Thoma Bravo secures Sophos deal

BY Richard Summerfield

Software-focused private equity firm Thoma Bravo is to acquire UK cyber security firm Sophos for $3.8bn.

Thoma Bravo’s takeover offer of $7.40 pence per share represents a 37 percent premium over Sophos’s closing price on Friday, the last day of trading before the deal was announced.

The board of directors of Sophos have stated their intention to unanimously recommend the offer to the company’s shareholders and the deal is expected to complete during the first quarter of 2020, pending customary closing conditions and regulatory approvals.

Thoma Bravo raised billions for its latest private equity fund this year, and has increasingly focused on the cyber security space. In 2018, the firm bought Imperva and Veracode. Though the firm has acquired more than 200 software and technology companies during its 40-year history, including holding stakes in other cyber security firms such as Tripwire, Blue Coat, Sonicwall, Digicert and Entrust, Sophos will be its first acquisition outside the US.

"We are excited by the opportunity to partner with the Sophos management team and employees as we further develop Sophos as a best-in-class software franchise and nextgen security leader,” said Seth Boro, a managing partner at Thoma Bravo. “The acquisition fits with our strategy of investing in and growing software and technology businesses globally. The global cybersecurity market is evolving rapidly, driven by significant technological innovation, as cyber threats to business increase in scope and complexity. Sophos has a market-leading product portfolio and we believe that, by applying Thoma Bravo’s expertise, operational framework and experience, we can support the business and accelerate its evolution and growth.”

“Today marks an exciting milestone in the ongoing journey of Sophos,” said Kris Hagerman, chief executive of Sophos. “Sophos is actively driving the transition in next-generation cybersecurity solutions, leveraging advanced capabilities in cloud, machine learning, APIs, automation, managed threat response, and more. We continue to execute a highly-effective and differentiated strategy, and we see this offer as a compelling validation of Sophos, its position in the industry and its progress.”

“It is the view of the Sophos Board that this is a compelling offer for Sophos shareholders which secures the delivery of future value for shareholders today,” said Peter Gyenes, chairman of Sophos. “Thoma Bravo has deep sector expertise in cybersecurity software as well as a long and successful track record of partnering with and investing in its portfolio companies to support long-term growth and success. Under Thoma Bravo’s ownership we expect Sophos to accelerate its evolution and leadership in next-generation cybersecurity. The Sophos board believes that this recommended offer delivers a significant opportunity for all stakeholders – our shareholders, customers, partners, and employees.”

News: Buyout firm Thoma Bravo adds Sophos to cybersecurity chest in $3.8 billion deal

Hong Kong abandons LSEG offer

BY Richard Summerfield

Hong Kong Exchange and Clearing (HKEX) has pulled the plug on its unsolicited $39bn offer for the London Stock Exchange Group (LSEG) after it became clear that it had failed to convince LSEG’s investors and management of the benefits of a merger between the two.

HKEX, the world’s largest capital-raising venue in five of the past 10 years, had made an £83.61 per share offer for LSEG which would have required LSEG to abandon its agreed $27bn deal to buy the data and trading group Refinitiv.

HKEX’s offer was flatly rejected by LSEG, which said that HKEX’s offer fell “substantially short” of an appropriate valuation. In a published letter to HKEX, LSEG said there was “no merit in further engagement”. As a result, the Hong Kong bourse withdrew its offer.

Following its initial approach , under UK takeover rules HKEX had until Wednesday 9 October to make a binding offer for LSEG, but having withdrawn its offer is now unable to pursue a renewed deal for at least six months.

“The board of HKEX continues to believe that a combination of [LSEG] and HKEX is strategically compelling and would create a world-leading market infrastructure group,” HKEX said in a regulatory statement. “Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.”

At the weekend, reports emerged which suggested that HKEX had been told by LSEG’s shareholders to increase its takeover offer to £90 a share, a 22 percent premium on LSE’s recent share price of £73.80.

In a statement, LSEG said it remained “committed to and continues to make good progress on its proposed acquisition of Refinitiv”. LSEG’s shareholders will vote on the Refinitiv deal in November, with the deal expected to close in the second half of 2020.

News: Hong Kong bourse pulls plug on $39 billion play for London Stock Exchange

M&A deal leaks plummet, reveals new report

BY Fraser Tennant

The number of M&A deal leaks has fallen for two years running, a decline driven entirely by the Asia-Pacific (APAC) region, according to a new Intralinks report.

The ‘2019 M&A Leaks Report’, a study carried out annually by Intralinks in association with the M&A Research Centre at the University of London’s Cass Business School, found that, after peaking at around 9 percent of announced M&A transactions in 2013, worldwide deal leaks have declined in recent years.

The report also notes that the decline in M&A deal leaks has occurred at the same time as increased regulations and enforcement actions by financial regulators against different forms of market abuse, including deal leaks – and there is undoubtedly a connection between increased regulatory attention and the decline in leaks.

Among the report’s other key findings, worldwide, the rate of M&A deal leaks fell in 2018 for the second consecutive year, and 7.4 percent of deals in 2018 involved a leak of the deal prior to its public announcement, compared to 7.9 percent in 2017 and 8.6 percent in 2016.

The fall in the overall worldwide rate of deal leaks in 2018 was driven solely by the APAC region, where leaked deals declined to 7.9 percent from 10.8 percent the previous year.

Furthermore, both the Americas and the Europe, Middle East and Africa (EMEA) regions saw increases in the rate of deal leaks in 2018 of 0.5 and 0.4 percentage points, respectively. APAC remains the region with the highest rate of deal leaks, followed by the Americas at 7.6 percent and EMEA at 5.8 percent.

“Deal leaking is down, but the stakes remain high,” said Philip Whitchelo, vice president of Intralinks. “In 2018, the difference in the median target takeover premium for leaked deals compared to non-leaked deals was an average of an extra $68.1m accrued to the shareholders of the targets in deals that leaked. This was the highest ‘leak premium’ difference for three years.”

Finally, for the 10 regions with the most M&A activity, the top three for deal leaks in 2018 were Hong Kong, Japan and the US. The bottom three countries for deal leaks in 2018 were the UK, Australia and France.

Report: 2019 M&A Leaks Report

Vista acquires Acquia for $1bn

BY Fraser Tennant

In a deal which highlights its preference to purchase undervalued tech companies and turn them around for a big profit, US investment firm Vista Equity Partners has acquired web content management and digital experience company Acquia for $1bn.

Following completion of the transaction, Acquia will continue to operate independently.

According to Acquia’s chief executive Michael O’Sullivan, Vista’s investment will enable Acquia to grow its presence in the digital experience platform (DXP) market, as it continues to innovate and serve the world’s most ambitious brands. Acquia currently serves more than 30 companies in the Fortune 100.

“Vista shares our belief that the DXP market is ripe for disruption and we are excited to partner with them to accelerate our plans,” said Mr O’Sullivan. “Over 4000 Acquia customers crave faster innovation, greater agility and better integrations than legacy marketing cloud providers can deliver. Vista’s support will allow us to invest more in R&D, expand faster, and get products to market quicker.”

With Vista’s backing, Acquia will maximise recent investments to take on legacy DXP providers and capture new market share. Vista’s portfolio of more than 60 companies and more than 70,000 employees, combined with its operational expertise, provides Acquia access to a vast community of resources, peers and practice experts.

A value-added investor with a long-term perspective, Vista exclusively invests in enterprise software, data and technology-enabled companies. “The world’s leading and most innovative digital brands understand that their ability to deliver a seamless digital customer experience is essential to their success,” said Robert F. Smith, founder, chairman and chief executive of Vista. “Acquia understands this and is leading the way in providing innovative solutions to its customers while, at the same time, giving back to the open source community.”

The Vista/Acquia transaction is expected to close in the coming weeks and is subject to customary closing conditions and regulatory approvals.

Mr Smith concluded: “We are thrilled to partner with Acquia and believe the company is well-positioned to capitalise on the tremendous opportunity in the DXP marketplace.”

News: Vista Equity Partners buys Acquia for $1B

Forever 21 files for Chapter 11

BY Richard Summerfield

US fashion retailer Forever 21 has become the latest brick-and-mortar firm to file for Chapter 11 bankruptcy protection.

The California-based company filed for bankruptcy protection in the US Bankruptcy Court for the District of Delaware, listing both assets and liabilities in the range of $1bn to $10bn.

Forever 21 will now begin a process of restructuring. Last week, the company had announced its intention to exit Japan and close all 14 stores of its locations in the country by the end of October. The company now expects to focus on the profitable core part of its operations and shut some, if not most, of its international locations, though its operations in Mexico and Latin America will likely remain open. The company does not expect to close locations in major US markets, though there will be a large number of store closures.

“We have requested approval to close up to 178 stores across the U.S. The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords,” the company said in a statement.  The company also said its Canadian subsidiary filed for bankruptcy and it plans to wind down the business, closing 44 stores in the country.

Forever 21 saw its revenue drop to $3.3bn last year, down from $4.4bn in 2016. It expects the restructured company to bring in $2.5bn in annual sales. The company employs about 32,800 people, down from 43,000 in 2016.

To facilitate its restructuring, the company has obtained $275m in financing from its existing lenders, with JPMorgan Chase Bank, N.A. acting as agent, as well as $75m in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.

“This was an important and necessary step to secure the future of our Company, which will enable us to reorganise our business and reposition Forever 21,” said Linda Chang, executive vice president of Forever 21. “The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees. With support from our key landlord and vendor constituents, we are confident we will emerge as a stronger, more competitive enterprise that is better positioned to prosper for years to come, and we remain committed to delivering the fast fashion trends that our customers have come to expect from Forever 21,” she added.

News: Forever 21 closing stores in bankruptcy filing shows limits to fast fashion