Blackstone Challenges Honeywell JDA Software Deal

Reuters reported last week that Honeywell is discussing a possible acquisition of JDA Software that would include the company's debt.

It was speculated that the deal could have been formally announced yesterday.

According to a new Reuters report, the New York City-based alternative asset manager Blackstone has since offered a financing plan to help Scottsdale, AZ-based software company JDA Software relinquish its $2 billion debt.

The move illustrates how Blackstone, the world's largest private equity firm, pursues innovative ways to secure deals when traditional leveraged buyouts are less attractive financially amid competition from companies such as Honeywell.

JDA's majority owner, buyout firm New Mountain Capital LLC, now has to decide whether to sell the company outright to Honeywell for around $3 billion, or stick with it and seek to accelerate its turnaround with new capital from Blackstone that would allow JDA to invest in its sales force and products.

Honeywell has been on an acquisition hunt, having announced in 2014 a goal of $10 billion in acquisitions by the end of 2018.

Last month, it boosted its automation portfolio, agreeing to acquire Intelligrated, a U.S. distribution systems and logistics company, for $1.5 billion.

Like Intelligrated, Honeywell does supply chain for distribution and manufacturing companies, though a large portion of JDA's business is supply chain software for retailers, which has not been Honeywell's traditional focus.

New Mountain took JDA Software private in 2012 for $1.9 billion and then merged it with another company called RedPrairie. Since then, the company has struggled with integration issues.

Exacerbating JDA Software's woes has been fierce competition among software vendors for products in supply chain planning, transportation and warehouse management.

Still, the company has recently reported some encouraging sale numbers. In the first half of the year the company had its highest growth in new customers since its merger with Red Prairie.

New Mountain Capital, JDA's majority owner, is now faced with the option of either selling itself to Honeywell or accepting Blackstone's capital investment to strengthen its sales force and products, according to Reuters.

Blackstone's proposed deal would involve a payment-in-kind financing agreement, including equity warrants that would give the firm a significant minority stake in JDA Software.

Related: Honeywell Explores Acquisition of JDA Software