TD's View of a Buyout of KXS Competitor Panasonic announced that it is acquiring Kinaxis competitor, Blue Yonder.
Impact: SLIGHTLY POSITIVE
The acquisition implies a C$225 per share valuation for Kinaxis. Panasonic
will purchase the remaining 80% of Blue Yonder's shares for US$5.6bln, adding to
the 20% existing stake it already owns. Including the repayment of $1.5bln of debt,
implies an $8.5bln valuation for Blue Yonder. Blue Yonder generated total revenue
of ~$1bln in 2020, of which only 25% was SaaS revenue compared to Kinaxis' 66%.
This implies that Blue Yonder was acquired at a 2020 EV/SaaS revenue multiple of
33.1x. Applying this multiple to Kinaxis' 2020 SaaS revenue of $149mm implies a
valuation of ~C$225 per Kinaxis share, or ~52% upside to its current share price.
Potentially positive for Kinaxis' market position. The acquisition will place Blue
Yonder under a major hardware vendor, bringing to question Blue Yonder's strategic
focus going forward.
Benefit from transaction disruption and strategic uncertainty. This
transaction is likely to be a major distraction for Blue Yonder during a time when
the deal pipeline has expanded significantly, in our view. Transitioning to software,
from a hardware-focused strategy, is challenging and could introduce customer
win and retention risks. Even Panasonic's management admitted that M&A is
not their strong suit. Tying Blue Yonder to Panasonic hardware could also cause
customers to consider more neutral software vendors, such as Kinaxis, in our view.
Benefit from potential revenue dis-synergies. Blue Yonder is particularly large
in retail and CPG, but if it has any major electronics vendors that compete with
Panasonic, those customers may consider another vendor, such as Kinaxis, rather
than support a competitor.
What does this mean for the Blue Yonder lawsuit? It is difficult to say given the
lack of visibility, but it could go either way. On one hand, Panasonic may have a strong
legal team and a larger portfolio of patents to assert. On the other hand, Kinaxis
has a large presence in the high tech space, many of which could be Panasonic's
partners. Panasonic suing a vendor to its partners could disrupt its own supply chain
- something Panasonic may not want to risk doing.