DALLAS — Two rivals in the business-to-business software industry said Monday that they will merge in what they billed as the sector's biggest combination ever, a $9.3-billion stock-for-stock deal.
Dallas-based I2 Technologies Inc. said it will buy Aspect Development Inc., based in Mountain View, Calif., to boost its business of linking manufacturers and their suppliers on the Internet.
The purchase price--a 35% premium over the companies' closing stock prices Friday--caught analysts by surprise.
Bala Srinivasa, an analyst with Pacific Growth Equities in San Francisco, said the merger is a good fit with Aspect's strength in content, filling a hole in the lineup of I2, which makes software used to link businesses.
"The difficulty most people have at first glance is the price tag," Srinivasa said.
Others questioned the deal's value. "I see no way of justifying a $9.3-billion valuation for Aspect," declared analyst Manuel Royo of Southwest Securities in Dallas. He said Aspect's revenue growth of 14% last year fell far short of typical Internet standards.
Sanjiv Sidhu, I2's chairman and chief executive, defended the deal, saying outside advisors supported the price for Aspect.
After news of the purchase, shares of I2 plunged nearly $28 before recovering to finish the day down $16.81 at $191.19. Aspect shares rose $11.81 to $96.81 on the Nasdaq Stock Market.
Besides the Aspect deal, I2 said Monday that it will pay $380 million in stock for Supplybase Inc., a privately held San Francisco company that provides content for suppliers.
Monday's acquisitions by I2 were possible because of the boom in business-to-business electronic commerce--some researchers say it could become a multitrillion-dollar industry within four years--and the hot stock market for technology, which has pushed I2's stock market value to more than $25 billion.
The new, larger I2 competes with companies such as Ariba, Commerce One and Oracle.
The combined company will have about 4,000 employees and a research-and-development budget of about $200 million, Sidhu said.
I2 will exchange 0.55 of its shares for each Aspect share, taking into account an Aspect 2-for-1 stock split, and issue 44.9 million shares. Aspect shareholders will own about 18% of the combined company. Aspect Chairman and CEO Romesh Wadhwani will become vice chairman of I2.