stakeholder in JDA, instead went with Blackstone’s structured financing deal. That arrangement includes preferred stock and equity warrants along with a guaranteed return of 7.5 percent

Blackstone will reduce JDA’s total existing debt by $500 million and lower its interest payments by $70 million per year, as well as provide the funds necessary to push future product development in cloud-based software. The deal is expected to close by the end of Q4.

JDA software is used by around 4,000 wholesale distribution and retail customers. The firm is currently carrying $2 billion of outstanding debt, a sum that’s roughly nine times its earnings before interest, taxes, depreciation and amortization. Blackstone reportedly passed on the opportunity to buy the company (and its debt) outright, instead opting for a minority investment. Earlier reports on the Blackstone offer had indicated it was contingent on the results of the proposed Honeywell takeover. However, it has become clear that in light of the Blackstone offer, New Mountain is willing to forgo the Honeywell deal.

“Industrial manufacturing companies don’t have a good track record of successfully working with business application vendors,” Dwight Klappich, an analyst at Gartner, noted on the deal.

The JDA about-face comes as bad news for Honeywell as it is attempting to beef up its supply chain and warehouse infrastructure. The firm has been on something of a shopping spree of late. Last month it purchased Intelligrated, a warehouse fulfillment solutions firm, from private equity group Permira Funds for $1.5 billion.