Md. firm's deal a plus

Manugistics Group gains after purchase of London company

Shares up $3.88, or 8.8%

STG Holdings gives Rockville company new clients, software

January 24, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Manugistics Group Inc., the Rockville software and consulting company that helps manufacturers manage supply chains, said yesterday that it had acquired a London software company that will add clients and expand its offerings.

Company officials said the purchase of STG Holdings Inc. at a price that could rise as high as $34 million fits Manugistics' strategy of investing in new, "best of breed" products. The London company develops software for the automotive, defense and technology industries to use in planning, scheduling and simulation.

Shares of Manugistics gained 8.8 percent - or $3.88 a share - to close at $47.88 on the news.

Manugistics issued $4.5 million in common stock and paid $1.5 million in cash for all outstanding shares, options and warrants of privately held STG.

Besides that initial payment, Manugistics will pay STG shareholders up to $28 million in common stock or cash at the end of October 2002, based on the company's performance in areas such as sales.

Manugistics now has access to an STG software product that manufacturing clients can use at several factories without having to install separate software in each plant, said Bradley G. Whitt, an analyst with Southwest Securities Inc.

"It looks like more of a technology and domain expertise acquisition ... as well as getting a couple of key people who understand planning and scheduling" for manufacturers that make products on demand, rather than through mass production, Whitt said.

Manugistics was interested in STG because of its strength and expertise in developing software products for the automotive, defense and high-tech industries, said Raj Rajaji, Manugistics' chief financial officer.

"They will add not only a good list of customers, but the domain experience and the products that complement our offerings," he said.

STG, started in 1987, has $6 million in annual sales and more than 300 clients such as Boeing Co., Xerox Corp., Caterpillar Inc., Brother Industries and Volvo Europe Trucks NV. Its staff of 40, including consultants, product developers and salespeople, will become employees of Manugistics.

Manugistics said it expects the acquisition, which closed last week, to begin adding to earnings immediately.

The company is enjoying a turnaround, with both its earnings and stock price climbing. In December, Manugistics reported third-quarter net income of $9.4 million, or 14 cents per diluted share, compared with a net loss of $4.8 million in the third quarter of 1999. Also in December, the company closed its purchase of Talus Solutions Inc., an Atlanta maker of pricing and revenue optimization software. Its shares have quadrupled since hitting a low of $11.25 last summer.

With the addition of STG, Manugistics has about 1,400 employees worldwide, including about 450 at its Rockville headquarters. Among its clients are Amazon.com Inc., BP Amoco PLC, Coca-Cola Bottling Co., Compaq Computer Corp., DuPont Co., General Electric Co., Harley-Davidson Inc., Marriott International Inc., Nestle and United Airlines.

With Manugistics' global sales and STG's operations in Europe, Africa and the Pacific, the company will be well positioned to enter key growth markets, said Stephen Franks, managing director.

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