Golden Gate in $1bn software deal

Tech specialist Golden Gate Capital has agreed to take Geac Computer Corp. private in a $1 billion deal. The San Francisco-based firm intends to split the company up once the deal closes.

San Francisco-based Golden Gate Capital has agreed to take Geac Computer Corp. private in a deal valued at roughly $1 billion (C$1.19 billion, €849 million). Golden Gate will pay $11.10 per share to acquire the Ontario-based software maker, which represents a roughly 27 percent premium to the company’s stock price at the close of trading on Friday.

At the annual meeting, we noted that the most important trend in our industry is consolidation. This economic paradigm cannot be ignored.

Charles Jones, president and CEO, Geac Computer Corp.

Geac, which is listed on both the Toronto Stock Exchange and the Nasdaq, is a provider of financial and operational software and services. Golden Gate intends to split the company at the completion of the deal, integrating Geac’s ERP software products unit into Infor (a current Golden Gate portfolio company), while Geac’s Industry Specific Applications group and the financial applications of the ERP division will form a new company.

“Golden Gate Capital looks at acquisitions with a different perspective than most private equity firms,” David Dominik, a managing director at the firm, said. “We seek to integrate companies that can grow significantly faster than they could on their own.”

Charles Jones, the president and CEO of Geac, noted that the sale of the company is, in part, a response to a shift in the industry. “At the annual meeting, we noted that the most important trend in our industry is consolidation. This economic paradigm cannot be ignored,” Jones said, adding, “Success in the software industry today derives from the strength of size and scale.”

Private equity is playing an increasingly larger role in this consolidation trend. Coincidently, alongside the Golden Gate announcement, two other deals were also made public today, as Vector Capital acquired Register.com in a $200 million public to private, and Garnett & Helfrich Capital carved the Ingres open-source database unit out of Computer Associates. Separately, Computer Sciences Corp. is reportedly being pursued by a group of private equity firms in a buyout that would be valued at around $12 billion.

The Geac acquisition is expected to close in the first quarter of 2006. The deal has already received the support of Crescendo Partners, one of the largest shareholders in Geac.

Golden Gate’s most recent fund was raised in 2004, when the firm received $1.8 billion in commitments for Golden Gate Capital Fund II.

The transaction will be financed through a combination of equity from Golden Gate, cash on Geac’s balance sheet and debt financing, which will be provided by JP Morgan, Merrill Lynch, Wells Fargo Foothill and DB Zwirn Finance.

Bear Stearns & Co. acted as financial advisor to Geac, which received legal advice from Blake, Cassels & Graydon LLP. JP Morgan advised Golden Gate on the deal, and Kirkland & Ellis and Borden Ladner Gervaise each served as counsel.