Symantec and Blue Coat, Inc. have announced that they have entered into a definitive agreement under which Symantec will acquire Blue Coat for approximately $4.65 billion in cash. The transaction has been approved by the Boards of Directors of both companies and is expected to close in the third calendar quarter of 2016. Greg Clark, Chief Executive Officer of Blue Coat, will be appointed Chief Executive Officer of Symantec and join the Symantec Board upon closing of the transaction.
Blue Coat is a web security company with a portfolio of integrated technologies serving as a trusted platform to deliver cloud generation security to its customers worldwide. For Blue Coat’s fiscal year ending April 30, 2016, GAAP revenue was $598 million and non-GAAP revenue was $755 million, with 17% year-over-year growth, supported by new products and new customers. For the same time period, the company had non-GAAP operating margins of 22% and cash flow from operations of $135 million. Also for this time period, GAAP operating margins were -42%.
Defining the future of cybersecurity
With the acquisition of Blue Coat, Symantec will define the future of cybersecurity and set the pace for innovation industrywide. The combined company will:
- Protect customers against more cyber threats, with in-breed protection, detection and remediation across endpoint, email, web, network and servers. This transaction will combine Symantec’s threat telemetry with Blue Coat’s networks and cloud security offerings to provide differentiated security solutions across endpoints, servers, emails and web transactions.
- Help enterprises securely embrace the cloud. Symantec will be able to deliver security for the cloud generation of users, data and apps, for the cloud, from the cloud and to the cloud. The company’s data loss prevention capabilities will be applied at the web proxy and to over 12,000 cloud applications.
- Bring together a formidable scale of investment in cyber R&D and threat research. These investments span over 3,000 engineers and researchers, as well as nine threat response centres.
“With this transaction, we will have the scale, portfolio and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cybercriminals. Together, we will be best positioned to address the ever-evolving threat landscape, the massive changes introduced by the shift to mobile and cloud, and the challenges created by regulatory and privacy concerns,” said Dan Schulman, Chairman of Symantec. “Greg and the entire Blue Coat leadership team have done an exceptional job of strengthening, growing and scaling their business. In addition to a proven track record of delivering scale and profitable growth, Greg brings significant leadership experience, deep security expertise and a history of successfully integrating companies into a single portfolio; he is the right person to lead Symantec as we advance our position as the leader in cybersecurity.
The Board of Directors will continue to be led by Symantec’s current Chairman, Schulman. Clark will serve as CEO and Seifert will continue as Chief Financial Officer. The integration of the two companies will be led by executives from both Symantec and Blue Coat, with integration planning 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.
Greg Clark, Chief Executive Officer of Blue Coat, said, “Today, Symantec keeps global enterprises, governments and individual consumers protected with solutions across threat protection, information protection and managed services. Likewise, Blue Coat is the trusted source for protecting billions of web transactions daily and is the clear leader in the growing cloud security market. Once combined, we will offer customers around the world – from large enterprises and governments to individual consumers – unrivaled threat protection and unmatched cloud security. With employees of Blue Coat and Symantec coming together, we will be well positioned to drive meaningful growth and push the boundaries of innovation. I am very excited about the opportunity to join Symantec as CEO and look forward to working with the strongest, deepest team in security to realise the many strategic and financial benefits this transaction will create.”
Thomas Seifert, Chief Financial Officer of Symantec, said, “With the $150 million in expected annual net cost synergies, in addition to our previously announced $400 million in planned net cost savings, this transaction will allow Symantec to improve our profitability while continuing to invest in innovation and drive growth. The acquisition is expected to be significantly accretive to our non-GAAP earnings creating meaningful value for our shareholders. We are reiterating our first quarter guidance and maintaining our commitment to our previously announced $5.5 billion capital return programme, of which the remaining $1.3 billion will be returned by the end of the current fiscal year. We will also continue our practice of paying a quarterly dividend to our shareholders.”
Investing in the future of Symantec
In connection with the transaction, Silver Lake has agreed to make an additional investment of $500 million in 2.0% convertible notes due 2021 of Symantec, doubling its investment in Symantec to $1 billion. In addition, Bain Capital has agreed to make an investment of $750 million in the convertible notes. The convertible notes are noncallable and unsecured, and have an initial conversion price of approximately $20.41 per share.
