JDA Software Group and i2 Technologies announced plans for a $396 million merger that would form a combined software company with a more extensive line of supply chain management products, heating up competition against industry giants Oracle and SAP.

The cash-and-stock deal announced Thursday is the second time the companies have tried to form one entity. JDA and i2 abandoned a similar effort last year after failing to reach an agreement on share price.

The combined company would create a business with annual revenues of $617 million, including $275 million of annual maintenance and recurring subscription fees. The latest transaction, which has been approved by the boards of each company, is expected to close in the first quarter of next year, pending the OK from regulators and i2 stockholders.

The merger adds i2's SCM software for discrete manufacturing to JDA's software for merchandising, supply chain planning and execution and revenue management. The combined company would have 2,970 employees and more than 6,000 customers, including i2's manufacturing clients, which include LG Electronics, Caterpillar and Toyota. JDA believes it achieve a total cost savings of $20 million by paring overlapping areas.

"The challenges of the economic crisis have focused the market's attention on the disciplines of supply chain planning and JDA has established a leading role in this active market," JDA Chief Executive Hamish Brewer said in a joint statement with i2. "Integrating i2's solutions and expertise will only expand our opportunity to build substantial new shareholder value over the coming years."

For i2, the merger would expand its geographic footprint, giving it a larger area for sales. "This is the right transaction for our customers, partners and employees," Jackson L. Wilson, chairman, president and chief executive of i2, said.

The companies agreed on two possible deal structures. The primary one, dependent on JDA raising sufficient funds, involves paying $12.70 in cash, plus O.256 of a share of JDA common stock, for each share of i2 common stock for a total value of $18 per share.

The alternative has JDA paying $6 in cash and 0.58 of a share of JDA common stock, which would also have a total value of $18 per share of i2 stock. The total value of either structure is $396 million.

Consolidation in the software market has been going on for years, with companies using mergers and acquisitions to grow market share and revenue. Oracle, for example, has greatly increased its footprint in the business software market through the acquisition over the years of rivals, such as PeopleSoft, Siebel Systems and J.D. Edwards.

More recently, the business intelligence market has seen lots of action by major tech companies. Microsoft, IBM, SAP and Oracle have all bought BI vendors to fold into their core software offerings.

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