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February 2005

ERP provider offers to buy Speedware for $114 million

Activant Solutions tenders stock offer; officers pledge nearly half of company’s shares to deal

Business has grown so much at Speedware Corp. that an Austin-based firm is borrowing $90 million to buy the Canadian corporation in a stock purchase valued at more than $114 million. Activant Solutions, a privately-held company with operations in the US, France, Ireland and the UK, plans to purchase Speedware in a friendly acquisition expected to close in 45 to 60 days.

Activant reported in an SEC filing that the company has already secured a “lock up agreement” to purchase 48 percent of the outstanding common Speedware shares from key shareholders in Speedware. Executives in the equity pool Polar Capital Investments, which became Speedware’s controlling shareholder in 2002, were among those listed in the lock up agreement. The group also included Speedware Ltd. founders Ian Farquharson and Jean-Pierre Theoret, as well as Speedware Corp. CEO Andrew Gutman.

In the SEC filing, Speedware agreed to halt any actions to sell itself to any other companies on Dec. 6, 2004. The Activant offer to purchase all Speedware shares at $3.19 per share — a 20 percent premium over the stock’s price on the day of the offer — was tendered on Jan. 24 of this year. Speedware shares closed at $3.85 per share after Activant made its offer.

Speedware said it wasn’t seeking a buyer when Activant made its offer.

The division of Speedware that serves the HP 3000 market, Speedware Ltd, is unlikely to see changes, according to Speedware’s top corporate officials. That group “is very profitable, and it’s made great strides in the migration space,” said Gutman. “There’s a tremendous amount of momentum in that division.”

Speedware had been through an ownership change to spark the parent corporation’s growth. Gutman joined Speedware as CEO in 2001, and Polar took on majority ownership the next year.

“We took a company that was struggling, and executed our strategy well to make it a very profitable company,” Gutman said. “We demonstrated we’re not afraid of these legacy markets, because there’s jewels hidden inside them.”

The parent corporation boosted revenues from $21 million to $36 million over the past year. Profits more than doubled in 2003 and continued to grow during 2004, fueled in part by acquisitions like last year’s $1.85 million purchase of eXegeSys products that led Speedware to form a new OpenERP Solutions division. The company also purchased wholesale distribution vendor Prelude Systems last year. A 2003 acquisition valued at $12 million brought Enterprise Computer Systems Inc., a building materials distribution software vendor, into Speedware’s portfolio.

Now the company joins the much larger Activant, a move that Speedware Ltd. Director of Marketing Chris Koppe painted as an addition of resources.

“Activant is an ERP company, so their main interests are in Speedware’s ERP holdings,” Koppe said of the Prelude and Enterprise divisions. “We’ve come along with the transaction in their eyes. But there is interest in our business intelligence business. Migrations are not part of [Activant’s] core business. The only thing that changes for Speedware Ltd. is that we go from being part of a $36 million company to part of an over $200 million company.”

Activant has built much of those resources in the distribution software business, offering a range of solutions to track components at lumber and building materials stores and retail auto aftermarket outlets. Over 18,000 wholesale, retail and manufacturing customer locations use Activant in lumber and building materials, hardware and home center, automotive and other distribution-intensive industries.

The company’s solutions include software, professional services, content, supply chain connectivity and analytics. Speedware Corp. officials say that Activant’s size and technical ability will make it a good home for the Canadian corporation.

“Activant’s deep vertical expertise, large installed customer base and solid technology are a natural fit with Speedware’s business,” said Gutman. “The combined entity will give our customers additional world-class service and best-of-breed products for driving their business growth.”

Activant said it expects its customer base will increase to 20,000 with the Speedware acquisition.

One customer which Speedware has helped migrate plans to monitor the new ownership for signs of maintaining a commitment to products for developers.

“We believe Speedware delivers a good suite of development products for maintaining business applications, one which provides them with a competitive edge in the HP 3000 market,” said Doug Smith, IT director at the Teachers Retirement System of Louisiana. “But that market is dwindling. Our plans for the next couple of years were to monitor the success of Speedware’s development products in the more open and more competitive Unix environment. The buyout of Speedware raises concerns for a long-term commitment by the new owners, which TRSL will be closely monitoring.”

The Speedware Ltd. offerings of “business intelligence and system migration tools” received such pledges in the Activant announcement of its tender offer. In addition, OpenERP Solutions’ business was mentioned as an avenue to “introduce Activant to small and mid-size manufacturing customers with next-generation ERP and supply chain applications built on open source platforms.”

Speedware Corp. officers said last fall they wanted to buy more companies in the HP 3000 community to continue the Speedware growth. The general manager of the OpenERP Solutions division has told his 100 eXegeSys sites running on HP 3000s that they need not migrate away from their platform if they can secure third-party support agreements. Gutman said that purchases of HP-related companies could well continue once the acquisition is approved by shareholders.

Activant changed its name in October of last year and hired Larry Jones as its new CEO. He said that Activant shares the same growth and acquisition goals as Speedware.

“Activant is focused on growth and acquisitions to become the premier technology provider of vertical ERP software and solutions to select industries,” Jones said in a press release. “The acquisition of Speedware is our first big step in this new direction and lays the foundation for revenue growth, technology innovation and increased thought leadership in key vertical segments.”


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