Leading antivirus software company Avast Software agreed to acquire rival AVG Technologies NV (NYSE: AVG) for $1.3 billion in cash. The offer price of $25.00 per share represents a 33% premium over the July 6, 2016 closing price and a premium of 32% over the average volume weighted price per share over the past six months.

Both companies are industry pioneers founded in the Czech Republic in the late 1980s and early 1990s, that expanded internationally in the 2000s, and now will be combining complementary strengths to position Avast for continued growth in the security industry.

The move comes two weeks after Intel Corp. (NASDAQ: INTC) was said to be seeking an exit strategy for Intel Security, the antivirus software maker formerly known as McAfee, which Intel acquired for nearly $7.7 billion in February 2011.

Global private equity firm CVC Capital Partners, through its CVC Fund V, acquired a major stake in Avast from its founders and growth equity firm Summit Partners, valuing the company at $1 billion In March 2014.

A few days ago, as part of its ambitious buyout strategy stretching across the globe from betting parlors to funeral parlors, CVC Capital offered to acquire Asia’s largest funeral services provider, Nirvana Asia Ltd. (HKEX: 1438), at a valuation close to $1 billion.

“Avast is the undisputed global leader in consumer PC antivirus and a pacesetter in mobile security – but we’re not yet number one in every market. CVC gives us the resources to become the number one PC security provider in the US and Asia, and the clear market leader in mobile security,” said Avast CEO Vincent Steckler.

Avast’s roots go back to 1988, when Czech researchers Eduard Kučera and Pavel Baudiš encountered the Vienna Virus and began their quest to save the world’s computers from it and others like it. Today, Avast has over 500 professionals headquartered in Prague, Czech Republic, with additional offices in the US, Germany, China, South Korea and Taiwan.

Avast is pursuing this acquisition to gain scale, technological depth and geographical breadth so that the new organization can be in a position to take advantage of emerging growth opportunities in Internet Security as well as organizational efficiencies. The technological depth and geographical reach will help Avast serve customers with more advanced security offerings in the core business and innovations in emerging markets, such as security for IoT devices.

Combining Avast’s and AVG’s users, the organization will have a network of more than 400 million endpoints, of which 160 million are mobile, that act as de facto sensors, providing information about malware to help detect and neutralize new threats as soon as they appear. This increase in scale will enable Avast to create more technically advanced personal security and privacy products, says AVG.

AVG Technologies is a security software company headquartered in Amsterdam, Netherlands that develops antivirus software and internet security services. It was formed in 1991 by Czech engineers Jan Gritzbach and Tomáš Hofer, and has corporate offices in Europe, Israel, Brazil, Canada and the United States.

Certain shareholders including funds affiliated with TA Associates, who hold a 13% stake in AVG, have agreed to support the deal. Avast plans to finance the transaction using cash on hand and committed debt financing of $1.685 billion from Credit Suisse Securities, Jefferies and UBS Investment Bank. In addition, Avast has contributed $150 million in equity investment to fund the transaction, which is not subject to a financing condition.

The deal is expected to close sometime between September 15, and October 15, 2016, depending on the timing of regulatory review, and subject to other customary closing conditions.

Jefferies International Limited is acting as exclusive financial advisor, and White & Case LLP and De Brauw Blackstone Westbroek N.V. are acting as legal advisors, to Avast. Morgan Stanley & Co. LLC is acting as financial advisor to AVG and Bridge Street Securities, LLC is acting as independent financial advisor to the supervisory board of AVG. Orrick, Herrington & Sutcliffe LLP and Allen & Overy LLP are acting as legal advisors to AVG.

Antivirus Product Market Share

 Jan 2015 Antivirus Product Market Share (OPSWAT Report)

Jan 2015 Antivirus Product Market Share (OPSWAT Report)

The above comparison chart only includes data from products with real time protection (RTP) enabled. According to OPSWAT, a San Francisco based software company that provides solutions to secure and manage IT infrastructure, based on data collected on January 2, 2015, Microsoft and Avast are the dominant vendors in its antivirus market share report, despite the exclusion of Microsoft’s Windows Defender, which is an optional built-in feature in Windows 10, and a feature of Windows 8 and 8.1 and “not actively acquired” by the user.

All other vendors (including McAfee VirusScan with a 3.6% market share, and its Enterprise version with a 2.2% share) show a single-digit market share, including Avira Free Antivirus, AVG Anti-Virus Free Edition, McAfee VirusScan, and Symantec Endpoint Protection. When combined, products that did not make the top ten in the rankings still make up a sizable 35% share of the market. OPSWAT is not a research institution and makes no claims on the accuracy of this data in the real world marketplace.

 Jan 2015 Antivirus Vendor Market Share (OPSWAT Report)

Jan 2015 Antivirus Vendor Market Share (OPSWAT Report)

CVC Capital Partners

Headquartered in Luxembourg, CVC Capital Partners is one of the world’s leading private equity and investment advisory firms. Founded originally in 1981 as the European arm of Citicorp Venture Capital, the CVC Group today employs some 300 people throughout Europe, Asia and the US.

The firm was spun out from Citicorp in 1993, as an independent private equity firm. The CVC team’s local knowledge and extensive contacts underpin a proven track record of over 30 years of investment success.

CVC manages capital on behalf of over 300 institutional, governmental and private investors worldwide, having secured commitments of more than US$71 billion in private equity, credit and growth funds.

In late May, CVC Capital acquired Italian gaming and payments operator Sisal Group SpA, from Apax Partners, Permira and Clessidra for €1 billion.

Bernie Ecclestone, CEO of Formula One Group, with Donald Mackenzie, Co-Founder and Co-Chairman of CVC Capital Partners

(L-R) Bernie Ecclestone, CEO of Formula One Group, with Donald Mackenzie, Co-Founder and Co-Chairman of CVC Capital Partners.

A few weeks earlier, CVC Capital acquired a majority stake in German gaming company Tipico for close to €1.5 billion ($1.68 billion). In December 2014, CVC acquired Sky Betting and Gaming for £800 million, consisting of five core brands Sky Bet (sports betting), Sky Vegas (online in-browser casino), Sky Casino (premium online casino, live table games), Sky Poker (online poker) and Sky Bingo (online bingo). CVC also made previous investments in British sports betting operator William Hill (2002 IPO exit, at 314% ROI) and the IG Group, a digital trading and betting platform.

CVC Capital also gained control of the Formula One Group in 2006 in a leveraged buyout funded with two loans – $965.6 million from its Investment Fund IV and $1.1 billion from RBS, turning the firm into the biggest winner in the history of the Formula One grand prix.



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