Second time’s a charm for I-many?

Contact: Brenon Daly

As it reported its first profit since going public in 2000, I-many also said Wednesday that it will be going private in a $36m buyout by LLR Partners. The Philadelphia-based buyout shop – led by Greg Case, who joined LLR from Apax Partners last fall – offered 43 cents for each share of I-many. (Montgomery & Co banked I-many, with Rob Louv, John Cooper and Joe Morgan handling the mandate.) We understand that a number of other private equity firms looked at I-many, with the process picking up momentum at the end of last year.

While the proposed acquisition is slated to close this summer, it still has to clear a few hurdles. For starters, terms can change if I-many’s cash holdings dip below $8m before the deal closes. The company, which held $9m in cash at the end of the first quarter and expects to generate cash every quarter this year, said in a conference call that the $8m requirement is a ‘conservative’ level. So it shouldn’t have trouble hitting that. Indeed, I-many shares were trading in line with LLR’s offer on Thursday.

The other big obstacle is a shareholder vote. Since the offer represents a 70% premium over where I-many’s shares were trading before the bid, one might think that a sign-off is automatic. But I-many’s shareholders have already shot down one offer. In December 2004, Selectica bid some $70m for I-many. That offer didn’t make it through because I-many’s shareholders said it undervalued the company. Indeed, a year and a half later, I-many shares had doubled.

The end of 2007, however, proved to be the high-water mark for shares of I-many. From more than $3, they dropped to a low of about a dime late last year. The company was in danger of getting delisted from the Nasdaq, which would have accelerated the payment of the notes that it sold in December 2007. According to terms, note holders have agreed to hold off on that, and will redeem them when the deal closes.