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Baan to acquire Coda Group

Business applications maker Baan announces plans to purchase enterprise accounting systems developer The Coda Group.

Business applications maker Baan (BAAN) today announced plans to purchase enterprise accounting systems developer The Coda Group.

Under the terms of the agreement, Baan would issue about 1.9 million of its shares for all the outstanding shares of Coda, giving the deal a value of about $87 million, based on current market value.

The acquisition of Coda, based in Harrogate, United Kingdom, would be an important step in the ongoing development of Baan's business application software package, said Rocky Gunderson, Baan's vice president of product and industry marketing.

"I think we?ve given the competition too much of a lead in the corporate financial market," Gunderson said, noting that acquiring Code would help expand the Baan enterprise applications package into that area.

Analysts said the move demonstrates Baan?s desire to move beyond its traditional manufacturing offerings.

Judy Hodges, an analyst with International Data Corporation, said the move is beneficial for Coda as well.

"It helps Coda, which was in a sorry position in the market, because the enterprise market is switching to more integrated solutions," she said. "For Baan, the move provides a best-of-breed financial system which is based in the United Kingdom, so it is also multi-currency."

According to Hodges, Coda claimed in 1997 that 62 percent of its customer base was in Europe, 30 percent was in the United States, and the rest was in other parts of the world.

"They also told us that 90 percent of their customers are corporations with earnings ranging from $20 million to $1 billion, and half of those are in the middle market, which is attractive to Baan, because they?ve been very active in that market space," Hodges added.

Along with competitors SAP, PeopleSoft, JD Edwards, and Oracle's applications group, Baan is targeting so-called middle-market companies, which, according to IDC estimates, are companies with annual revenues of between $20 million and $250 million.

Over the past year, Baan has made similar acquisitions of, and investments in, companies that develop various types of applications it feels would bundle well with its enterprise resource planning (ERP) applications package.

After today?s announcement, analysts were quick to question the acquisition?s potential impact on Baan?s ongoing joint venture with Hyperion, which provides financial software for planning budgets and consolidating accounts.

But Gunderson said the move complements the Hyperion relationship because Coda develops systems for corporate accounting, whereas Hyperion provides software for budgeting. "We?ll be able to leverage Hyperion?s budgeting software with Coda?s financial accounting," he said.

If successful, the deal is expected to close by the end of the second quarter, June 30.