Blue Coat has scrapped its IPO plans in favour of a $4.65bn takeover by IT security rival Symantec.
Greg Clark, Blue Coat CEO, will take the helm at Symantec, so resolving the question of succession of Mike Brown, who announced his resignation as CEO in April.
On a pro-forma basis, the combined company would have $4.4bn in revenues in FY 2016 and with Blue Coat under its wing, Symantec’s enterprise security business will increase to 62 per cent of group turnover. But $4.65bn is a helluva price to pay.
Symantec is taking on $2.8bn of new debt and using cash on the balance sheet to fund the acquisition. The company aims to pay down a “significant portion of this debt within the next several years” through cash reserves and also through cash generation. It also thinks it can squeeze an additional $150m from Blue Coat in annual cost savings, on top of $400m planned cost cuts, announced in February 2016.
The deal is part-funded by Bain Capital, Blue Coat’s owner, which bought the company for $2.4bn just a year ago. It is buying $750m in unsecured notes in Symantec at a conversion price of $20.41 per share. This is a premium of about 18 per cent on Symantec’s closing price on Friday.
Silver Lake is doubling its investment into Symantec into $1bn, by pumping in another $500m in the form of 2 per cent convertible notes, due in 2021. The private equity firm bought $500m of notes in February 2016, at a conversion price of $21 a share. ®