Supply chain applications vendor i2 has agreed to buy Aspect Development in the world's largest software merger to date, based on current stock valuations.
The share-swap deal values the collaborative design software supplier at $9.3bn (£6bn), but i2 is effectively giving up 35 per cent of its equity to complete the transaction.
Analysts applauded the deal but are cautious about the extent to which i2 is committed to providing customers with a comprehensive procurement offering.
Larry Lipide, vice president at AMR Research, said that while attention so far had been fixed on the size of the deal, "it's playing with Monopoly money. It's stock not cash."
He said i2's strategy regarding indirect and non-contract parts procurement is unclear. "It's lacking in the indirect procurement market and doesn't want to get involved in dealing with transaction execution," he said.
i2 announced a deal with IBM and Ariba to try to rectify the shortfall earlier this month. The companies plan to provide businesses with the applications and services to develop online trading hubs.
The trading hub is a new phenomenon and most analysts agree that trading rules have yet to be fully defined. This provides i2 with the potential opportunity to use its existing market presence to define the sector as it chooses.
Lipide said that the deal strengthens i2's position in the market for in-bound strategic procurement in the automotive and high-technology sectors.
He said i2 provides strong supply chain planning and scheduling applications, while Aspect Development provides collaborative design and content for helping manage strategic sourcing.
The combination means that i2 can confidently say to manufacturers in the planning stages of procuring their main materials and services that it can manage most of the business processes from the drawing board through to planning, specification and parts delivery.
Lipide also said that i2 now has sufficient financial and operational muscle to compete directly with SAP and Oracle in strategic supply chain deals rather than just picking off the planning part of the deal.
But Barry Wilderman, an analyst at researcher Meta Group, expressed concern about the two companies' ability to successfully complete the organisational integration.
The deal means that i2 has to absorb an extra 1000 staff. Romesh Wadhwani, Aspect Development's chief executive, said: "We don't see major problems, we have been complementary to each other for some time - there's no competitive element."
At the same time, i2 also agreed to buy Supplybase, which provides software for web-based product design and for sourcing custom parts and assemblies. The deal is valued at $380m.
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