PORTLAND (AP) – Portland software developer I-Many announced Monday it is selling part of its business for $20 million in cash and stock.

The company will sell its health and life sciences section to Neoforma of San Jose, Calif., for $10 million in cash and $10 million in common stock, giving I-Many a small ownership in the supply chain management company.

The health and life sciences section accounted for two-thirds of I-Many’s revenue. The deal is expected to close around the end of September.

I-Many makes software that helps companies manage contracts.

Most of the 150 employees in the division will be hired by Neoforma, the company said in a press release. I-Many employs 300 workers.

It is unclear whether workers in the company’s Portland or Edison, N. J. offices will be affected.

The company characterized the deal as a way to focus on other markets with growth potential while allowing their health and sciences business to go to a company specifically devoted to that sector.

The deal drew heavy fire from analysts and investors and sent I-Many’s stock price plummeting by more than a third from $1.62 per share to its closing price of $1.06. The stock traded at almost nine times the normal volume.

The price Neoforma paid for the division was a particular concern to those on the call. Similar deals in the software industry are valued at two to three times revenue, rather than at less than half, said Michele Whalen, portfolio manager with New York-based Morgens Waterfall Vintiadis & Co.

In fiscal year 2002 and the first quarter of 2003, the unit being sold generated $44 million in revenue. The part of the company that would be left after the sale generated $21.9 million during the same period.

“Overall, we think it’s an excellent company, but the transaction is puzzling and we don’t understand the methodology behind it,” said Whalen. “I-Many shareholders are not getting a very good price.”

The sale is subject to approval by stockholders and other closing conditions.

AP-ES-07-22-03 0216EDT