Symantec (SYMC) Stock Rising on Acquisition of Blue Coat

Symantec will be combining its threat telemetry systems with the networks and cloud security offerings of Blue Coat to provide various security solutions to hundreds of millions of servers and endpoints and billions of web transactions and email accounts.

Symantec’s acquisition of Blue Coat is the company’s way to march ahead in the cybersecurity space.

“Once combined, we will offer customers around the world – from large enterprises and governments to individual consumers – unrivalled threat protection and unmatched cloud security”. That number is nearly double the $2.4 billion that Bain paid for Blue Coat just previous year, but on par with what analysts expected Blue Coat to receive from the abandoned IPO. 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. The overall goal of the acquisition is to bring together user authentication, cloud gateway, application discovery, data-loss prevention and cloud analytics technologies for a more comprehensive approach to modern security challenges, the companies said.

He says if Symantec is smart, it will learn from Blue Coat’s channel strategy, which gives partners a chance to stand out by demonstrating expertise and commitment.

And companies are planning to increase spending on what Symantec and Blue Coat sell, with 87 percent saying they would boost cybersecurity spending this year, according to a 2015 Cisco survey of more than 1,000 executives in 10 countries including the U.S.

However, Blue Coat also has a chequered reputation in some quarters. Shares of Symantec were up nearly 7 percent on Monday morning after the company published the acquisition deal.

Following the acquisition of Blue Coat, investors should expect some layoffs as the company works around to curtail expenses. The lack of product overlap combined with the expected $150 million in cost synergies may allow the company to build its portfolio while cutting costs, but only time will tell if it will be able to innovate with the rapidity that this market demands. Symantec revealed that the combined entity’s revenues would have been $4.4 billion in fiscal 2016 as against $3.6 billion it reported as a standalone company.

Going forward, Greg Clark, current CEO of Blue Coat, will be appointed CEO of Symantec and join the Symantec board upon closing of the transaction.

As part of the deal, P-E firm Silver Lake is doubling its Symantec investment to $1B via 2% convertible notes due 2021, and Blue Coat majority owner Bain is reinvesting $750M in the post-merger company via convertible notes on the same terms.

Symantec intends to finance the transaction with cash on the balance sheet and $2.8 billion of new debt. Bain Capital has agreed to purchase $750 million worth of noncallable and unsecured convertible notes in Symantec at an initial conversion price of $20.41.