i2 Technologies to be bought out?

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Recent consolidation in the tech sector has got analysts thinking a buyout may be in the future for i2 Technologies, Inc. (Nasdaq: ITWO). This week saw the first ripple of what could be a greater consolidation wave in the tech sector when software conglomerate Oracle Corporation (Nasdaq: ORCL) purchased BEA Systems. 

The speculation comes as the deadline for the provider of supply chain management’s recommendations for strategic review nears. Last November, i2 Technologies formed a strategic review committee to assist JP Morgan — which the company hired earlier in 2007 — to explore strategic options and devise a recommendation by Jan. 31, 2008.

“If companies such as Manugistics, Stellent, and Agile can find a home — so too should i2, with all of its maintenance revenue, IP, and net operating losses (NOLs),” Susquehanna Financial analyst James Friedman wrote in a research note. As a result of the buyout potential, the analyst is maintaining a positive rating.

Friedman’s analysis suggests an economic value of $590 million to $640 million as a buyout price for the firm, which would yield a per share take-out valuation of $19 to $21.

Friedman further suggests i2’s net operating loss carry-forwards could create substantial value for a strategic buyer. By applying Internal Revenue Code limits, the analyst speculates the company’s NOLs could be worth $70 million to $75 million, which could boost a potential bid for the company up to the range of $650 million to $700 million when combined with $115 million in cash.

Shares of i2 Technologies (ITWO) edged up 2.95%, or $0.36, to $12.55 at 12:54 p.m. ET. Shares of i2 Technologies have been trading in the range of $11.50 to $27.46 for the past 52 weeks.

About the Author
Reporter Jennifer Schonberger is based in SmallCapInvestor.com's Washington, D.C. bureau. Read More

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