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Blue Coat CEO Michael Brown will take helm at Symantec once deal closes, likely in Q3.
Symantec on Monday announced that it has agreed to acquire Blue Coat for US$4.65 billion in cash, a deal that will help it to build scale in the enterprise security market.
The transaction brings with it another benefit for Symantec. Blue Coat CEO Greg Clark will step up as chief executive of the merged entity, closing a leadership gap for Symantec, whose CEO Michael Brown announced his resignation just over six weeks ago.
"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," said Dan Schulman, chairman of Symantec, in a statement.
"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," he said.
Schulman also described CEO-elect Clark as the right person to lead Symantec going forward and thanked Ajei Gopal for the role he has played as interim president and COO in recent weeks.
Clark, meanwhile, talked up the benefits of the merger.
"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," he said.
"Once combined, we will offer customers around the world – from large enterprises and governments to individual consumers – unrivalled threat protection and unmatched cloud security," he said, adding that the merged entity will be "well positioned to drive meaningful growth and push the boundaries of innovation."
The boards of both companies have approved the deal and the firms expect it to close in the third quarter of this year, subject to the usual conditions and receipt of relevant regulatory approvals.
The combined companies would have $4.4 billion revenue in fiscal 2016, on a pro forma basis, of which 62% would come from enterprise security.
Symantec said it expects to realise $550 million in run rate cost savings, of which $400 million will come from its previously announced cost cutting programme.
As such, the transaction will enable Symantec to improve profitability, while investing in its business and driving growth, chief financial officer Thomas Seifert said.
"The acquisition is expected to be significantly accretive to our non-GAAP earnings creating meaningful value for our shareholders," Seifert said.
"We are reiterating our first quarter guidance and maintaining our commitment to our previously announced $5.5 billion capital return programme, of which the remaining $1.3 billion will be returned by the end of the current fiscal year," he added. "We will also continue our practice of paying a quarterly dividend to our shareholders."
Symantec said it will fund the transaction using cash on its balance sheet and $2.8 billion in new debt.
In connection with the deal, Silver Lake has committed to an additional $500 million investment in Symantec convertible notes, doubling its investment in the company to $1 billion, while Bain Capital has agreed to a $750 million investment in the convertible notes.
