Intel sells McAfee unit stake to TPG in $4.2bn deal

November 2016 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Joining forces in a transaction that will create an independent cyber security company, Intel Corporation and TPG have announced a definitive agreement to jointly invest in a new company, a spin-out of Intel Security.

Under the terms of the agreement, TPG, a leading global alternative asset firm with demonstrated expertise in growing profitable software companies and carve-out investments, will own 51 percent of the new company while Intel, a global technology leader that powers the cloud as well as billions of smart, connected computing devices, will have a 49 percent stake (receiving $3.1bn in cash).

The new company is to be called McAfee and, following completion of the transaction, will be positioned as one of the world’s largest pure-play cyber security companies, with access to significant financial, operational and technology resources.

The multi-step transaction values the new entity at approximately $4.2bn, based on an equity value of approximately $2.2bn, plus McAfee net debt of approximately $2bn. The debt will be financed initially by Intel until completion of audited financial statements for McAfee – expected within three to five months of the transaction’s close.

As part of the deal, TPG is making a $1.1bn equity investment to help drive growth and enhance focus as a standalone business. The firm has described the investment as reflecting its confidence in Intel Security’s industry-leading enterprise and consumer businesses, strong market position and business momentum.

“We believe that McAfee will thrive as an independent company,” said Jim Coulter, co-founder and CEO of TPG. “With TPG’s investment, along with continued support from Intel, McAfee will sharpen its focus and become even more agile in its response to today’s rapidly evolving security sector.

“TPG is excited to partner with Intel and McAfee management to accelerate growth of the business by enhancing its go-to-market strategy and continuing to grow and strengthen its core product offerings.”

Appointed to lead McAfee and position it so that it can capitalise on significant global growth opportunities through greater focus and targeted investment, Chris Young, senior vice president and general manager of the Intel Security Group at Intel Corporation, will take on the role of CEO of the new company.

“As a standalone company supported by these two partners, we will be in an even greater position of strength, committed to being the best provider the cyber security industry has ever seen,” said Mr Young in a communication to stakeholders. “We will continue to focus on solving the unique demands of customers in the dynamic cyber security marketplace, drive innovation that anticipates future market needs and continue to grow through our strategic priorities.”

These unique demands are currently served by Intel Security’s comprehensive software platform which protects more than a quarter of a billion endpoints, secures the footprint for nearly two-thirds of the world’s 2000 largest companies and detects more than 400,000 new threats every day.

“Security remains important in everything we do at Intel and going forward we will continue to integrate industry-leading security and privacy capabilities in our products from the cloud to billions of smart, connected computing devices,” said Brian Krzanich, CEO of Intel. “As we collaborate with TPG to establish McAfee as an independent company, we will also share in the future success of the business and in the market demand for top-flight security solutions, creating long-term value for McAfee’s customers, partners, employees and Intel’s shareholders. Intel will continue our collaboration with McAfee as we offer safe and secure products to our customers.”

The Intel/TPG transaction is expected to close in the second quarter of 2017, subject to certain regulatory approvals and customary closing conditions.

Fraser Tennant