JDA aims to launch $275 million senior secured notes in December

By Cristal Cody

Tupelo, Miss., Nov. 5 - JDA Software Group, Inc. said Thursday it plans to seek $275 million in high-yield senior secured notes in its newly revived plans to acquire i2 Technologies, Inc. for about $434 million, or $18.00 a share, through cash, stock and debt financing.

"We intend to launch a high-yield bond in December to finance the structure," JDA chief executive officer Hamish Brewer said on an investor conference call on Thursday. "This is not a traditional structure; however, we believe it is appropriate and achieves the certainty of closure that both i2 and JDA shareholders will want."

The supply chain solutions companies sought a merger last year, but the deal fell apart when JDA could not complete the financing under the grueling credit markets.

Now the company has two alternative plans to complete the merger.

Under the intended structure, JDA intends to raise $275 million of senior unsecured notes through a best-efforts financing until Dec. 18. If JDA raises sufficient funds, it will pay i2 shareholders $12.70 a share in cash and 0.256 of a share of JDA.

Pete Hathaway, JDA's chief financial officer, said on the call that the company will sell the notes on a best-efforts basis.

"We think we can do this as the market appears open and active right now," he said. "We expect the notes to price between 8½% and 8¾% and a range of five to seven years. We think we can clear the market by early December."

Hathaway also said on the call that the company will retire i2's 2½% convertible preferred stock at a price of $122 million, which includes a 10% change-of-control premium.

As part of the deal, i2's $160 million in cash will be used to close the transaction to provide a net buyout cost to JDA of $396.1 million.

"Our operating plan for the financing is to pursue the intended structure and finance the acquisition using a majority of cash," Hathaway said. "The backup plan if needed will use an alternative structure that contemplates using a majority of stock."

Alternative financing

If JDA cannot raise the funds, it plans to launch an alternative structure to finance the merger with a $120 million term loan and $20 million revolving credit facility commitment from Wells Fargo Foothill and Wells Fargo Securities.

Under the alternative structure, JDA will pay i2 shareholders $6.00 a share in cash and 0.580 of a share of JDA.

"That's a backup commitment we do not expect or intend to use, unless the high-yield markets are not available to us between now and December," Hathaway said. "We expect the term loan to price at a yield of 6¼ to 63/4."

The deal is expected to close in the first quarter of 2010.

In addition, under either merger structure, JDA will pay $1,100 for each outstanding share of i2's series B convertible preferred stock and all accrued and unpaid dividends.

Goldman Sachs & Co. acted as exclusive financial adviser to JDA, and Thomas Weisel Partners Group, Inc. served as i2's financial advisor.

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