Symantec has agreed to acquired Blue Coat for USD 4.65 billion in cash, in a deal that has been approved by the board of directors of both companies and which is expected to close in the third quarter. Upon closing, Symantec will be led by Blue Coat CEO Greg Clark, who will also join the Symantec board.
On a pro-forma and adjusted basis, the combined company would have reported USD 4.4 billion in revenues for its fiscal full year to end April, with 62 percent coming from enterprise security. By the end of fiscal 2018, Symantec expects to realize USD 550 million in run-rate cost savings, of which USD 400 million will come from Symantec’s previously announced cost efficiency programme. Adjusted earnings per share are expected at USD 1.70-1.80.
Blue Coat, a provider of advanced web security products for global enterprises and governments which recently filed for IPO, reported revenues for its fiscal full year to end April at USD 598 million. Adjusted revenue lifted 17 percent from the year before to USD 755 million, supported by new products and new customers. The adjusted margin went to 22 percent, while the operating margins amounted to minus 42 percent.
In connection with the transaction, Silver Lake will make an additional investment of USD 500 million in 2.0 percent convertible notes due 2021 of Symantec, doubling its investment in Symantec to USD 1 billion. Bain Capital has agreed to make an investment of USD 750 million in the convertible notes. The convertible notes are noncallable and unsecured, and have an initial conversion price of USD 20.41 per share. David Humphrey, a managing director at Bain Capital, will be appointed to Symantec’s board of directors.
The integration of the two companies will be led by executives from both Symantec and Blue Coat, with integration set to begin immediately. The companies expect an efficient and successful integration given their complementary product offerings and distinct customer footprints, as well as Blue Coat’s management team’s track record of integration. The combined company will be headquartered in Mountain View, California.
With the acquisition, Symantec said it will enhance its leadership position to define the future of cybersecurity and set the pace for innovation industrywide. The combined company plans to protect customers against more cyber threats, help enterprises securely embrace the cloud, and push investment in cyber R&D and threat research. Symantec intends to finance the transaction with cash on the balance sheet and USD 2.8 billion worth of new debt. The company is aiming to pay down a significant portion of this debt within the next several years with cash on the balance sheet and through cash generation. The transaction is subject to the satisfaction of customary closing conditions, including applicable regulatory approvals. JP Morgan is acting as lead financial advisor to Symantec. Barclays, BofA Merrill Lynch, Citi, JP Morgan and Wells Fargo Securities are acting as financial advisors and are providing debt financing to Symantec.
