Symantec (NASDAQ: SYMC), a global leader in cybersecurity, agreed to acquire Blue Coat Inc., the #1 market share leader in web security, for $4.65 billion in cash. The transaction has been approved by the boards of directors of both companies and is expected to close in the third calendar quarter of 2016.

With more than 15,000 customers worldwide, during Blue Coat’s fiscal year ending April 30, 2016, its GAAP revenue was $598 million and non-GAAP revenue was $755 million, with 17% year-over-year growth, operating margins of 22% and cash flow from operations of $135 million.

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.

“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 Greg Clark, CEO of Blue Coat, who will be appointed CEO of Symantec and join the Symantec board upon closing.

The board will continue to be led by Symantec’s current chairman, Dan Schulman, who commented, “With this transaction, we will have the scale, portfolio and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cybercriminals. Together, we will be best positioned to address the ever-evolving threat landscape, the massive changes introduced by the shift to mobile and cloud, and the challenges created by regulatory and privacy concerns.”

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. Symantec intends to finance the transaction with cash on the balance sheet and $2.8 billion of new debt.

J.P. Morgan is acting as lead financial advisor to Symantec. Barclays, BofA Merrill Lynch, Citi, J.P. Morgan and Wells Fargo Securities (in alphabetical order) are acting as financial advisors and are providing debt financing to Symantec. Fenwick & West LLP is acting as legal advisor to Symantec in connection with the acquisition and the convertible note investment, and Fenwick & West LLP and Simpson Thacher & Bartlett LLP are acting as legal advisors to Symantec in connection with the debt financing. Goldman, Sachs & Co., is acting as lead financial advisor to Blue Coat. Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC are also acting as financial advisors to Blue Coat. Ropes & Gray and Wilson Sonsini Goodrich & Rosati are acting as legal advisors to Blue Coat.



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