Oracle set to make first acquisition in Israel

The US software giant will pay $41 million cash for Demantra, a planning solutions company.

Sources inform ''Globes'' that software giant Oracle (Nasdaq: ORCL) is set to acquire Israeli high-tech company Demantra for $41 million in cash.

Demantra has raised a total of $42 million since it was founded. Most of Demantra’s investors will see only a marginal return on their investment, save for two venture capital firms, Advent International and Formula Ventures, which will make a 50% return on their money. Advent and Formula Ventures, which is managed by Shai Beilis and Nir Linchevski, participated in Demantra’s third financing round. At the same time as the financing round, the company was restructured and recapitalized.

Sources inform ''Globes'' that Advent invested $15 million and will receive $24 million, while Formula Ventures invested $6 million and will receive $9 million. The remaining $17 million will be divided among the other investors and the the company’s management and employees.

Demantra was founded in 1996 by Yoni Cheifetz and Bart Feldman. In 1998, the company was acquired by the Baan Brothers’ Vanenburg group for $15 million in cash. In 2002, the company appointed William A. Seibel as president and CEO. Demantra, which develops demand-driven planning software solutions, ended 2005 with sales of $20 million. The company is headquartered in Waltham, Massachusetts and has small R&D center in Ramat Gan, which employs 30 people.

Under Seibel’s leadership, Demantra grew 400% in 2001-2003. The company signed a raft of contracts with giant companies and launched a new product range that made it a supplier of a full set of planning solutions for product management. It also switched from marketing its products through a chain of resellers to direct sales to customers.

Demantra ended the first quarter of 2006 with results that were 45% higher than expected. The company posted a 67% increase in revenue compared with the corresponding quarter in 2005, with revenue from software licensing jumping 178%, compared with the corresponding quarter last year. In addition, it also won a two new customers, C&S Wholesale Grocers, the second largest supermarket chain in the US, and champagne manufacturer Korbel. Its other customers include a video games manufacturer and a leading publishing house.

Commenting on the first quarter results, Seibel said, “Our selection by industry leaders such as Cargill, John Fairfax, C&S Wholesale Grocers, and Korbel further validates that our demand-driven planning solutions are filling a critical gap in existing business systems.” Among Demantra’s other customers are Dunkin Donuts, Wendys, Unilever, Johnson and Johnson (NYSE: JNJ), Fox Studios, HunterDouglas Window Fashions, and Organic Valley.

Demantra was considered to be one of the most promising companies in the local high-tech sector at the end of the 1990s. Part of the evidence for this was its ability to raise finance even during times of crisis, and from its own customers such as Cargill. Sources close to the company said today that Demantra’s acquisition by Oracle was made possible following the internal changes that have been made in recent years. The fact that Demantra was once considered a potential success story and was eventually sold for the modest sum of $40 million is one of the signs of the times.

Demantra, said the sources, had been harmed by the shake-up that swept through the enterprise software industry last year. “The big players rule the market. Small companies find it difficult to survive, and certainly find it a tough job to compete with the giants. Companies such as Demantra that have had good sales but are still scraping the glass ceiling, can do a lot better under the ownership of Oracle,” they said.

Oracle has never before acquired a company in Israel. In 2005, the software giant signed a cooperation agreement with the Chief Scientist, with the goal of investing in start-ups and software solutions manufacturers. The cooperation between Oracle and the Chief Scientist was agreed following a meeting between company president Safra Catz and the Minister of Trade, Industry and Labor.

Since the agreement was announced, Oracle and the Chief Scientist have made a joint investment in YaData, which develops software for market segment targeting and management solutions for large enterprises. In addition, Oracle is in the process of acquiring technology for database connectivity from Attunity.

Published by Globes [online], Israel business news - www.globes.co.il - on May 31, 2006

© Copyright of Globes Publisher Itonut (1983) Ltd. 2006

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