Symantec Set to Buy Blue Coat Systems
June 12 2016 - 8:40PM
Dow Jones News
Symantec Corp. plans to buy Blue Coat Systems Inc. in a $4.65
billion deal that will give the computer-security company a new
portfolio of cyberdefense technologies along with a new chief
executive.
Blue Coat Chief Executive Greg Clark is set to take that role at
Symantec after the deal closes, which is expected to occur before
October, the companies plan to announce. Symantec has been
searching for a new CEO ever since Michael Brown stepped down in
April amid disappointing financial results.
In moves representing votes of confidence on the deal,
private-equity firm Bain Capital LLC, which controls Blue Coat,
will invest $750 million of the proceeds back into the combined
company in the form of debt convertible into equity, while Silver
Lake will invest $500 million in convertible debt on top of $500
million it already agreed to put into Symantec this year.
Following a rash of high-profile breaches, computer security is
now a major topic of discussion in corporate boardrooms. While
Symantec is a pioneer in antivirus software that runs on personal
computers, Blue Coat's domain is the World Wide Web. The company's
technology is used by more than 15,000 companies to block dangerous
or inappropriate websites.
Blue Coat is also a seller of security services delivered over
the internet, also known as "cloud" computing. Blue Coat had filed
for an initial public offering earlier this year, and analysts'
estimates for the value of the company should it have taken that
route were in the range of what Symantec is paying.
In a joint interview, Symantec Chairman Daniel Schulman and Mr.
Clark said the combined company would be a security juggernaut that
would have more than 3,000 engineers at its disposal.
"This is an extremely compelling combination," Mr. Schulman
said. "We now are going to have the scale, the portfolio of
products and services, and the resources necessary to protect
customers against a constantly evolving threat landscape."
"There is virtually no product overlap between Blue Coat and
Symantec," Mr. Clark added.
Symantec has struggled to translate increased corporate concern
about cyberthreats into new revenue. Sales of the company's
corporate-security products were down 2%, totaling $2.1 billion,
during its 2015 fiscal year. Revenue in the company's consumer
business dropped 9%. Shares of Symantec have dropped 27% over the
past year.
The deal is Symantec's largest acquisition since its 2005
purchase of Veritas Software, and the latest in a series of big
steps it has taken as Symantec tries to turn around its fortunes in
the increasingly competitive market for computer-security
products.
In January, Symantec sold off its Veritas data-storage division
to Carlyle Group for $7.4 billion. Back in 2005, Symantec had paid
more than $10 billion for the company, but the acquisition proved
to be an unwieldy distraction.
Some layoffs are expected following the acquisition. "I think
inevitably in any combination of companies there are some
redundancies," Mr. Schulman said.
Bain has done well on its Blue Coat investment. It bought the
company about a year ago in a deal valued at $2.4 billion. It has
since bolstered the company with a couple of cloud-related
acquisitions.
Symantec is paying more than $2.2 billion more than Bain's 2015
purchasing price, but buying Blue Coat last year "would have been
impossible," operationally, as the company was in the process of
divesting itself of Veritas, said Thomas Seifert, Symantec's chief
financial officer.
"If you look at what we've paid, it's well within the range of
what an IPO valuation would have been," he said. "With this IPO
path in mind, we think we paid fair value for what we're
receiving."
The combined company would have some $4.4 billion in fiscal-2016
revenue, nearly two-thirds from corporate security. Symantec
ultimately expects $150 million of cost savings from the deal, on
top of a $400 million expense-reduction drive the company had
already announced.
Write to Robert McMillan at Robert.Mcmillan@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
June 12, 2016 20:25 ET (00:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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