|
Symantec to buy Veritas for US$13.5 billion
16 December, 2004
by Liam Lahey
Symantec Corp. and Veritas Software Corp. are on the verge
of a merge.
The two companies have entered into a definitive agreement
to merge in an all-stock transaction. Based on Cupertino,
Calif.-based Symantec's stock price of US$27.38 at market
close on December 15, the transaction is valued at approximately
$13.5 billion.
The goal is one of a unified front: Symantec's security solutions
-- from its growing enterprise offerings to its familiar Norton
consumer brand -- combined with the Mountain View, Calif.-based
storage solution provider -- would provide enterprise customers
with a more effective way to secure and manage their data,
officials said.
Under the agreement, which has been unanimously approved
by both boards of directors, Veritas' stock will be converted
into Symantec stock at a fixed exchange ratio of 1.1242 shares
of Symantec common stock for each outstanding share of Veritas
common stock. Upon closing, Symantec shareholders will own
approximately 60 per cent and Veritas shareholders approximately
40 per cent of the combined company. The transaction is expected
to be tax-free to shareholders of both companies for U.S.
federal income tax purposes.
Based on data from IT consultancy IDC Corp., the total market
opportunity for the combined company today is approximately
$35 billion and is expected to grow to $56 billion by 2007.
Forrester Research's take on the reason Symantec wishes to
acquire Veritas is straightforward. It's entirely about market
dominance.
"There is no overlap between them -- the companies'
product portfolios are vaguely complementary -- but don't
expect any radical new technology combinations because there
are few, if any. This acquisition, if it occurs, is about
remaining competitive in a consolidating market filled with
giants like Cisco, Hewlett-Packard, IBM, and Sun."
Symantec says the merger will expand its combined revenue
base and create an entity with significantly greater financial
scale and resources. The aggregate revenue of the combined
company is expected to be approximately $5 billion for fiscal
year 2006, which begins in April 2005 and ends in March 2006.
Approximately 75 per cent of the revenue of the combined
company is expected to come from the enterprise business and
25 per cent from the consumer business. In addition, the combined
company will have approximately $5 billion in cash.
"Both Symantec and Veritas have a strong and long-standing
commitment to the channel," said Michael Sotnick, vice-president
Americas partner sales, for Veritas. "As a single company
post merger, we will extend that commitment in pursuit of
new business opportunities in all geographies. Today is truly
an exciting day for all Symantec and Veritas partners and
we look forward to working with each partner to build upon
our existing foundation of success."
"These are two organizations, both market leaders, looking
at how to best serve the market and increase their overall
customer base," said Michelle Warren, IT industry analyst
for Evans Research Corp. "They'll take the best of practices
of each and push forward; there will be some obstacles to
overcome such as the blending of the two corporate societies.
We saw that with the HP- Compaq merger."
There's change abound in the overall security market as the
trend continues to be a move towards a network-centric approach
versus a client-centric one, she said.
"It's an interesting shift. The industry is moving away
from the PC and into the network, which gives IT professionals
greater control over the network and it minimizes a tax on
the system."
Warren said both organizations enjoy a high profile in the
Canadian marketplace and both boast strong partner communities.
Though ERC has little doubt the two channels would work together
smoothly, Warren said time would tell if the combined company
will maintain its current partner numbers.
The Symantec-Veritas announcement comes on the heels of the
Oracle- PeopleSoft merger, which begs the question if further
consolidation in the enterprise software industry is forthcoming?
Warren thought so.
"Everything happens in threes," she said. "We'll
probably see one more, big merger like this before the end
of the year."
The Symantec-Veritas transaction is expected to close in
the second calendar quarter of 2005 and is subject to customary
closing conditions, including approval by the shareholders
of both companies and regulatory approvals, officials said.
The combined company will operate under the Symantec name.
John W. Thompson, chairman and CEO of Symantec, will continue
in the same role of the combined company. Gary L. Bloom, chairman,
president and CEO of Veritas, will be vice-chairman and president
of the combined company. The board directors of the combined
company will include six members of Symantec's current board
and four from Veritas' current board for a total of 10 members.
"The new Symantec will help customers balance the need
to both secure their information and make it available, thus
ensuring its integrity," Thompson said in a statement.
"We believe that information integrity provides the most
cost- effective, responsive way to keep businesses up, running
and growing in the face of system failures, Internet threats
or natural disasters."
|
