Apax in Deals For Two ERP Vendors

Sponsor: Apax Partners

Target: Epicor Software Corp.

Seller: Shareholders

Price: $976 million

Target: Activant Solutions

Sellers: Hellman & Friedman, Thoma Bravo, JMI Equity

Price: Undisclosed

Apax Partners has struck deals to two software firms, in combined deals valued at about $2 billion, with plans to roll up the target companies to establish a new platform in the enterprise software space, according to peHub, a sister Web site to Buyouts.

Apax is buying Activant Solutions, a Livermore, Calif.-based provider of enterprise resource planning software for mid-market retailers and distributors. Activant had 2009 revenue of $378.9 million and more than 1,700 employees, according to the company’s Web site. The sellers are Hellman & Friedman, Thoma Bravo and JMI Equity, which acquired Activant in 2006.

Apax is also buying Epicor Software Corp., which offers ERP software for manufacturers. Apax is paying $12.50 a share cash for Epicor, an 11.2 percent premium to the company’s closing share price of $11.24 on the last day of trading before the deal was announced. The deal is valued at $976 million.

Elliot Associates, which owns 13.5 percent of Epicor, has agreed to the sale. In February, Epicor reported that fourth quarter revenue grew about 5 percent to $117.2 million. Epicor, of Irvine Calif., employs 2,572 people. As of Dec. 31, 2010, debt consisted of $230 million in outstanding bonds and $47.5 million in a credit facility.

The combined company, which will be private, will retain the Epicor Software name. It will have 30,000 customers and $825 million in annual revenue. It was not clear whether there will be any job cuts or management changes at either company.

The sale of Epicor does include a go-shop provision, which allows the company to seek out superior proposals from third parties through May 4. Epicor’s board has approved the sale, which is expected to close in the second quarter.

“At this time Epicor and Activant remain two separate companies and we have no comment on any potential go-forward management or product strategy,” wrote Damon Wright, VP of Epicor’s investor relations, in an e-mail message.

Officials of Activant declined comment.

The Apex proposal to buy both Activant and Epicor “is a major consolidation play in mid-market ERP,” one banker said. Epicor will be a “nice combination” with Apax portfolio company Plex Systems, which provides software for manufacturers, the source said.

The ERP space has seen significant amount of consolidation. Lawson Software received a $1.8 billion bid in March from Golden Gate Capital to buy the company for $1.8 billion, or $11.25 a share. Other ERP vendors, like Oracle, are expected to bid for Lawson, according to press reports.

Apax typically invests in larger deals, in companies with a value between €1 billion and €5 billion. The buyout shop targets five sectors including tech and telecom; retail and consumer; media; health care; and financial and business services. Apax is currently investing from two funds: Apax Europe VII, which raised €11.2 billion ($15.9 billion) in 2007 and Apax US VII, which raised $856.34 million the year before.

Bank of America Merrill Lynch and RBC Capital Markets are providing debt financing for the Epicor acquisition. For Activant, Bank of America NA and Royal Bank of Canada are offering debt.

Jefferies advised Activant in the sale. Ron Eliasek, Dave Ramazetti, Joe Jabes, Peter Gant and Jeff Gelles served as financial advisers to Apax in buying Activant and Epicor.

John Joliet, Stuart Goldstein, Kyle Madan, Ed Chung and Steven White of Moelis & Co. advised Epicor.

Luisa Beltran is a senior writer for peHub, a sister Web site to Buyouts.