Lawson sale leaves workers' fates uncertain

For months, rumors stirred anticipation about the possible sale of Lawson Software. Now, after the $2 billion deal was made official Tuesday, the suspense has shifted to the future of the company's 700 local workers and its presence in St. Paul.

Lawson, with 3,800 total employees and fiscal 2010 sales of $736 million, said Tuesday it has accepted an offer from Golden Gate Capital and business software company Infor. Lawson and Infor compete in the enterprise software market, which includes financial and human resources applications for corporations, hospitals and government.

Lawson spokesman Terry Blake said executives "don't know, frankly" whether the combined Lawson-Infor business will need all of Lawson's workers, or whether Lawson's St. Paul headquarters will remain an important company location. Infor is based in Alpharetta, Ga.

"There's good and not so good in deals like this," Blake said.

It's also unclear whether Harry Debes, Lawson's CEO and president, will have a role in the combined operation.

Analyst Steve Koenig of Longbow Research in Cleveland said there is no doubt Infor will downsize the Lawson staff, but it may focus cuts more in administrative functions than other areas. "The cuts also will depend on whether Infor decides to go to market with the Lawson products or just maintain the ones that have been sold," Koenig said.

Considering that the St. Paul headquarters is largely administrative staff, Koenig estimated that 25 percent or more of the 700 employees there might be vulnerable. Infor previously said it was planning to expand employment by hiring 400 additional software engineers so it could ship about 60 percent more products and enhancements than last year. Infor declined to provide an executive to talk about the acquisition Tuesday.

"There are a lot of talented people in that building," said Cecile Bedore, St. Paul's director of planning and economic development. "Our hope and goal is that [Infor] recognizes, as did Lawson, the value of locating and growing in St. Paul. It's premature to speculate."

Lawson's employment in the building has fallen from about 1,000 when the city-built Lawson Commons opened in 1999. In early 2010, Lawson was St. Paul's 12th-largest private employer with about 800 people, according to the annual report of the Capital City Partnership. U.S. Bancorp was first with 4,700, followed by Regions Hospital with 4,534.

Then-Mayor Norm Coleman's $101 million Lawson Commons project, including a 1,000-car parking ramp, was a publicly funded bid to lure Lawson from Minneapolis. St. Paul sold the office tower for $53.5 million in 2000 to St. Paul-based Frauenshuh Cos., which sold it for a higher price to a Texas-based real estate investment trust.

The city, which retained ownership of the parking ramp and related retail space, still owes about $28 million on the project.

Software consolidation

Last year, Lawson ranked No. 8 in the business market worldwide, with a 1.8 percent market share, according to Connecticut research firm Gartner. Privately owned Infor ranked No. 4 with a 5 percent market share, Gartner said.

"The recession had an impact, but the market is still growing in single-digit percentages, and it's a huge worldwide market," Blake said. The global business software market is forecast to be $90 billion this year, he said.

Golden Gate's affiliate, GGC Software Holdings, said Infor and Lawson will serve about 75,000 clients combined, including customers in the manufacturing, health care, distribution and hospitality industries, as well as the public sector. GGC said Infor has about 70,000 customers in 125 countries.

The consolidation trend reduced the pool of potential buyers for a company such as Lawson. When Infor and GGC made their offer for Lawson in March, Lawson said it contacted other potential buyers. But when asked whether Lawson had received any competing offers, Blake would say only that there was "no other superior proposal."

That might explain why the original offer of $11.25 a share, made public in early March, did not increase during the acquisition talks.

One reason the bid didn't go up was that it was already higher than Golden Gate and Infor's original offer, Koenig said.

"Lawson management told us there was a prior bid from Infor that was lower than $11.25, although I don't know what it was," Koenig said. "But Lawson management refused to take the first offer to Lawson's board. The $11.25 bid was the result of negotiation."

Lawson's Blake agreed.

"It's a negotiated price," Blake said. "That means there was an earlier, lower bid."

Lawson said its board unanimously approved the $11.25 offer, and that board members will vote their shares in favor of the deal. The directors own a combined 9 percent stake in the company.

The acquisition is expected to close in the third quarter, pending a Lawson shareholder vote and government antitrust clearance.