Exclusive: Blackstone challenges Honeywell with JDA financing plan - sources

August 16, 2016 1:04 PM EDT

The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) April 4, 2016. REUTERS/Brendan McDermid - RTSDKHE


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By Lauren Hirsch and Greg Roumeliotis

(Reuters) - Blackstone Group LP (NYSE: BX) has offered a financing plan to help debt-laden U.S. supply chain management company JDA Software Group Inc, giving it an alternative option to selling itself to Honeywell International Inc (NYSE: HON), people familiar with the matter said.

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.

Blackstone has proposed to JDA a so-called payment-in-kind financing deal whose coupon would be paid with additional securities, some of the people said. The financing would include equity warrants that would give Blackstone a significant minority stake in the company, the people added.

While JDA's debt pile of more than $2 billion is hampering its ability to invest in its growth, the company does not have to make significant debt repayments for the next two years and is in compliance with its loan covenants, the people said. New Mountain may decide not to pursue any transaction whatsoever, the people added.

The sources asked not be named because the matter is confidential. Blackstone and New Mountain declined to comment, while Honeywell and JDA Software did not immediately respond to requests for comment.

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 Inc, 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.

Reuters first reported last week that Honeywell was exploring an acquisition of JDA.

(Reporting by Lauren Hirsch and Greg Roumeliotis in New York; Editing by Bernard Orr)



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