EDS announced Sunday it is selling its CAD division, called UGS PLM Solutions, to three private equity firms for US$2.05 billion -- cash -- at 2.3x annual revenues. Reuters reports that UGS PLM's management also is making an equity investment. The company produces Unigraphics NX, Solid Edge, and other CAD-related software.
The money is much needed by EDS to pay down its $5 billion worth of debt. It had aquired UGS (Unigraphics Solutions) and SDRC some years ago, hoping to use the software to sell more services. Last fall, EDS announced plans to sell a minority share (thought to be 20%), but earlier this year changed its mind to sell 100% at a price of more than 2x annual revenues. (Last year, the division made $104 million profit on revenues of $897 million.)
The buyers are:
Bain Capital (Boston) invests in late-growth software (that would be UGS PLM Solutions) and other technology companies. They have an investment in one other CAD company: Alibre.
Silver Lake Partners (Menlo Park CA) makes large-scale investments in technology. Both Bain Capital and Siliver Lake Partners have invested in Gartner Group.
Warburg Pincus (New York) also invests in technology firms.
The new owners (well, in about 90 days) say they plan no changes to the business and its 5,000 employees, and that current ceo Tony Affuso stays on.
Dow Jones reports that "some investment bankers consider the purchase price rich for a relatively slow-growth niche of the technology sector." But higher-than-expected price was due to the trio bidding against another trio: Kohlberg Kravis Roberts, Golden Gate Capital, and Texas Pacific Group.
This sale changes the dynamics of the CAD industry. Instead of being the minor, rarely-mentioned-in-conference-calls, 4% division of a $21-billion-a-year corporation, UGS PLM Solutions is now its own company -- allowing it to takes its place with Dassault Systemes and Autodesk as the three largest CAD companies in the world.