Notable Mergers and Acquisitions 9/8: (HPE) (LMCA) (APIC) (INTC)

September 8, 2016 9:43 AM EDT

Get instant alerts when news breaks on your stocks. Claim your 2-week free trial to StreetInsider Premium here.

*** Hewlett Packard Enterprise (NYSE: HPE) announced plans for a spin-off and merger of its non-core software assets with Micro Focus in a transaction valued at approximately $8.8 billion.

The combination of these software assets -- which includes HPE's Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses -- and Micro Focus' highly complementary portfolio will create one of the world's largest pure-play software companies. The new company will have the global footprint, agility and financial strength to drive software innovation across a comprehensive array of products. At the same time, the move enables a standalone HPE to realize its vision of being the industry's leading provider of hybrid IT, built on the secure, next-generation, software-defined infrastructure that will run customers' data centers today, bridge them to multi-cloud environments tomorrow, and enable the emerging intelligent edge that will power campus, branch and IoT applications for decades to come.

"With today's announcement, we are taking another important step in achieving the vision of creating a faster-growing, higher-margin, stronger cash flow company well positioned for our customers and for the future," said Meg Whitman, President and Chief Executive Officer of HPE.

Partnership with SUSE In addition, HPE and Micro Focus announced plans for a commercial partnership that will name SUSE as HPE's preferred Linux partner and will bring together HPE's Helion OpenStack and Stackato solutions with SUSE's OpenStack expertise to provide best-in-class enterprise-grade hybrid cloud offerings for HPE customers.

Positioning HPE for the Future With approximately $28 billion in annual revenue, the future HPE will have significant scale, a diversified, world-class portfolio and a global footprint to meet the evolving needs of its customers and partners.

The company will be an industry leader in delivering secure hybrid IT solutions, leveraging its world-class portfolio of software-defined servers, storage, networking and converged infrastructure. HPE's newly created Software-Defined and Cloud business will build upon key software assets like HPE OneView and the Helion Cloud platform to deliver software-defined Hybrid IT solutions like Synergy -- HPE's composable infrastructure offering that enables customers to operate their workloads with unprecedented speed and agility.

HPE will also redefine IT at the edge with leading campus, mobility and IoT offerings. The company's "edge" solutions enable customers to quickly and securely gain insights from the growing amount of data processed outside of the data center. And through Aruba, HPE delivers the industry's leading platform to enable an innovative user and workforce experience anywhere.

Wrapped around this portfolio is HPE's world-class Technology Services capability that helps customers transform their IT environment and take advantage of opportunities in emerging areas like campus, branch and industrial IoT programs. Technology Services comprises about 22,000 service professionals and will represent approximately 25 percent of the company's revenue after the spin-off of its Enterprise Services business and non-core software assets.

"Services and Software remain key enablers of HPE's go-forward strategy," continued Whitman. "HPE will double down on the software capabilities that power and differentiate our infrastructure solutions and are critical in a cloud environment."

Creates Global Software Leader The combination of HPE's software assets with Micro Focus is expected to create a business with annual revenues of approximately $4.5 billion. The combined company will have strong recurring revenue streams, global reach and be well diversified across product lines -- spanning IT operations, security, information management, big data analytics, cloud, open source and development. In addition, the company will have a strong go-to-market capability with nearly 4,000 salespeople worldwide, and deep R&D resources to deliver best-in-class solutions to customers and partners.

Micro Focus' proven track record of managing both growing and mature software assets will ensure higher levels of investment in growth areas like big data analytics and security, while maintaining a stable platform for mission-critical software products that customers rely on. With this approach, each product line will have a clear and important role in overall company performance, and employees will have a high level of clarity on the strategy for their organization.

"We believe that the software assets that will be a part of this combination will bring better value to both our customers and shareholders as part of a more focused software company committed to growing these businesses on a stand-alone basis," added Whitman.

Micro Focus expects to improve the margin on HPE's software assets by approximately 20 percentage points by the end of the third full financial year following the closing of the transaction, while also investing in key growth areas like big data and security. As owners of 50.1 percent of the combined company, HPE shareholders will share in the value of these operational improvements, as well as future growth of earnings.

The combined company will be led by Kevin Loosemore, Executive Chairman of Micro Focus, and Mike Phillips will serve as Chief Financial Officer.

"The time is right for consolidation in the infrastructure software market and this proposed merger will create one of the leading players in this space," said Loosemore. "The combined organization will benefit from strong positions in a number of key segments, further enhancing our customers' ability to leverage both prior and new IT investments to exploit the latest industry innovations such as mobility, cloud, the Internet of Things, Big Data and Analytics. The transaction reinforces Micro Focus' established acquisition strategy and our focus on long term customer value through the disciplined and efficient management of mature infrastructure software products."

Transaction Valued at $8.8 Billion At the completion of the transaction, currently expected to occur by the second half of HPE's fiscal year 2017, HPE shareholders will own American Depositary Shares ("ADSs") representing 50.1% of the equity of the new combined company (which will continue under the name Micro Focus) on a fully diluted basis. This equity stake in Micro Focus is valued at approximately $6.3 billion based on the closing price of Micro Focus shares as of market close on September 5, 2016. HPE will also receive a $2.5 billion cash payment prior to the completion of the merger, resulting in total consideration to HPE and its shareholders of approximately $8.8 billion. The transaction is expected to be tax-free to HPE.

An HPE senior executive will serve on the board of directors of the combined company. In addition, HPE will nominate 50% of the independent directors to the combined company's board.

To recognize the $8.8 billion of value and unlock a more attractive financial profile for HPE going forward, HPE expects to incur one-time after-tax separation costs of approximately $700 million, with the vast majority occurring in fiscal year 2017. The transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of the transaction by Micro Focus' shareholders.

*** Liberty Media Corporation ((Nasdaq: LMCA) and CVC Capital Partners (“CVC”) announced today that Liberty Media has agreed to acquire Formula One, the iconic global motorsports business, from a consortium of sellers led by CVC.

  • Transaction price represents enterprise value for Formula One of $8.0b
  • Chase Carey appointed as Chairman; Bernie Ecclestone to remain CEO
  • Initial sale of 18.7% minority stake in Formula One, with 100% sale subject to satisfaction of conditions

Liberty Media owns interests in a broad range of media, communications and entertainment businesses. Those interests are attributed to three tracking stock groups: the Liberty SiriusXM Group, the Liberty Braves Group, and the Liberty Media Group.

The consideration comprises cash and newly issued shares in the Liberty Media Group tracking stock (LMCK) and a debt instrument exchangeable into shares of LMCK. The transaction price represents an enterprise value for Formula One of $8.0 billion and an equity value of $4.4 billion(1).

The acquisition will be effected by Liberty Media acquiring 100% of the shares of Delta Topco, the parent company of Formula One (Delta Topco herein referred to as “Formula One”)(2). The acquisition is subject to the satisfaction of certain conditions and is described in more detail below.

Concurrent with the execution of the agreement to effect the acquisition, Liberty Media has completed the acquisition of an 18.7% minority stake in Formula One for $746 million, funded entirely in cash (which is equal to $821 million in consideration less a $75 million discount to be repaid by Liberty Media to selling stockholders upon completion of the acquisition). Prior to completion, CVC Funds will continue to be the controlling shareholder of Formula One.

After completion of the acquisition, Liberty Media will own Formula One and it will be attributed to the Liberty Media Group which will be renamed the Formula One Group. The consortium of sellers led by CVC will own approximately 65%(1)(3) of the Formula One Group’s equity and will have board representation at Formula One to support Liberty Media in continuing to develop the full potential of the sport. In addition, a CVC representative will be joining the Liberty Media Board of Directors.

Chase Carey has been appointed by Delta Topco and will serve as the new Chairman of Formula One, succeeding Peter Brabeck-Letmathe, who will remain on Formula One’s board as a non-executive director. Bernie Ecclestone will remain Formula One’s CEO.

Greg Maffei, President and Chief Executive Officer of Liberty Media, said: “We are excited to become part of Formula One. We think our long-term perspective and expertise with media and sports assets will allow us to be good stewards of Formula One and benefit fans, teams and our shareholders. We look forward to working closely with Chase Carey and Bernie Ecclestone to support the next phase of growth for this hugely popular global sport.”

Chase Carey, Chairman of Formula One, said: “I am thrilled to take up the role of Chairman of Formula One and have the opportunity to work alongside Bernie Ecclestone, CVC, and the Liberty Media team. I greatly admire Formula One as a unique global sports entertainment franchise attracting hundreds of millions of fans each season from all around the world. I see great opportunity to help Formula One continue to develop and prosper for the benefit of the sport, fans, teams and investors alike.”

Bernie Ecclestone, Chief Executive Officer of Formula One, said: “I would like to welcome Liberty Media and Chase Carey to Formula One and I look forward to working with them.”

Donald Mackenzie, Co-Chairman of CVC, commented: “We are delighted Chase Carey is joining Formula One as its new Chairman and that he will be working alongside Bernie Ecclestone. Chase’s experience and knowledge of sport, media and entertainment is as good as it gets and we are very pleased to secure his services. Bernie has been a wonderful CEO for us over the last 10 years. There have been many successes and the occasional challenge but there has never been a dull moment and we have had a lot of fun. The combined skills of Chase and Bernie mean that the successes should continue and we wish them well. We would like to thank Peter Brabeck-Letmathe for his outstanding contribution during his tenure as Chairman. His leadership has served the company well, and we are pleased that he will remain on the board as a non-executive director.”

In the acquisition the selling stockholders will receive a mix of consideration comprising: $1.1 billion in cash, 138 million newly issued shares of LMCK and a $351 million exchangeable debt instrument to be issued by Formula One and exchangeable into shares of LMCK. Funding for the cash component of the acquisition is expected to come from cash on hand at the Liberty Media Group. The newly issued LMCK shares will be subject to market co-ordination and lock-up agreements.

The Teams will be given the opportunity to participate in the investment in Formula One, and the detailed terms of that investment will be agreed in due course. Certain teams have already expressed an interest in investing after completion of the acquisition.

The interest in Formula One already acquired by Liberty Media, and the remaining interest to be acquired upon the closing of the acquisition, along with $4.1 billion of existing Formula One debt (which will be non-recourse to Liberty Media) and $0.7 billion in Formula One cash, is being attributed to the Liberty Media Group tracking stock.

Upon completion of the acquisition, the Liberty Media Group will be renamed the Formula One Group and the ticker symbols for the Series A, Series B and Series C Liberty Media Group tracking stocks will be changed from LMC (A/B/K), respectively, to FWON (A/B/K), respectively. Formula One will remain based in London.

The completion of the acquisition is subject to certain conditions, including the receipt of: (i) certain clearances and approvals by antitrust and competition law authorities in various countries, (ii) certain third-party consents and approvals, including that of the Fédération Internationale de l’Automobile, the governing body of Formula One, and (iii) the approval of Liberty Media’s stockholders of the issuance of LMCK shares in connection with the acquisition and the name change of the Liberty Media Group to the Formula One Group, and is expected to close by the first quarter of 2017. Additional information regarding the acquisition and Formula One will be included in a proxy statement to be filed by Liberty Media with the Securities and Exchange Commission relating to the matters to be voted upon by Liberty Media’s stockholders described above.

Liberty Media’s President and CEO, Greg Maffei and Formula One’s Chairman, Chase Carey will host an investor conference call at 6:00pm ET / 4:00pm MT on Wednesday, September 7, 2016 to discuss the acquisition in more detail. The call can be accessed by dialing: (i) (844) 838-8043 (U.S. / Canada), (ii) (678) 509-7480 (International) or (iii) 0800-028-8438 (U.K.) at least 10 minutes prior to the start time. The call will also be broadcast live across the internet and archived on Liberty Media’s website. Presentation materials to be used during the investor call have been posted to the Liberty Media website. To access the webcast and the accompanying presentation materials go to An archive of the webcast will also be available on Liberty Media’s website for one year after appropriate filings have been made with the SEC. Relevant images for media use will be posted to Liberty Media’s website under the “What’s New” section of the Liberty Media homepage.

Morgan Stanley is serving as exclusive financial advisor and Baker Botts LLP is serving as legal advisor to Liberty Media. Goldman Sachs International is serving as exclusive financial advisor and Freshfields Bruckhaus Deringer and Weil, Gotshal & Manges are serving as legal advisers to Delta Topco.

*** Apigee (Nasdaq: APIC) announced that it has entered into a definitive agreement under which Google will acquire Apigee for $17.40 per share in cash, for a total value of approximately $625 million. The transaction is subject to the satisfaction of customary closing conditions, including Apigee stockholder approval and applicable regulatory approvals. The companies expect the transaction to close by the end of 2016.

“We’re excited about adding Apigee to Google,” said Diane Greene, SVP of Google’s cloud businesses. “Companies are moving beyond the traditional ways of communicating like phone calls and visits and instead are communicating programmatically through APIs. APIs allow the company’s backend services to talk to the mobile and web-based apps used by their customers and partners. Instead of the doctor phoning a prescription into the pharmacy, they can use an app that talks to the pharmacy through an API. Apigee easily enables this by providing a comprehensive API platform that supports secure, stable, multi-language, dev, test, publish and analytics capabilities.”

Chet Kapoor, Apigee CEO said: “We've entered a new era of cloud computing, where enterprises are increasingly running business-critical applications in the cloud – and across multiple clouds. Google is the open cloud provider committed to delivering new software for not only hybrid-cloud environments, but also for the multi-cloud world.” Kapoor continued, “With their history of innovation in web and mobile technologies, we believe Google is the partner for companies embarking on digital transformation. We look forward to being able to accelerate our mission to connect the world through APIs as part of the Google team.”

*** Intel Corporation (Nasdaq: INTC) and TPG announced a definitive agreement under which the two parties will establish a newly formed, jointly-owned, independent cybersecurity company. The new company will be called McAfee following transaction close. TPG will own 51 percent of McAfee and Intel will own 49 percent in a transaction valuing the business at approximately $4.2 billion. TPG is making a $1.1 billion equity investment to help drive growth and enhance focus as a standalone business.

Through this transaction, TPG, a leading global alternative asset firm with demonstrated expertise in growing profitable software companies and carve-out investments, and Intel, a global technology leader that powers the cloud and billions of smart, connected computing devices, will work together to position McAfee as a strong independent company with access to significant financial, operational and technology resources. With the new investment from TPG and continued strategic backing of Intel, the new entity is expected to capitalize on significant global growth opportunities through greater focus and targeted investment.

The new company will be one of the world’s largest pure-play cybersecurity companies. Last year, Intel Security unveiled a new strategy that refocused the business on endpoint and cloud as security control points, as well as actionable threat intelligence, analytics and orchestration. This new strategy allows customers to detect and respond to more threats faster and with fewer resources.

“Security remains important in everything we do at Intel and going forward we will continue to integrate industry-leading security and privacy capabilities in our products from the cloud to billions of smart, connected computing devices,” said Brian Krzanich, CEO of Intel. “As we collaborate with TPG to establish McAfee as an independent company, we will also share in the future success of the business and in the market demand for top-flight security solutions, creating long-term value for McAfee’s customers, partners, employees and Intel’s shareholders. Intel will continue our collaboration with McAfee as we offer safe and secure products to our customers.”

"We believe that McAfee will thrive as an independent company. With TPG’s investment, along with continued support from Intel, McAfee will sharpen its focus and become even more agile in its response to today’s rapidly evolving security sector," said Jim Coulter, Co-Founder and Co-CEO of TPG. "TPG is excited to partner with Intel and McAfee management to accelerate growth of the business by enhancing its go-to-market strategy and continuing to grow and strengthen its core product offerings.”

“At TPG, we look to partner with both established and emergent leaders in dynamic and growing markets,” said Bryan Taylor, Partner at TPG. “We have long identified the cybersecurity sector, which has experienced strong growth due to the increasing volume and severity of cyberattacks, as one of the most important areas in technology. Given McAfee’s leading global market position, loyal customer base, and trusted technology, we see a compelling opportunity to invest in a highly-strategic platform that is growing consistently and addressing significant and evolving market demand.”

Positioning the New Company for Future Growth

Chris Young will be appointed CEO of the new company upon closing of the transaction. Today he published an open letter to Intel Security’s stakeholders outlining benefits of the transaction and new company.

“As a standalone company supported by these two partners, we will be in an even greater position of strength, committed to being the best provider the cybersecurity industry has ever seen,” Young said. “We will continue to focus on solving the unique demands of customers in the dynamic cybersecurity marketplace, drive innovation that anticipates future market needs, and continue to grow through our strategic priorities.”

Currently, Intel Security’s comprehensive software platform protects more than a quarter of a billion endpoints, secures the footprint for nearly two-thirds of the world’s 2,000 largest companies, detects more than 400,000 new threats each day, and represents more than 7,500 strong of the industry’s most talented professionals. The business has demonstrated strong momentum. Through the first half of this year, Intel Security Group revenue grew 11 percent to $1.1 billion, while operating income grew 391 percent to $182 million. Intel Security also increased total bookings 7 percent per year on a constant currency basis from 2013 to 2015.1

Terms of the Transaction, Financing and Timeline

Under the terms of the agreement, TPG will own 51 percent of a newly-formed cybersecurity company in a multi-step transaction valuing Intel Security at approximately $4.2 billion, based on an equity value of approximately $2.2 billion plus McAfee net debt of approximately $2 billion. The debt initially will be financed by Intel until completion of audited financial statements for McAfee (expected within three to five months of close). The transaction is expected to close in the second quarter of 2017, subject to certain regulatory approvals and customary closing conditions.

To keep up on all the Mergers & Acquisitions data in real-time, go to our M&A Insider page.

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Special Reports

Related Entities

Goldman Sachs, Morgan Stanley, CVC Capital Partners, Notable Mergers and Acquisitions, McAfee Intel Merger, Earnings, Definitive Agreement

Add Your Comment