Emptoris shrugs off possible fine, goes shopping

Contact: Brenon Daly

A little more than four months after selling to Marlin Equity Partners, Emptoris reached into the deep pockets of its buyout shop owner to fund its first acquisition: the recent pickup of the contract and service management business from Click Commerce. The deal was part of a larger divestiture of Click Commerce by Illinois Tool Works (ITW), effectively unwinding its September 2006 acquisition. In all, three Click Commerce units went to Marlin, with only the contract and service management unit getting slotted under Emptoris.

As we noted when ITW announced the divestiture last October, Click Commerce was a puzzling purchase for ITW, a 96-year-old company that makes everything from commercial ovens to industrial packing tape to arc welders. ITW paid $292m for Click Commerce in 2006. Although terms weren’t disclosed, we understand that the unit Emptoris acquired was generating some $15m in sales. With the additional revenue, we estimate that Emptoris would be running north of $50m.

Whatever size the check that Emptoris wrote for the Click Commerce division, we would note that one insider at rival Ariba quipped that Emptoris better not spend all ‘our’ money. The Ariba source was needling its rival about the fact that a patent lawsuit between the two companies is currently in the final stages. A jury has awarded – and the court has affirmed – some $6m in damages to Ariba. Emptoris is appealing the judgment.

Unclipping Click Commerce

It turns out that software doesn’t really fit in a toolbox, after all. Illinois Tool Works, which reports third-quarter earnings Thursday, said recently that it plans to divest its Click Commerce division. (With the process just beginning, we don’t expect ITW to say much about the divestiture during tomorrow’s call.) The move would unwind ITW’s puzzling purchase two years ago of the supply chain management vendor. It paid $292m in cash for Click Commerce in September 2006.

ITW is a 96-year-old company that makes everything from commercial ovens to industrial packing tape to arc welders. It has inked more than 50 acquisitions during each of the past two years, spending about $1bn in 2007 and $1.7bn in 2006. And the company is on pace for a similar number of deals this year, having notched 26 buys in the first two quarters. Acquisitions are key for ITW, since the additional revenue picked up represents virtually the only growth at the company. In 2007, its core business expanded just 1.8%.

In announcing the divestiture, ITW indicated that Click Commerce had sales of $67m last year. (That was down slightly from the $74m the company posted in the four quarters prior to the acquisition.) And although ITW hasn’t broken out updated cash-flow figures for Click Commerce, the company has, historically, been a profitable operation. (In the two quarters leading up to the acquisition, Click Commerce had run at a solid 24% operating margin.) We suspect that any number of buyout firms – perhaps those that missed the sale of i2, another big supply chain management company – would be interested in taking a look at the book on Click Commerce.