By Krystal Hu and Anirban Sen
NEW YORK (Reuters) -U.S. data security software firm Cohesity told Reuters on Wednesday it has agreed to acquire Veritas' data protection business in a deal that values the combined entity at $7 billion.
The cash and stock acquisition is expected to help Cohesity, which is backed by Japan's SoftBank (TYO:9984) Group, achieve positive growth margins and expand into international markets, Cohesity CEO Sanjay Poonen said in an interview, adding that the firms together have $1.6 billion in annual revenue.
"You've got the fastest growth on our side and the best profitably on their side, combined together to be a profitable growth machine that's innovating with AI," he said.
The deal comes at a time when Cohesity's biggest competitor Rubrik is, according to sources, planning to launch a stock market flotation in the coming weeks.
San Jose, California-based Cohesity's artificial intelligence-powered software helps organizations protect and manage their data against cybersecurity threats. It is also working with Big Tech in the adoption of generative AI to search and retrieve large amounts of data.
It raised about $1 billion in equity and $2 billion in debt from investors including Haveli Investments, Premji Invest and Madrona to help fund the deal, according to people familiar with the matter.
Cohesity's takeover of the Veritas unit values the business at over $3 billion including debt, one of the sources said, requesting anonymity.
Veritas is majority-owned by private equity firm Carlyle Group (NASDAQ:CG), which acquired the company from Symantec (NASDAQ:GEN) in 2016. Carlyle has rolled over its stake in the unit and will join the board of the newly merged company. Veritas CEO Greg Hughes will also join the board.
The deal is expected to close by the end of the year.
Veritas will form a separate company that will comprise its remaining businesses, including data compliance and backup services.
Cohesity's customers include Salesforce (NYSE:CRM), Delta Air Lines (NYSE:DAL), Nasdaq and Broadcom (NASDAQ:AVGO).
In late 2021, Cohesity tapped JPMorgan Chase (NYSE:JPM) and other banks to prepare for an initial public offering but chose not to proceed after the market for listings soured due to macroeconomic volatility.
JPMorgan Chase, Simpson Thacher and Bartlett, and Gunderson Dettmer advised Cohesity on the deal. JPMorgan also provided committed financing for the deal, while PJT Partners (NYSE:PJT) served as debt capital markets advisor to Cohesity. Guggenheim Securities, Morgan Stanley and Latham & Watkins advised Veritas.