F5 Networks (FFIV) Stock Up On Reports Of Acquisition Offer

F5 Networks Inc. (NASDAQ:FFIV) was among one of the biggest single-day gainers during yesterday’s trading session. Shares of the company gained nearly 13% yesterday after Reuters reported that it has hired investment bank, Goldman Sachs Group Inc. (NYSE:GS) , to help it in evaluating takeover offers.

This was also its biggest single day gain in almost five years. At yesterday’s closing price of $123.94, the company had a market capitalization of $8.3 billion.

Citing people familiar with the matter, the international news agency revealed that F5 Networks has received an acquisition offer and has thus approached Goldman Sachs to decide how to proceed.

F5 Networks is a leading provider of integrated Internet traffic and content management solutions designed to improve the availability and performance of mission-critical Internet-based servers and applications. In other words, it offers products that help organizations in boosting security and performance of applications and servers.

We believe that the company’s recent move to consider the buyout offer may be aimed to create value for shareholders as slower sales growth and declining profits have led to a significant decline in share prices from the last 52-week high.

Notably, F5 Networks reported lower-than-expected results for the second quarter of fiscal 2016 on Apr 20. A volatile spending atmosphere and intensifying competition negatively impacted the company’s overall performance.

Furthermore, during the second-quarter conference call, the company’s management revealed that due to soft market environment in the financial and telecommunications carrier, it is witnessing a decline in bookings. Notably, a major part of the company’s overall revenues come from these markets.

Therefore, by selling itself, F5 Networks will not only create value for investors but also bring in some new talent in the management level, which would reposition the company for growth.

For buyers too, this is the right time to make an offer as the stock is trading at a discount of 8% from its 52-week high of $135.20, which was achieved on Jul 31, 2015.

Nevertheless, sources remain doubtful if the recent offer will finally materialize, as F5 Networks has received takeover offers in the past too but had concluded none. As Reuters reported, the company “had previously attracted interest from companies that included IBM Corp (NYSE:IBM) , Oracle Corp (NYSE:ORCL). and Juniper Networks (NYSE:JNPR) ”.

We will have to wait to see what happens this time.