Indian-owned companies forge biggest-ever software deal

Indian-owned companies forge biggest-ever software deal
Chidanand Rajghatta

BANGALORE, MARCH 13: Two Indian-owned American companies joined forces in the US on Monday to create a business-to-business behemoth in what is being described as the largest deal ever in the software industry.

I2 Technologies, a Dallas-based firm founded by Sanjiv Sidhu, has struck a deal to acquire Aspect Development for $ 9.3 billion in stock, media reports in the US said today. Aspect, a Silicon Valley company, is headed by Romesh Wadhwani.

The Wall Street Journal, which first broke the news of the deal, said the accord is likely to significantly bolster I2's position in the booming e-commerce market. The transaction, expected to close in the third quarter, would be the largest software deal ever, the paper added. I2 and Aspect are two of the fastest-growing companies specialising in business-to-business e-commerce, a red hot market that is attracting great attention because large companies are using the internet to streamline product design, order taking, inventories and distribution.

I2 shares have soared by nearly 900 per cent in the last six months. Aspect is up by close to 700 per cent in the last six months.

I2 in particular has created a niche for itself in the B-to-B sphere and become a market leader by pioneering a new class of business software known as "supply-chain management." This helps manufacturers keep track of availability of parts and supplies from vendors in order to improve factory production and delivery of finished goods, helping cut huge costs.

Founded in 1988 by Sanjiv Sidhu, a former Texas Instruments engineer who wanted to improve manufacturing efficiency through software, I2 went public in 1996 and has roared to a pre-eminent position with a market cap today of more than $ 30 billion. Aspect, a smaller company, has a market cap of about $ 2.75 billion.

The companies said the deal will create an outfit with combined 2000 revenues that make it the largest provider of software and content for the business-to-business market. The combined company will have 4,000 employees and a research and development budget of nearly $1 million per business day. "Both of us joining really creates a B2B juggernaut in e-commerce," Sanjiv Sidhu, i2's chairman and chief executive, was quoted as saying in the WSJ interview.

In a separate interview with Reuters Securities Sidhi said "The merger will create a business-to-business marketplace powerhouse with unmatched solution breadth and depth of functionality, unparalleled content, and a laser-focus on value creation.'' Under the deal, i2 will exchange 0.55 of its shares for each share of Aspect Development, after the effect of a 2-for-1 split. Romesh Wadhwani, Aspect's chairman and CEO, will become vice chairman of i2 and join its board, which will increase in size to five. Following the news of the mega-deal, I2 shares dropped as expected by about 10 per cent to $ 190 (at the time of writing) while Aspect climbed to split adjusted $ 90.