Invensys Determined to Make Baan Deal Work

LONDON (07/26/2000) - If at first you don't succeed, try again. And if you still fail, change the terms of the deal. Such is the case for Invensys PLC.

The London-based company announced on Wednesday that it intends to follow through on its commitment to buy the business software supplier Baan Co. NV, despite the fact that Baan shareholders on Tuesday once again failed to meet Invensys' terms for acquisition.

The tally of the shareholder vote revealed that Invensys' total share purchase would equal 75 percent of Baan, 20 percent shy of what Invensys had required to seal the deal, the company said in a statement. Rather than withdraw its bid for the troubled Baan, the software automation and controls group said it was revising its terms for acquisition, requiring Baan shareholders to sell 50 percent of all shares plus one, for the original price of 2.85 euros per share (US$2.67).

Invensys' offer to buy the Netherlands-based ERP (Enterprise Resource Planning) software vendor, in a deal valued at approximately 762 million euros, was initially made at the end of May. As part its original offer, Invensys has said it would have to purchase 95 percent of all Baan shares. [See "Invensys to Make Final Announcement on Baan," July 25.]The new deadline for Baan shareholders to tender their shares to Invensys is now Aug. 1, 11:59 p.m. EDT, Invensys said. Furthermore, as part of a "four-step programme designed to save Baan," Invensys will immediately take over management control of Baan, acquire all of the company's assets and liabilities and will offer "suitable financing to secure Baan's near term future," Invensys said.

"The situation at Baan required decisive and immediate action. We re-examined the case for acquiring Baan and, in the process, considered terminating the offer. However, we remain convinced that this deal is in the best interest of Invensys' shareholders, but only if we can fully integrate its operations into our new Software and Systems division," said Invensys chief executive Allen Yurko in a statement.

Baan's interim Chief Executive Officer Pierre Everaert added, "We are pleased that Invensys has agreed to amend their 95 percent condition to enable us to move forward."

Baan shareholders will also vote on August 15 whether to accept the Invensys offer to buy Baan's assets in exchange for its liabilities. Invensys reserved the right to withdraw its offer between now and the August 1 deadline, the company said.

Invensys has offered to buy company assets, separately from the purchase of shares, as a way to prompt shareholders to sell their shares.

Because Invensys failed to gain 95 percent of Baan stock, the Dutch business software supplier will remain listed on the stock exchange, something Invensys was trying to avoid, according to Luuk Bruna, an analyst for International Data Corp., an affiliate of the IDG News Service.

"Invensys is very sure of their offer and will look to acquire the entire 95 percent of Baan as soon as it can. But that may take a long time because there is a group of shareholders who aren't so pleased about the unlisting," Bruna said.

According to Bruna, the Baan shareholder holdouts are mainly rich, Dutch private investors who do not want the Netherlands-based company to be swallowed up by the U.K.-based Invensys.

Even so, the Invensys deal may very well be Baan's best hope, and Baan management is doing what they can to push the deal through, Bruna said.

"Here in the Netherlands, there will be little immediate effect as a result of the deal, but I assume the international offices of Baan will be closed and be gotten rid of as soon as possible. There will also be an enormous cut in costs, especially in development, an area where Baan used to spend heavily," Bruna said.

Tuesday's deadline was an extension from the initial deadline of July 13, when the tally of the original Baan shareholder vote revealed that Invensys' total share purchase would only equal 58 percent of Baan.

Since Invensys granted the deadline extension, Baan said on July 20 that it expects to report an operating loss for the second quarter of between US$85 million and $95 million, or between 32 cents and 36 cents per share. For the corresponding quarter, ended June 30, 1999, Baan posted a net loss of $9.1 million, or 4 cents per share.

Revenue is expected to drop to between $70 million and $80 million, as compared to $172.8 million a year ago. Revenue is also slipping sequentially, from $106 million in the first quarter of 2000 ended March 31 and $130 million in the fourth quarter of 1999, Baan said.

Furthermore, the management team for the battered business software supplier issued a statement on July 18 warning that if the pending acquisition by Invensys falls through, Baan may find it impossible to continue operations as an independent company. [See "Baan Expects to Report More Losses for Q2," July 20 and "Baan Says Invensys Deal Is Its Only Hope," July 18.]Baan, with dual headquarters in Barneveld, the Netherlands, and Reston, Virginia, can be reached at +31-342-42-8888 or +1-703-234-6000, or at http://www.baan.com/. Invensys, based in London, can be reached at +44-207-834-3848 or at http://www.invensys.com/.

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