Symantec To Buy Blue Coat For About $4.651 Bln In Cash

(RTTNews) - Symantec Corp. (SYMC) said that it agreed to buy Blue Coat Inc for approximately $4.651 billion in cash. The Boards of Directors of both companies approved the transaction.

The deal is expected to close in the third calendar quarter of 2016. The transaction is subject to the satisfaction of customary closing conditions, including applicable regulatory approvals.

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.

Symantec anticipates the acquisition to be significantly accretive to its non-GAAP earnings creating meaningful value for its shareholders.

Symantec intends to finance the transaction with cash on the balance sheet and $2.8 billion of new debt. The company is focused on paying down a significant portion of this debt within the next several years with cash on the balance sheet and through cash generation.

Blue Coat is the #1 market share leader and share gainer in Web Security with a widely recognized portfolio of integrated technologies serving as a trusted platform to deliver Cloud Generation Security to more than 15,000 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.

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. .... We are reiterating our first quarter guidance and maintaining our commitment to our previously announced $5.5 billion capital return program, of which the remaining $1.3 billion will be returned by the end of the current fiscal year."

Non-GAAP earnings per share for the fiscal year 2018 is expected to be $1.70-$1.80, including $150 million in run-rate cost synergies from blue coat transaction plus previously announced $400 million in net cost savings.

On a pro-forma, non-GAAP basis, the combined company would have had $4.4 billion in revenues in fiscal year 2016, of which 62% would come from enterprise security. By the end of fiscal 2018, Symantec expects to realize $550 million in run-rate cost savings, of which $400 million will come from Symantec's previously announced cost efficiency program.

The Board of Directors will continue to be led by Symantec's current Chairman, Dan Schulman. Clark will serve as CEO and Seifert will continue as Chief Financial Officer.

Members of Blue Coat's management team have not only agreed to join Symantec but also made the decision to rollover a substantial portion of their cash and options into the combined entity.

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.

In connection with this investment, David Humphrey, a Managing Director of Bain Capital Private Equity, will be appointed to Symantec's Board of Directors, effective at the close of the transaction.

SYMC closed Friday's regular trading at $17.30, down $0.09 or 0.52 percent.