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January 10, 2005
UGS Acquiring Tecnomatix
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Jeff Rowe - Managing Editor

by Jeff Rowe - Contributing Editor
Each MCAD Weekly Review delivers to its readers news concerning the latest developments in the MCAD industry, MCAD product and company news, featured downloads, customer wins, and coming events, along with a selection of other articles that we feel you might find interesting. Brought to you by MCADCafe.com. If we miss a story or subject that you feel deserves to be included, or you just want to suggest a future topic, please contact us! Questions? Feedback? Click here. Thank you!

UGS Acquiring Tecnomatix

UGS, a leading global provider of product lifecycle management (PLM) software and services, has announced a definitive agreement to acquire all of the outstanding equity of Tecnomatix Technologies Ltd., the leader in Manufacturing Process Management (MPM) software solutions for the automotive, electronics, aerospace and other manufacturing and processing industries, for approximately $228 million in cash, or $17.00 a share.

The transaction represents another strategic milestone for UGS as it continues to expand its suite of software solutions in order to provide value across a product's entire lifecycle. Today's announcement demonstrates the company's continuing dedication to leadership in the high-growth sector of digital manufacturing -- a PLM strategy that focuses on improving every aspect of how a company builds its products. CIMdata, a leading PLM consulting and research firm, estimates that investments in digital manufacturing initiatives by industrial companies are expected to grow by more than 25 percent annually over the next three years. UGS has reported a nearly 100 percent increase in digital
manufacturing-related revenue over the last four quarters.

UGS currently deploys Tecnomatix software in conjunction with its Open Manufacturing Backbone (OMB), a globally-scalable technology backbone designed to transform the process of digital manufacturing through an open environment in which third-party software applications can interoperate. As a result of the transaction being announced today, UGS now expects to speed up the integration with Tecnomatix solutions and deliver these solutions as an integral component of both its OMB and its E-factory digital manufacturing solution more quickly and seamlessly.

"Integrating Tecnomatix into UGS is a natural but significant step in our digital manufacturing strategy and should accelerate our ability to deliver this premier software on behalf of UGS and Tecnomatix customers," said Tony Affuso, chairman, CEO and president of UGS. "Customers that have committed to digital manufacturing technology from Tecnomatix and/or UGS can expect to see enhanced delivery of even deeper and richer capabilities going forward as we more fully integrate our respective solutions.

"We believe that the Tecnomatix team brings to the table a tremendous amount of industry knowledge and deep expertise in digital manufacturing technology. We expect the combination of the Tecnomatix team with UGS' PLM- and digital manufacturing-leading capabilities to enable UGS to provide unparalleled technical understanding and the deepest and broadest coverage on a worldwide basis in the digital manufacturing market."

The transaction -- which, subject to the receipt of required regulatory approvals, is expected to close by the end of the first quarter 2005 -- marks the formal linkage between UGS and Tecnomatix, which have been working closely together through a strategic alliance since 2002. Following the close of the transaction, the companies intend to offer a fully integrated solution of Tecnomatix MPM to UGS Teamcenter users while continuing to offer Tecnomatix' leading open standalone MPM solution integrated with the PLM environment of choice for its customers. In addition, the companies intend to announce additional technology enhancements later this year.

"We are confident that the combined technologies and know-how of both companies will enable us to offer the best manufacturing planning and execution solution for the benefit of all customers," said Harel Beit-On, chairman of Tecnomatix. "In addition, unlike with other technology acquisitions, this one is prefaced by more than two years of close collaboration between our companies, so the formal integration of Tecnomatix technologies into UGS' digital manufacturing solution promises to go very smoothly.

"The two organizations have been working well for the past two years and the Tecnomatix employees are looking forward to becoming a part of the leading PLM team in UGS."

The Tecnomatix transaction marks UGS' fourth technology acquisition since the company launched independent operations in May 2004.

"UGS continues to grow its franchise through its dedication to offering the world's best product lifecycle management software to its customers, and the addition of Tecnomatix to the UGS family is a major step forward in that effort," Affuso said. "Along with sustained internal spending on research and development, these acquisitions have added significant value to our technology platform, which was already second to none in the PLM industry."

Tecnomatix Agrees To Be Acquired By UGS

Tecnomatix Technologies Ltd. (NASDAQ:TCNO), a leader in Manufacturing Process Management (MPM), today announced that it has entered into a definitive agreement for all of its outstanding equity to be acquired by Plano, Texas-based UGS, a leading global provider of product lifecycle management (PLM) software and services.

Under the agreement, and subject to the satisfaction of certain customary conditions, including approval by Tecnomatix shareholders and regulatory authorities, shareholders will receive $17.00 per share in cash for each Tecnomatix share they own. This represents a premium of 39% to Tecnomatix's average closing price over the last 60 trading days. The transaction implies a total equity value of $227.7 million (based on 12.2 million shares outstanding and assuming exercise of 2.9 million options).

Tecnomatix's founders and other significant shareholders owning approximately 13% of the outstanding shares have irrevocably committed to vote in favor of the acquisition. The transaction has received the unanimous support of Tecnomatix's Board of Directors and, subject to the receipt of required regulatory approvals, is expected to be completed by the end of the first quarter 2005.

"This agreement with UGS offers an attractive price to our shareholders. This price validates the business value of MPM solutions to leading manufacturing enterprises, as well as the contribution that Tecnomatix and its employees made in developing this marketplace. From an innovative vision only five years ago to over 300 productive enterprise deployments today, the Tecnomatix MPM offering has become the chosen path to manufacturing excellence at the world's leading automotive, aerospace and electronics manufacturers," said Harel Beit-On, chairman of Tecnomatix. "Through this marriage of best-in-class MPM solutions and UGS' leading enterprise PLM expertise, Tecnomatix customers and
manufacturers around the world will realize even greater business value and product introduction success."

Jaron Lotan, president and CEO of Tecnomatix said: "UGS is uniquely positioned to acquire Tecnomatix after two years of close collaboration. Joining UGS will enable Tecnomatix to benefit from the vast technical resources, as well as the broader market coverage of this leading enterprise solution provider. This combination will offer customers an integrated IT solution combining UGS' enterprise capabilities with Tecnomatix's industry leading digital manufacturing products and services. Tecnomatix employees can look forward to personal growth as part of UGS."

Commenting from UGS, Tony Affuso, chairman, CEO and president of UGS, stated, "After having worked closely with Tecnomatix for a number of years, we are excited that we will be able to further capitalize on the strengths of both organizations. Given the recent successes of our joint sales initiatives and ongoing product integration efforts, this agreement marks an important extension of our efforts to offer customers comprehensive solutions to their most complicated planning and production issues. Tecnomatix solutions will provide UGS with expanded offerings in the PLM space for existing UGS customers, as well as new customers in selected industries currently being served by Tecnomatix. We
look forward to Tecnomatix employees, with their in-depth knowledge and experience, becoming part of our organization. Following the acquisition, it is UGS' intention to continue to support all existing Tecnomatix customers and solutions."

Tecnomatix is being advised by Morgan Stanley on this transaction.

While both of the news items above obviously announce basically the same thing, we thought we'd run them both to get the perspective of each of the companies involved in the transaction. Outwardly, this looks like a good deal for both parties and makes a lot of sense, and is not too surprising. Not too surprising because UGS and Tecnomatix have had an increasingly close relationship the past few years. The technologies offered by each company are quite complementary to each other, so should result in a good fit.

Tecnomatix is the fourth technology acquisition that UGS has made since becoming an independent entity last May, so things seem to be moving right along in the right direction for UGS. Unlike its acquisition of CAD component supplier, D-Cubed (that, by the way, has its components embedded in just about every CAD application), Tecnomatix represents an acquisition of a standalone and established series of products and services. Tecnomatix provides what it calls Manufacturing Process Management (MPM) solutions for the automotive, electronics, aerospace, and other manufacturing and processing industries. Tecnomatix eMPower products and services for MPM are used for design, simulation, and
execution of production processes, and provide real-time control and visibility throughout all levels and processes of shop-floor operations.

This acquisition also represents what we feel is a continuing trend in the engineering software arena that will only gather more momentum - consolidation. While new engineering software companies will always be emerging, just about as many will be absorbed by other companies. We look ahead and predict that at least four to six prominent, middle-tier MCAD companies will merge or be acquired by other companies in the coming year.

Editor's Note: We have been overwhelmed by the outpouring of sentiment that we have received during the past few weeks for our tribute to Joe Greco. We thank you for your kind thoughts regarding a friend and colleague who meant so much to us all.

Jeffrey Rowe is the editor and publisher of MCADCafé and MCAD Weekly Review. He can be reached here or 408.850.9230.

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    -- Jeff Rowe, MCADCafe.com Contributing Editor.