On Friday, retailing software company Retalix (Nasdaq: RTLX; TASE: RTLX) announced two acquisitions.
Retalix has bought Integrated Distribution Solutions, L.L.C. (IDS) of Omaha, Nebraska, a provider of integrated enterprise software solutions for the wholesale grocery, convenience store, and food service distribution industries, for $44 million.
Retalix has also bought TCI Solutions, Inc. (TCI) of Irvine, California, for $34.3 million. TCI is a provider of strategic pricing, merchandising and inventory management solutions for the grocery industry.
The consideration for the IDS consists of $37.4 million in cash and $7.0 million in Retalix shares. Retalix has also agreed to pay up to an additional $5.0 million in Retalix shares if IDS meets certain performance criteria over the next two years.
In 2004, IDS had revenue of $27.4 million (excluding resale of third party hardware) and was profitable. Retalix expects the transaction to be accretive to earnings in 2005.
Retalix acquired 97% of the preferred stock of TCI, representing 73% of the outstanding capital stock of TCI on an as converted basis, for a purchase price of $30.05 million, consisting of $12.8 million in cash and $17.25 million in Retalix shares. After giving effect to the acquisition of the preferred stock, Retalix will be required to pay only the additional consideration of $4.3 million in cash to complete the transaction.
The merger is subject to TCI shareholder approval. Retalix expects that the transaction will close in the second quarter of 2005.
In 2004, TCI had revenues of $21.9 million and a net loss of $2.9 million. Retalix expects the acquisition to have no effect on earnings in 2005, and to be accretive to earnings in 2006.
Retalix CEO Barry Shaked said, "A major part of Retalix's growth strategy has been to expand our offering of enterprise and supply chain management solutions, and our addressable markets. IDS's suite of enterprise solutions for distributors serving the food retail sector is a natural extension of our suite of synchronized solutions, which span the food retail enterprise from warehouse to checkout.
"We foresee significant synergies from combining the IDS solutions with our supply chain management applications. We believe this combination positions Retalix to become the leading supply chain solution provider for the grocery, convenience store and food service industries.
"In addition, the acquisition of IDS will allow us to offer a fully integrated ERP solution to our existing customer base, in particular small and medium sized food retailers who are currently underserved by larger enterprise software providers. I am confident that this acquisition will strengthen our position as the fastest growing provider of enterprise-wide software solutions to the global food retail industry."
In connection with the acquisition, Retalix has formed a separate Supply Chain Solutions Division, to be headed by Victor Hamilton, CEO of IDS, which will focus on the development, marketing, sales and support of Retalix's supply chain management solutions, including the products acquired from IDS and OMI International. "By creating this new division, we will be able to have a dedicated focus on our customers' supply chain management needs, while maintaining our commitment to a synchronized end-to-end solution, leveraging our company's strengths across the food enterprise -- from the warehouse, to the headquarters, to the store," said Shaked. "Our vision of synchronizing demand from the supplier to the consumer takes a giant step forward with this acquisition and new organizational focus."
On the TCI acquisition, Shaked said, "TCI is an excellent complement to our existing enterprise-wide solution suite for grocers, and will continue to build upon our strong position as provider of the broadest synchronized solution for food retailers, which span the food retail enterprise from warehouse to checkout.
"The combined customer base of Retalix and TCI represents many of the leading grocers in the US, and testifies to the strength of our respective product offerings. Further, our broad customer base will serve as a strong platform for future growth, as we introduce new products and functionality.
"This is an important strategic acquisition for Retalix, which will provide Retalix with a comprehensive merchandising and inventory management solution for small and medium-sized grocers and convenience stores, that is significantly differentiated from other competitive offerings."
Citigroup Global Markets Inc. acted as financial advisor to Retalix. William Blair advised IDS.
In January 2004, Retalix bought OMI for $18.6 million in a cash and shares deal. OMI deals in supply chain management and logistics centers. Retalix has also bought Italian company UNIT, for $2.8 million, to market its products in Italy.
Retalix had $124.4 million revenue in 2004, 35% more than in 2003, and made a net profit of $6 million, compared with $8.3 million in 2003. The fall in profit was due to the acquisition on OMI. In its original guidance for 2005, Retalix said it expected revenue of $150 million. The company has updated this to $185 million in the wake of the two acquisitions, and says it expects a net profit of over $15 million.
Published by Globes [online], Israel business news - www.globes.co.il - on April 3, 2005