B2B software maker and auction FreeMarkets Inc. late Tuesday evening decided
it is better to be safe than sorry when it killed its merger agreement with
e-business solution provider Adexa Inc., citing slouching market conditions
and Securities and Exchange Commission delays.
As the agreement was amicable and mutual, Pittsburgh’s FreeMarkets will not
pay a dime of termination fees to Los Angeles-based Adexa. FreeMarkets said
the SEC’s hesitation in approving the merger played a role in the companies
decision to scrap the deal.
But the firms, which both make products that facilitate the lucrative market
of selling and buying on the Web, have embarked on a non-exclusive strategic
relationship under which they will cross-sell each other’s e-commerce
products. Also, FreeMarkets will acquire a 3 percent stake in Adexa for $6
“Both companies felt that under current market conditions, the proposed deal
did not make as much sense as originally
anticipated,” said K. Cyrus Hadavi, president and chief executive officer of
Adexa in a public statement. “…We look forward to partnering with
FreeMarkets to leverage our technology and to broaden our collaborative
commerce solutions for customers.”
The original deal was brought to the table last February 8, when FreeMarkets
said it would swap 17.25 million shares and options in exchange for all of
the outstanding shares and options of Adexa. The net worth of the stock deal
was estimated at $340 million.
Though the market has depreciated considerably since February, the deal made sense at the time. According to a report by Forrester Research, purchasing executives plan to buy almost 50 percent of
their direct materials online by 2002. And the same percentage of
manufacturers expect to use an online marketplace solution to optimize
production schedules with suppliers. As for more general market data, AMR
Research forecasted that the market for traditional supply chain planning
management software will reach $9.5 billion by 2002.
Adexa enjoys a number of high-profile customers, including Advanced Micro
Devices Inc., Conexant Systems Inc. and Lucent Technologies Inc, while its
new partner FreeMarkets has executed over 11,500 online auctions for more
than $16.6 billion worth of goods and services to date.