The network and application performance specialist Riverbed has agreed a deal with the private equity firm Thoma Bravo and the Ontario Teachers’ Pension Plan. According to reports, the buyout is worth nearly $3.6 billion. The company has been looking to sell for nearly a year.
Microscope reported the day-to-day operations are unlikely to change, with the current CEO, Jerry M. Kennelly, staying put. Karl Campbell, the regional vice president for the UK and South Africa divisions, told the Microscope, “What it means for us is it’s just a change of shareholders”.
The price would equal to $21 per share, which is a premium of 12% over the share price on Friday. The start of the week has seen the price climb a bit, while still remaining below the offered price.
Long Quest to Sell
The technology company has been urged to sell for nearly a year by its largest single shareholder, Elliot Management. The company even offered to buy Riverbed earlier in February, an offer that was turned down by the company.
Riverbed has been looking what strategy to undertake after the offer and it seems it has now find a likely partner in the private equity firm. The company’s statement said the aim was to ‘maximize value’ which they believe has now been achieved.
Analysts Believe the Price is Undervalued
But many analysts have claimed the deal is clearly undervaluing the company. Microscope wrote that analysts at Yahoo! Finance believe the deal, although better than what Elliot Management offered in February, is not truly representative of the value of Riverbed. Furthermore, Rigrodsky & Long P.A. is thought to be investigating whether the board of directors acted appropriately or if there were “possible ‘breaches of fiduciary duties and other violations of law’”.
But some experts don’t share the view of undervaluation. Mark Seager, EMEA pre-sales VP at Riverbed, commented the deal to Microscope by stating the valuation highlights the company’s current situation well. “You have to remember that the share price is based on pre-activist involvement.
If you look at what’s happened to Riverbed, with Elliot getting in involved; if you actually look prior to the activist involvement, our fair market value at that point was $15, so you can draw your own perception as to whether $21 was good or bad,” he told the newspaper.
Part of Thoma Bravo’s Portfolio
The deal is a good fit for the private equity firm’s portfolio. The VarGuy pointed out to previous deals highlighting the firm’s long history in buying out technology companies. In 2010, it bought Novell for $2.2 billion and just recently acquired Compuware for $2.5 billion.
The firm’s managing partner, Seth Boro, was quoted in the Daily Telegraph saying, “This investment is the largest in Thoma Bravo’s history, and it marks a continued emphasis on and confidence in companies that deliver mission-critical technologies for an expanding, global customer base”. The deal is still subject to regulatory approval and it is expected to be finalized during the early months of 2015.