Symantec is buying Blue Coat in a $4.65 billion deal that will bolster its cloud security business and see Blue Coat CEO Greg Clark take over leadership of the combined company.
Symantec Corp. (Nasdaq: SYMC), the maker of Norton antivirus software, said the acquisition would help it to better address emerging cybersecurity threats and serve enterprise customers that are making increasing use of cloud and mobile technologies.
Founded in 1996, Blue Coat develops a range of web security solutions for global enterprise customers and governments, and now claims to serve about 15,000 organizations.
The deal will create a company expected to generate about $4.4 billion in annual revenues, with around 62% of sales coming from enterprise security offerings. Symantec should also become a much stronger rival to security players such as FireEye Inc. and Palo Alto Networks Inc. as a result of the takeover.
Symantec plans to fund the acquisition through cash on its balance sheet and $2.8 billion in new debt. The company managed to raise about $7.4 billion earlier this year from the sale of Veritas, a business that specialized in back-up and recovery software, and is reported to have been eyeing Blue Coat Systems Inc. (Nasdaq: BCSI) for some time as a means of rekindling its fortunes. (See Symantec Sells Storage Business for $8B.)
CEO Michael Brown quit the company in April after it missed sales expectations for its final fiscal quarter and saw revenues drop by 9% over the financial year ending in March, to $3.6 billion. Ajei Gopal has been acting as interim president until a permanent replacement could be found.
While Blue Coat's revenues came in at just $598 million last year, the company reported sales growth of 17% compared with the previous year.
Even so, the fee of $4.65 billion is nearly twice as much as current owner Bain Capital paid for Blue Coat in May last year, indicating the scale of Symantec's growth expectations for the business.
In a statement, Symantec CFO Thomas Seifert said the transaction would deliver $150 million in annual net cost "synergies," on top of the $400 million Symantec is already looking to realize in net cost savings. Seifert also expects the deal to be "significantly accretive" to earnings, although Symantec has not yet provided more detailed guidance in this area.
Symantec investor Silver Lake Partners has agreed to make an additional investment of $500 million in the company, doubling its overall investment to $1 billion, while Bain Capital is to invest $750 million in the business.
David Humphrey, a managing director at Bain, will also gain a seat on Symantec's board of directors once the Blue Coat deal has been finalized, which is expected to happen in the third quarter.
While Clark is set to become CEO of the new company, Dan Schulman will retain his current role as chairman of Symantec and Seifert will continue as CFO.
"Once combined, we will offer customers around the world -- from large enterprises and governments to individual consumers -- unrivaled threat protection and unmatched cloud security," said Clark in a statement.
— Iain Morris, , News Editor, Light Reading