Industrial conglomerate Honeywell is engaged in discussions to acquire supply chain software firm JDA Software in a $3 billion deal, just weeks after buying warehouse automation firm Intelligrated, according to a Fortune story quoting sources familiar with the talks.
New Mountain Capital, JDA's majority owner, already has been exploring a possible sale of JDA to other private equity firms, and despite the emergence of Honeywell as a buyout candidate, it is not certain what action (if any) New Mountain will take, Fortune said.
New Mountain Capital privatized JDA in 2012 and merged it with another company, RedPrairie, in a $1.9 billion deal. While JDA has about 4,000 corporate customers, it also reportedly has $2 billion in debt.
The retail industry supply chain is undergoing major changes driven by new technology, and with the Intelligrated buy and the rumor of another deal, it sure seems like Honeywell recognizes that and wants to participate in a market on the move.
Given the Intelligrated deal and Honeywell's rather clear efforts to build up its supply chain and warehouse assets and expertise, it would not be too surprising to see Honeywell step in and buy JDA Software, but it looks like a bit different deal in at least a couple of ways.
If the rumored price tag for for JDA sticks, it will be gotten at twice the price of Intelligrated, a company that reportedly was experiencing strong revenue growth as Honeywell put its name on the acquisition. However, Honeywell is a multi-national conglomerate and can afford to make deals of all sizes, so maybe $3 billion is a bet it's willing to make quickly to achieve a solid base from which to compete in an explosive sector.
Second, a debt load of $2 billion is no fun for anyone to manage and chip away at. It sounds like JDA and its majority owner may be at the end of their rope trying to do so. Honeywell, again, as a much larger company, probably would have a better chance of streamlining JDA and leaving itself with some strategically useful assets than many other firms would. (RedPrairie may be worth salvaging, if a recent deal with Wal-Mart is any indication.)
What's not so clear right now is where and how Intelligrated and JDA fit into Honeywell's suddenly intriguing collection of supply chain and logistics capabilities. If Honeywell does end up acquiring JDA, we may well see the giant acquire even more properties to fuel its ambitions. At some point, it will have to take a breather and make sense of it all.