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GXS - A New Start? Again?
In the same year that Francisco Partners LP declared "We carried out a market check with JPMorgan Chase & Co (JPM.N) and although the valuations we received were reasonable, we did not think they were compelling for us to sell GXS at this moment," roughly that same amount was enough for OpenText to acquire the company. It could be that Francisco Partners simply tired of the slow pace of recovering its investment or that its own investors didn't see the light at the end of the tunnel.
I posted my own assessment of the possible future of GXS a few months ago here and still believe that under the conditions at the time, recovery for the VAN was a long shot. But I'm surprisingly (even to myself) encouraged about the prospects of the combination of OpenText and GXS. But first to the finances.
According to OpenText there is a "Financial commitment of $800m Debt" which seems to be essentially a refinancing of the existing $750m that was outstanding. In addition, the company anted up $265m in cash and $100m in stock. The announcement of the deal seems to have drawn significant enthusiasm in the market as OpenText shares moved up 2.4% at the time.
All in all, I think this combination may actually work for both companies. OpenText is calling GXS "a leader in business-to-business (B2B) cloud integration" in its press releases. Certainly the company has cloud services, but that isn't the first thing I think of when I imagine GXS. Their most successful segment recently has been their managed services operations that don't rely primarily on cloud based systems.
But I believe that if OpenText can manage to successfully concentrate on the GXS cloud products and integrate them into their successful EIM (Enterprise Information Management) efforts this could spell the beginning of the new breed of fully-connected enterprise systems. In fact we've been writing about exactly these kinds of forays in articles like this one.
While I don't like to predict winners and losers, I do think there's a better than decent chance that this new combined entity could become a new breed of integration provider that does connect the supply chain to the front and back of the business. In doing so it could deliver a better version of visibility. But I've been wrong before and there's a lot of work to be done by both companies before there's any verdict pronounced. Last modified on Friday, 20 December 2013