- Symantec Enhances Global Leadership
Position with Transformational Combination; Delivers Comprehensive
Enterprise Cyber Defense Across Critical Threat Vectors and Helps
Customers Securely Embrace the Cloud
- Greg Clark, Blue Coat CEO, to Lead
Symantec Following Closing
- Silver Lake to Double Investment to $1
Billion
- Bain Capital, Majority Shareholder in
Blue Coat, to Reinvest $750 Million in Combined Company and David
Humphrey, a Managing Director of Bain Capital, to Join Symantec
Board
- FY18 Non-GAAP EPS 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
Symantec (NASDAQ:SYMC) and Blue Coat, Inc. today announced that
they have entered into a definitive agreement under which Symantec
will acquire Blue Coat for approximately $4.651 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. 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.
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.
For the same time period, the company had non-GAAP operating
margins of 22% and cash flow from operations of $135 million. Also
for this time period, GAAP operating margins were -42%.
Defining the Future of Cybersecurity
With the acquisition of Blue Coat, Symantec will enhance its
leadership position to define the future of cybersecurity and set
the pace for innovation industrywide. The combined company
will:
- Protect customers against more cyber
threats, with best-in-breed protection, detection and remediation
across endpoint, email, web, network and servers. This
transaction will combine Symantec’s leading threat telemetry with
Blue Coat’s networks and cloud security offerings to provide
differentiated security solutions across hundreds of millions of
endpoints and servers, and billions of email and web
transactions.
- Help enterprises securely embrace
the cloud. Symantec will be able to deliver security for the
cloud generation of users, data and apps, for the cloud, from the
cloud and to the cloud. The company’s leading data loss prevention
capabilities will be applied at the web proxy and to over 12,000
cloud applications.
- Bring together a formidable scale of
investment in cyber R&D and threat research. These
investments span over 3,000 engineers and researchers, as well as
nine Threat Response Centers.
“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,”
said Dan Schulman, Chairman of Symantec. “Greg and the
entire Blue Coat leadership team have done an exceptional job of
strengthening, growing and scaling their business. In addition to a
proven track record of delivering scale and profitable growth, Greg
brings significant leadership experience, deep security expertise
and a history of successfully integrating companies into a single
portfolio; he is the right person to lead Symantec as we advance
our position as the leader in cybersecurity.
“On behalf of the Board, I want to thank Ajei Gopal for his
decisive and insightful leadership as our Interim President and
COO; he has been central to creating and driving our business
momentum during a time of transition and has been an integral part
of the team engineering the Blue Coat acquisition. I also want to
thank Thomas Seifert and Scott Taylor, and the rest of the Symantec
management team, for their fortitude and hard work, which has
helped enable us to announce this transformational acquisition,”
Mr. Schulman added.
Greg Clark, Chief Executive Officer of Blue Coat, said,
“Today, Symantec keeps global enterprises, governments and
individual consumers protected with solutions across threat
protection, information protection and managed services. Likewise,
Blue Coat is the trusted source for protecting billions of web
transactions daily and is the clear leader in the growing cloud
security market. Once combined, we will offer customers around the
world – from large enterprises and governments to individual
consumers – unrivaled threat protection and unmatched cloud
security. With employees of Blue Coat and Symantec coming together,
we will be well positioned to drive meaningful growth and push the
boundaries of innovation. I am very excited about the opportunity
to join Symantec as CEO and look forward to working with the
strongest, deepest team in security to realize the many strategic
and financial benefits this transaction will create.”
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. The acquisition is expected to be significantly accretive
to our non-GAAP earnings creating meaningful value for our
shareholders. 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. We will also
continue our practice of paying a quarterly dividend to our
shareholders.”
Delivers Attractive Financial Benefits to Symantec
Shareholders
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.
Creating a Strong Organization and Leadership Team, Focused
on Integration Planning
The Board of Directors will continue to be led by Symantec’s
current Chairman, Mr. Schulman. Mr. Clark will serve as CEO and Mr.
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.
Mr. Schulman added, “The Board would like to thank
Symantec’s management team for their continued dedication and
commitment to our company and welcome Blue Coat’s executive team to
Symantec.”
The integration of the two companies will be led by executives
from both Symantec and Blue Coat, with integration planning to
begin immediately. The companies expect an efficient and successful
integration given their complementary product offerings and
distinct customer footprints, as well as Blue Coat’s management
team’s track record of integration. The combined company will be
headquartered in Mountain View, California.
Investing in the Future of Symantec
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.
Financing and Path to Completion
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.
The transaction, which is expected to be completed in the third
calendar quarter of 2016, is subject to the satisfaction of
customary closing conditions, including applicable regulatory
approvals.
Advisors
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.
About Greg Clark
Greg Clark has served as the chief executive officer of Blue
Coat and as a member of the company’s board of directors since
September 2011. Prior to joining, Mr. Clark was president and chief
executive officer of Mincom, a global software and services
provider to asset-intensive industries, from 2008 to August 2011.
Mincom was acquired by the ABB Group in July 2011. Before joining
Mincom, Mr. Clark was a founder and served as president and chief
executive officer of E2open, a provider of cloud-based supply chain
software, from 2001 until 2008. Earlier in his career, Mr. Clark
founded security software firm Dascom, which was acquired by IBM in
1999. He served as a distinguished engineer and vice president of
IBM’s Tivoli Systems, a division providing security and management
products, from 1999 until 2001. He holds a B.S. from Griffith
University.
Conference Call and Webcast
Symantec and Blue Coat will host a conference call and webcast
at 8 am ET/5 am PT on June 13, 2016 to discuss the transaction. The
webcast and accompanying slides can be accessed on the Internet at
http://www.symantec.com/invest. A replay and our prepared remarks
will be available on the investor relations home page shortly after
the call is completed.
Conference Call Dial-in:
Domestic: (877) 475-6198
International: (970) 297-2372
Conference ID: 27504829
About Symantec
Symantec Corporation (NASDAQ: SYMC) is the global leader in
cybersecurity. Operating one of the world’s largest cyber
intelligence networks, we see more threats, and protect more
customers from the next generation of attacks. We help companies,
governments and individuals secure their most important data
wherever it lives.
About Blue Coat
Blue Coat, Inc. is a leading provider of advanced web security
solutions for global enterprises and governments, protecting 15,000
organizations including over 70 percent of the Fortune Global 500.
Through the Blue Coat Security Platform, Blue Coat unites network,
security and cloud, protecting enterprises and their users from
cyber threats – whether they are on the network, on the web, in the
cloud or mobile.
About Silver Lake
Silver Lake is the global leader in technology investing, with
over $24 billion in combined assets under management and committed
capital. The firm’s portfolio of investments collectively generates
more than $100 billion of revenue annually and employs more than
210,000 people globally. Silver Lake has a team of approximately
100 investment and value creation professionals located in London,
New York, Menlo Park, San Mateo, Hong Kong and Tokyo. The firm’s
current portfolio includes leading technology and
technology-enabled businesses such as Alibaba Group, Avaya,
Broadcom Limited, Cast & Crew, Ctrip, Dell, Global Blue,
GoDaddy, Intelsat, Motorola Solutions, Quorum Business Solutions,
Red Ventures, Sabre, Smart Modular, Solar Winds, Vantage Data
Centers, and WME/IMG. For more information about Silver Lake and
its entire portfolio, please visit www.silverlake.com.
About Bain Capital
Bain Capital Private Equity has partnered closely with
management teams to provide the strategic resources that build
great companies and help them thrive since our founding in 1984.
Our team of more than 400 investment professionals creates value
for our portfolio companies through our global platform and depth
of expertise in key vertical industries including technology, media
and telecommunications, retail, financial and business services,
healthcare and industrials. The firm’s successful track record of
investments in information technology businesses include Applied
Systems, BMC Software, FIS, Genpact, MYOB, Sungard Availability
Services, TeamSystem, UGS PLM, and Viewpoint Construction Software.
In addition to private equity, Bain Capital invests across asset
classes including credit, public equity and venture capital, and
leverages the firm’s shared platform to capture opportunities in
strategic areas of focus. For more information visit
www.baincapitalprivateequity.com.
Forward-Looking Statements
This press release contains statements which may be considered
forward-looking within the meaning of the U.S. federal securities
laws, including statements regarding the acquisition of Blue Coat,
Inc. and the time frame in which this will occur, the expected
benefits to Symantec, its customers, stockholders and investors
from completing the acquisition, including expected growth,
earnings accretion and cost savings, statements regarding the
investment by Bain Capital and Silver Lake, statements regarding
Symantec’s planned capital return program, and statements regarding
leadership changes in connection with the acquisition and
investments and the potential benefits to be derived therefrom.
These statements are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to differ materially from results
expressed or implied in this press release. Such risk factors
include those related to: required regulatory approvals and the
satisfaction of other closing conditions, the potential impact on
the businesses of Blue Coat and Symantec due to uncertainties
regarding the acquisition; the retention of employees of Blue Coat
and the ability of Symantec to successfully integrate Blue Coat and
to achieve expected benefits; general economic conditions;
fluctuations and volatility in Symantec’s stock price; the ability
of Symantec to successfully execute strategic plans; maintaining
customer and partner relationships; fluctuations in tax rates and
currency exchange rates; the timing and market acceptance of new
product releases and upgrades; and the successful development of
new products, and the degree to which these products and businesses
gain market acceptance. Actual results may differ materially from
those contained in the forward-looking statements in this press
release. Symantec assumes no obligation, and do not intend, to
update these forward-looking statements as a result of future
events or developments. Additional information concerning these and
other risks factors is contained in the Risk Factors section of
Symantec’s Form 10-K for the year ended April 1, 2016.
Use of Non-GAAP Financial Information
Our results of operations have undergone significant change due
to the impact of litigation accruals, discontinued operations
including the gain on the sale of Veritas, stock-based
compensation, restructuring, transition and separation matters,
charges related to the amortization of intangible assets, and
certain other income and expense items that management considers
unrelated to the Company’s core operations. The results of
operations of Blue Coat have undergone significant change due to
the impact of purchase accounting on revenue from prior
acquisitions, stock-based compensation, restructuring, transition
and integration matters, charges related to the amortization of
intangible assets, and certain other income and expense items that
management considers unrelated to the Company’s core operations. To
help our readers understand our past financial performance and our
future results, we supplement the financial results that we provide
in accordance with generally accepted accounting principles, or
GAAP, with non-GAAP financial measures. The method we use to
produce non-GAAP results is not computed according to GAAP and may
differ from the methods used by other companies. Non-GAAP financial
measures are supplemental, should not be considered a substitute
for financial information presented in accordance with GAAP and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP. Our management
team uses these non-GAAP financial measures in assessing Symantec’s
operating results, as well as when planning, forecasting and
analyzing future periods. Investors are encouraged to review the
reconciliation of our non-GAAP financial measures to the comparable
GAAP results, which is attached to our press release and which can
be found, along with other financial information, on the investor
relations page of our website
at: http://www.symantec.com/invest.
___________________________
1 Purchase price of $4.65 billion based on estimated Blue Coat debt
and cash balances at time of close and before estimated transaction
expenses. GAAP RESULTS RECONCILED TO NON-GAAP RESULTS (1)
(Dollars in thousands, unaudited) Year Ended April
30, 2016
Non-GAAP
revenue
GAAP net revenue $ 598,337 Plus: Impact of purchase accounting on
net revenue 157,037 Adjusted non-GAAP net revenue $
755,374
Non-GAAP
operating margin
GAAP operating loss (252,478 ) GAAP operating margin % -42 % Plus:
Impact of purchase accounting on net revenue 157,037 Amortization
of intangible assets and purchased technology 165,326 Acquisition
write-up of acquired inventory sold 29,210 Stock-based compensation
expense 22,565 Restructuring and other charges 2,857 Acquisition
fair value adjustments to earn-outs (970 ) Acquisition transaction
costs 30,417 Acquisition integration, transition and other 3,537
Financial sponsor fees 5,839 Non-GAAP operating
income $ 163,340 Non-GAAP operating margin % 22 % (1)
For more information about our non-GAAP financial measures, please
see Appendix A. GAAP RESULTS RECONCILED TO NON-GAAP
RESULTS CONTINUED (1) Fiscal Year Ended April 1, 2016 (2) (Dollars
in thousands, unaudited)
Non-GAAP pro
forma net revenue
Symantec
Blue
Coat
Pro
Forma
GAAP net revenue $ 3,600,174 $ 598,337 $ 4,198,511 Plus: Impact of
purchase accounting on net revenue - 157,037
157,037 Non-GAAP net revenue $ 3,600,174 $ 755,374 $ 4,355,548
(1) For more information about our non-GAAP financial
measures, please see Appendix A. (2) Blue Coat's fiscal year end
differs by less than 94 days from Symantec's fiscal year end,
therefore Blue Coat's net revenue from its fiscal year ended April
30, 2016 is combined with Symantec's net revenue from its fiscal
year ended April 1, 2016.
Explanation of Non-GAAP
MeasuresAppendix A
Objective of non-GAAP measures of
Symantec: Symantec Corporation (“Symantec”) supplements the
financial results and projections that it provides in accordance
with generally accepted accounting principles, or GAAP, with
non-GAAP financial measures. Symantec believes its presentation of
pro forma and non-GAAP financial measures, when taken together with
corresponding GAAP financial measures, provides meaningful
supplemental information regarding our future results. Symantec’s
management team uses these pro forma and non-GAAP financial
measures in assessing its operating results, as well as when
planning, forecasting and analyzing future periods. Symantec
believes that these non-GAAP financial measures also facilitate
comparisons of its performance to prior periods and to its peers
and that investors benefit from an understanding of the pro forma
and non-GAAP financial measures. Pro forma and non-GAAP financial
measures are supplemental and should not be considered a substitute
for financial information presented in accordance with GAAP.
No reconciliation of the forecasted range for non-GAAP EPS for
fiscal 2018 is included in this release because the acquisition and
other charges associated with the Blue Coat acquisition that may
impact the GAAP measure, as well as non-cash compensation expense
and other non-cash charges, are not yet known and subject to
change, and the variability of these charges could have a
significant, and potentially unpredictable, impact on Symantec’s
future GAAP financial results.
Objective of non-GAAP measures of Blue
Coat: Blue Coat, Inc. (the “Company,” “we,” “our” or “us”)
believes its presentation of non-GAAP financial measures, when
taken together with corresponding GAAP financial measures, provides
meaningful supplemental information regarding the Company’s
operating performance for the reasons discussed below. Our
management team uses these non-GAAP financial measures in assessing
the Company’s operating results, as well as when planning,
forecasting and analyzing future periods. We believe that these
non-GAAP financial measures also facilitate comparisons of the
Company’s performance to prior periods and to the Company’s peers
and that investors benefit from an understanding of the non-GAAP
financial measures. Non-GAAP financial measures are supplemental
and should not be considered a substitute for financial information
presented in accordance with GAAP.
Impact of purchase accounting on net
revenue: We define adjusted net revenue as net revenue
excluding the impact of purchase accounting. The Company regularly
monitors these measures to assess its operating performance. On
February 15, 2012, in connection with the Thoma Bravo
Acquisition, and on May 22, 2015, as part of the Bain
Acquisition, the Company was required to write down its deferred
revenue balances due to purchase accounting in accordance with
GAAP. In addition, in connection with the Company’s other
acquisitions, the Company was also required to make similar
adjustments to write down its deferred revenue balances due to
purchase accounting in accordance with GAAP. The impact on revenue
related to purchase accounting as a result of these transactions,
particularly as a result of the Bain Acquisition, limits the
comparability of revenue between periods. While the deferred
revenue written down in connection with the Company’s acquisitions
will never be recognized as revenue under GAAP, we do not expect
the Bain Acquisition to have an impact on future renewal rates of
the contracts included within the deferred revenue write-down, nor
do we expect revenue generated from new service and subscription
contracts to be similarly impacted by purchase accounting
adjustments. Accordingly, we believe presenting adjusted net
revenue to exclude the impact of purchase accounting adjustments,
including the deferred revenue write-down, aids in the
comparability between periods and in assessing the Company’s
overall operating performance. If these adjustments were not made,
the Company’s future revenue growth rates could appear overstated.
Adjusted net revenue has limitations as an analytical tool, and you
should not consider it in isolation or as a substitute for net
revenue. Other companies in our industry may calculate this measure
differently, which may limit its usefulness as a comparative
measure.
Amortization of intangible assets and
purchased technology: When acquiring a business, the Company
is required to allocate a portion of the purchase price to the
accounting value assigned to intangible assets acquired and
amortize this amount over the estimated useful lives of the
acquired intangible assets and purchased technology. The acquired
company, in most cases, has itself previously expensed the costs
incurred to develop the acquired intangible assets, and the
purchase price allocated to these assets is not necessarily
reflective of the cost the Company would incur in developing the
intangible asset. We eliminate these amortization charges from the
Company’s non-GAAP operating results to provide better
comparability of pre- and post-acquisition operating results and
comparability to results of businesses utilizing internally
developed intangible assets.
Acquisition write-up of acquired inventory
sold: In connection with the Company’s Bain Acquisition, and
other acquisitions, the Company was required to write up its
inventory balances to fair value in purchase accounting in
accordance with GAAP. Recording inventory at fair value in purchase
accounting had the effect of increasing inventory and thereby
increasing the cost of revenue in subsequent periods as compared to
the amounts the Company would have otherwise recognized. The
acquisition write-up of acquired inventory sold represents the
incremental cost of revenue that was recognized as a result of
purchase accounting. We exclude these expenses because we believe
they are not reflective of ongoing operating results in the period
incurred and not directly related to the operation of the Company’s
business.
Stock-based compensation: This
generally consists of expenses for common stock options and
restricted stock determined in accordance with the authoritative
guidance on stock-based compensation. For comparability purposes,
we believe it is useful to provide a non-GAAP financial measure
that excludes stock-based compensation in order to better
understand the long-term performance of the Company’s core business
and to facilitate the comparison of the Company’s results to the
results of the Company’s peer companies. Furthermore, unlike
cash-based compensation, the value of stock-based compensation is
determined using complex formulas that incorporate factors, such as
market volatility, that are beyond the Company’s control.
Restructuring and Other Charges. In
connection with certain acquisitions and global realignments
intended to reduce the Company’s combined operating cost structure
and eliminate operating redundancies, the Company incurred
restructuring and other charges that primarily consisted of
severance and related costs resulting from the reduction of
headcount. We believe they are not directly related to the
operation of the Company’s business.
Acquisition fair value adjustments to
earn-outs: In July 2015, the Company acquired Perspecsys,
Inc. and estimated an acquisition date fair value of the contingent
earn-out of $1.0 million, which was subsequently adjusted to zero
and recognized as a benefit through the consolidated statements of
operations in the year ended April 30, 2016. We exclude these
benefits because we believe they are not reflective of ongoing
operating results in the period incurred and not directly related
to the operation of the Company’s business.
Acquisition transaction costs:
Acquisition transaction costs include financial advisory, legal and
accounting professional services costs incurred as a result of the
Company’s acquisitions during the period. We exclude these expenses
because we believe they are not reflective of ongoing operating
results in the period incurred and not directly related to the
operation of the Company’s business.
Acquisition integration, transition and
other costs: These consist of employee-related integration
and transition costs, and the amortization of the write-up of our
operating leases that are incurred as a result of our acquisitions
during the period. We exclude these expenses because we believe
they are not reflective of ongoing operating results in the period
incurred and not directly related to the operation of the Company’s
business.
Financial sponsor fees: These
consist of financial sponsor fees. We exclude these expenses
because we believe they are not reflective of ongoing operating
results in the period incurred and not directly related to the
operation of the Company’s business.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160612005076/en/
For Symantec:MediaKristen Batch,
503-516-6297kristen_batch@symantec.com
InvestorsJonathan Doros,
650-527-5523jonathan_doros@symantec.com
For Blue Coat:Danielle Hamel,
408-541-3651Danielle.Hamel@bluecoat.com
For Silver Lake:Tom Williams,
415-671-7676silverlake@brunswickgroup.com
For Bain Capital:Stanton Public Relations &
MarketingAlex Stanton, 212-780-0701astanton@stantonprm.com
Charlyn Lusk, 646-502-3549clusk@stantonprm.com
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