Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Buyout firm Thoma Bravo adds Sophos to its cybersecurity chest with $3.8 billion deal

Published 10/14/2019, 09:54 AM
Updated 10/14/2019, 09:56 AM
Buyout firm Thoma Bravo adds Sophos to its cybersecurity chest with $3.8 billion deal

Buyout firm Thoma Bravo adds Sophos to its cybersecurity chest with $3.8 billion deal

By Yadarisa Shabong

(Reuters) - U.S. private equity firm Thoma Bravo is adding Sophos Group (L:SOPH) to its cybersecurity stable, announcing on Monday a buyout deal that values the British maker of antivirus and encryption products at about $3.8 billion.

The takeover price of 583 pence per share represented a 37% premium from Sophos's closing price on Friday and Sophos shares surged nearly 38% on news of the deal.

Sophos, whose customers include Under Armour Inc (N:UAA), Ford Motor Co (N:F) and Toshiba Corp (T:6502), listed in 2015 at 225 pence per share and has seen its market value double since then, despite a tough 2018.

Thoma Bravo's move for Sophos trails several other buyout deals by U.S. funds drawn toward the UK as the pound weakened ahead of Brexit.

Sophos Group shareholders will get $7.40 per share in cash, which is 583 pence per share.

Shares of rival Avast (L:AVST) also rose after the Sophos deal was announced.

Sophos CEO Kris Hagerman told Reuters that his company had first been approached by Thoma Bravo in June.

"The (Sophos) board ultimately concluded that this offer and the acquisition can accelerate Sophos' progress in next-generation cybersecurity," Hagerman said.

CYBERSECURITY MARKET EVOLVING

Private equity funds are increasingly targeting listed companies in Britain. Advent recently offered to buy engineering firm Cobham (L:COB) while an investment consortium led by Blackstone (NYSE:BX) looks to take control of Madame Tussaud's owner Merlin (L:MERL).

Thoma Bravo, which raised billions for its latest private equity fund this year, had been targeting the cyber security sector. Late last year, it bought Imperva and another cyber security firm called Veracode from Broadcom Inc (O:AVGO).

In 2017, it purchased Sophos' close competitor Barracuda Networks, which manages data security over the cloud.

"The global cybersecurity market is evolving rapidly, driven by significant technological innovation, as cyber threats to business increase in scope and complexity," Seth Boro, managing partner, at Thoma Bravo said in a statement on Monday.

Analyst Neil Campling of Mirabaud Securities said Sophos could be "valuably merged with Barracuda to focus on the SMB (small and medium businesses) opportunities".

Sophos's Hagerman said there was a transition to next-generation security products such as machine-learning and APIs, with the cloud at the heart of that transition for products to actively communicate with each other and manage threat responses.

Hagerman noted that Sophos' growth in recent years has fundamentally been due to its security solutions that can be deployed to any size organization.

Analysts at Hargreaves Lansdown (LON:HRGV) cautioned investors about Thoma Bravo's dollar-denominated deal for Sophos, saying "but should a Brexit deal be agreed, a rally in sterling could leave investors out of pocket."

J.P. Morgan Cazenove, Lazard, and UBS AG London Branch were Sophos' financial advisers and Goldman Sachs (NYSE:GS) advised Thoma Bravo.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.