Symantec [SYMC] on Sunday night said it has agreed to acquire web security firm Blue Coat, Inc. for $4.7 billion in cash, giving it greater scale and a more comprehensive suite of cyber security solutions.
The deal has already been approved by both companies’ boards of directors and is expected to close in the third quarter. Once the transaction is complete, Symantec will have annual sales of $4.4 billion and add capabilities in protecting against cyber threats to the Web, networks and cloud applications. Symantec said that 62 percent of Symantec’s post-acquisition sales will come from enterprise security with the remainder in consumer security applications.
“Together with Blue Coat, we will be best positioned to usher in a new era of cyber security solutions 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,” Dan Schulman, Symantec’s chairman, said on Monday at the outset of an investor call to discuss the acquisition.
Symantec said that combined with Blue Coat, it will be able to offer customers cyber security capabilities for email, cloud servers and applications, data centers, networks, and endpoints.
Ajei Gopal, Symantec’s interim president and chief operating officer, said on the investor call that there is only “small overlap” between the two companies’ capabilities and that the combination will create “huge leverage in our ability to share core protection engines, and the vast amount of threat data we collect.”
In the area of cloud security Symantec will be able to offer end-to-end solutions for all sizes of customers, Gopal said.
Gopal said the acquisition is “transformational” for the cyber security industry amid a constant rise in cyber threats and attacks.
“With this combination, we will have best-in-breed protection across all the major threat vectors, both on-premises and in the cloud,” Gopal said. “With advanced threat protection capabilities from both companies, we will be able to detect and remediate the most sophisticated cyber attacks. In short, customers will be able to rely on Symantec to solve their most critical cyber security challenges.”
Symantec said the deal will enable $150 million in annual cost savings synergies, which are in addition to $400 million in previously announced planned annual cost savings. The full $550 million in annual cost savings is expected to be realized by the end of FY ’18.
Symantec said the depth and breadth of its resources combined with Blue Coat will also “drive the next wave of innovation.”
Once the deal closes, Blue Coat CEO Greg Clark will become CEO of Symantec. Schulman will remain as chairman and so will Thomas Seifert as chief financial officer.
Blue Coat had $598 million in sales for its fiscal year ended April 30, although operating margins were a negative 42 percent. The company has more than 15,000 customers. Symantec has more than 370,000 customers.
Bain Capital is the majority shareholder in Blue Coast and will reinvest $750 million in Symantec. The private equity firm Silver Lake is going to double its investment in Symantec to $1 billion.
Symantec is financing the deal with cash on hand and $2.8 billion of new debt. J.P. Morgan is the lead financial adviser to Symantec, which also includes Barclays, BofA Merrill Lynch, Citi, and Wells Fargo Securities on its banking team. All the investment banks are providing debt financing.
Blue Coat’s lead financial adviser is Goldman Sachs with assistance from Morgan Stanley & Co. and Credit Suisse.