Private equity firm Thoma Bravo and the Ontario Teachers’ Pension Plan have agreed to buy US-based wide area network (WAN) optimisation specialist Riverbed Technology for US$3.6bn.
The cash deal marks a successful campaign for activist hedge fund…
Private equity firm Thoma Bravo and the Ontario Teachers’ Pension Plan have agreed to buy US-based wide area network (WAN) optimisation specialist Riverbed Technology for US$3.6bn.
The cash deal marks a successful campaign for activist hedge fund Elliott Management, which is Riverbed’s largest shareholder with around 10% and began calling for a sale nearly a year ago.
At US$21 per share, the offer matches an earlier bid from Elliot, which had initially announced a US$19 per share deal at the start of the year to encourage Riverbed to seek strategic alternatives amid declining sales in its core business.
Elliot is supporting the new offer from Ontario Teachers and Thoma Bravo, which represents a 12% premium on the closing price of the company’s shares on the Friday before the announcement.
Notably, it is the latest in a string of multibillion dollar deals that Thoma Bravo has made after Elliot took a position in a technology firm and then called for its sale. It comes as Thoma Bravo completes a US$2.4bn deal for US IT software firm Compuware, which Elliot had offered US$2.3bn for in 2012 after amassing a significant stake.
The Riverbed deal also has the support of its board, but still requires the approval of other shareholders as well as the nod from regulators. It would be the largest in Thoma Bravo’s history.
Jerry Kennelly, chairman and CEO of Riverbed, said: “Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximise value, the board unanimously concluded that partnering with Thoma Bravo was the best choice for Riverbed, as this transaction will provide our stockholders with significant and immediate cash value.
“Further, Thoma Bravo is a highly regarded private equity firm with deep experience in the technology industry and a 30-year track record of helping companies like ours flourish. With the benefit of Thoma Bravo’s knowledge and insights, combined with the added flexibility we will have as a private company, Riverbed will be able to focus on reaching the next level of growth, which will benefit our employees, customers and partners.”
Riverbed announced it was reviewing strategic alternatives during its Q3 results in October, when it also revealed restructuring plans to cut annual costs by US$20m-US$25m and improve operating margins by 1% to 2%.
The group posted US$276m in GAAP revenue for Q3 2014, representing 6% year-over-year growth. GAAP net income for Q3 2014 was US$11.5m, compared with US$3.8m for the corresponding period in 2013.
The acquisition has been backed by debt commitments from Credit Suisse, Citigroup and Barclays, although the transaction is not subject to a financing condition, according to an SEC filing. It is tied to a US$252m termination fee.
Based in San Francisco, Riverbed provides a variety of satellite communication services and is predominantly focused on satellite WAN optimisation solutions.
Qatalyst Partners and Goldman Sachs are financially advising Riverbed, and Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal adviser.
Thoma Bravo hired Kirkland & Ellis as legal adviser.
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