Epicor Corporate Headquarters: Irvine, CA

Apr 5 - Private equity firm Apax Partners will buy Epicor Software Corp and privately held Activant Solutions Inc for about $2 billion (1.2 billion pounds) and combine them to gain scale in a business management software market dominated by Oracle and SAP AG.

Apax said the combined entity will be one of the largest global providers of enterprise applications focused on the manufacturing, distribution, services and retail sectors.

The deal will give the combined company critical mass in the retail segment of the enterprise resource planning software market, Signal Hill Group analyst Richard Baldry told Reuters.

Epicor shareholders will get $12.50 a share, a premium of 11 percent to Friday's closing, which values the business management software maker at $790 million.

However, the stock rose to a year-high of $12.57 in morning trade on Nasdaq, indicating that some investors expected a higher bid.

Baldry said in a note that Epicor's in-house development and sales business model makes it an attractive target, as potential suitors will not have to worry about alienating partners.

Epicor has a 30-day "go-shop" period.

"You got the normal suspects SAP and Oracle and private equity firms. I would consider some of the large infrastructure software companies like Microsoft, IBM and HP as long shots," Benchmark Co's Mark Schappel said. There is a one-out-of-three chance of a rival bid, he added.

Lazard Capital analyst Joel Fishbein also said Apax's offer is reasonable and that he does not expect a rival bid meaningfully above current levels.

Last month, Epicor's bigger rival Lawson Software got an unsolicited $1.8 billion bid from privately held software company Infor and Golden Gate Capital.

Livermore, California-based Activant provides retail and distribution management software. Apax did not disclose the terms of the Activant deal.

The new company, to be called Epicor Software Corp, would have over 30,000 customers and $825 million in annual revenue.

ELLIOTT'S BIG PUSH

"The deal is not surprising given Epicor had a catalyst for a sale -- Elliott Associates, an activist hedge fund," Benchmark's Schappel said.

Apax has support for the deal from a third of Epicor shareholders, including Elliott Associates which owns 13.5 percent of Epicor.

In October 2008, Elliott had offered to buy the company for $9.50 a share, but later lowered the bid to $7.50. It terminated it in November that year.

"We have been working with the company for three years to find ways for them to maximize the value for all shareholders," a source close to the deal at Elliott Associates said.

"Apax has been willing to pay a fair value and we worked with the management to accept it."

Apax said it has funding commitments from Bank of America Merrill Lynch and RBC Capital Markets for the deals, expected to close in the second quarter of 2011.

London-based Apax Partners, which manages funds of about $40 billion, recently backed software firm iGate to buy a majority stake in India's Patni Computer Systems for $1.2 billion.

Epicor shares were up 11 percent at $12.48 on Monday. More than one million shares changed hands by 1320 ET, about four times their normal volume.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Sriraj Kalluvila and Joyjeet Das)