Informatica sold in $5.3bn LBO

June 2015 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

European private equity (PE) group Permira and the Canada Pension Plan Investment Board have agreed to acquire US data software and services firm Informatica Company in a deal worth approximately $5.3bn.

The deal, announced in April, is expected to be completed in either the second or third quarter of 2015 and is the largest PE deal of the year to date. Informatica’s board of directors has recommended the deal to the company shareholders, however the transaction is still subject to the assent of those stockholders, as well as the customary regulatory approvals.

Informatica, which helps companies to integrate and analyse data from a variety of sources, had a prosperous 2014 – the firm’s revenue rose 10.5 percent last year, reaching $1.05bn. Its pre-tax income climbed 21 percent to $170.3m.

Under the terms of the deal, Informatica’s shareholders will receive $48.75 in cash for each share of the company’s common stock held. The agreed deal price represents a 6 percent premium on Informatica’s share price on 6 April, the day before the deal was announced. “After careful consideration and deliberation of strategic alternatives, our Board of Directors unanimously concluded that the sale of Informatica to the Permira funds and CPPIB is in the best interest of all Informatica stakeholders”, Sohaib Abbasi, Informatica’s chairman and chief executive, said in a statement. “While delivering immediate compelling value to our shareholders, we remain committed to the long-term success of our customers, partners and employees. Permira and CPPIB share both our vision for Informatica to power the data-ready enterprise and our conviction in sustained long-term growth.”

Informatica’s sale has been rumoured for some time. In February, the company is believed to have hired a number of financial advisers to help it defend itself from activist investor Elliott Management, after earlier sale attempts had proven unsuccessful. Activist investor Elliott, which holds around 8 percent of Informatica’s stock, is the company’s largest current shareholder. Elliott has a strong track record of activism in the software and tech spaces. The company has aggravated the boards of a number of tech firms in recent years, including both Riverbed Technology and BMC. In the case of Informatica, Elliott had been agitating for a sale for some time in an effort to maximise shareholder value. Jesse Cohn, Elliott’s head of US equity activism, said: “[Informatica chief executive officer Sohaib Abbasi] has built a great company with a market leading product portfolio and today he and his board have delivered truly outstanding value to shareholders.”

“Informatica is an outstanding company and a clear leader in the essential field of enterprise data solutions”, said Brian Ruder, a Permira partner and co-head of the firm’s technology sector team. “We are very excited about the company’s ongoing transition to cloud and subscription based services, as well as its continued pursuit of four separate billion dollar market opportunities in cloud integration, master data management, data integration for next generation analytics, and data security. In addition, we look forward to working with this talented team of dedicated employees and CPPIB to grow the business and achieve Informatica’s highest potential.”

Permira’s move for Informatica is in line with other acquisitions that the firm has made over the course of the last 20 or so years. In fact, more than a third of all the acquisitions it has made since the late 1990s have been in the tech space. For Informatica, the transaction will see the firm taken private after going public in 1999.

There is hope that the size of the deal for Informatica will help to kick start private equity activity, which has been surprisingly sparse so far in 2015. The first quarter of the year saw just $30bn worth of takeovers announced, the lowest level of activity since 2009.

Richard Summerfield