Vista Equity acquires TIBCO for $4.3bn

November 2014 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Private equity (PE) group Vista Equity Partners announced on 29 September that the firm had agreed to acquire enterprise software company TIBCO Software in a $4.3bn deal.

According to the terms of the deal, TIBCO’s shareholders will receive $24 per share in cash for their stake in the company, taking the deal total to $4.3bn, including the assumption of TIBCO’s existing debt. Although the sale has been unanimously approved by TIBCO’s board of directors, the transaction is still subject to approval by its stockholders, as well as regulatory approvals and other customary closing conditions. Both sides expect the deal to close in the fourth quarter of 2014. “The sale of TIBCO to Vista will provide our shareholders with immediate and substantial cash value, as well as a compelling premium, and the Board has unanimously agreed that this transaction is in the best interests of all our stakeholders,” said Vivek Ranadivé, TIBCO’s chairman and chief executive, in a statement announcing the deal.

The $24 per share price agreed for TIBCO is a 23 percent premium above TIBCO’s closing price of $19.51 on Friday 26 September, the last day of trading before the deal was announced and a 26.3 percent premium to the closing price of TIBCO common stock on 23 September, the day before media reports appeared which suggested multiple parties were competing to complete a deal for TIBCO.

The sale of TIBCO comes toward the end of what has been a difficult year for the company. Declining profits and pressure to sell from activist investors Starboard Value and Praesidium Investment Management have taken their toll on TIBCO. Over the last year the company’s stock has fallen by around 25 percent. However, financial difficulties notwithstanding, around 20 other bidders were interested in striking a deal for TIBCO. Some of Vista’s competitors for the deal included a number of strategic buyers and other PE groups.

“We look forward to working with the talented management team and employees to accelerate TIBCO’s growth and strengthen its leadership as a complete fast data platform,” said Robert F. Smith, chairman and chief executive of Vista. “We worked hard to make this deal happen because we understand the tremendous value that TIBCO can bring to its customers and the marketplace as a private company. We are incredibly excited to help TIBCO reach its full potential.”

TIBCO, based in Palo Alto, California, develops software which can be utilised to provide real-time data analysis of processes including inventory keeping and cross-selling products. At the time of writing, the deal to acquire TIBCO represents the largest buyout of a publicly traded technology company to date this year, surpassing the $2.5bn acquisition of American software company Compuware Corporation by PE firm Thoma Bravo which was announced earlier in September.

Vista has developed a reputation in the software industry for acquiring and revitalising enterprise software firms. The group, based in San Francisco, California, has more than $13bn in assets under management within the software industry.

On 30 September, law firm Robbins Arroyo LLP released a statement noting that it was launching an investigation into Vista Equity’s bid for TIBCO. According to Robbins Arroyo, the investigation will focus on whether the board of directors at TIBCO is undertaking a fair process aimed at obtaining maximum value and adequate compensation for its shareholders. The $24 per share price point agreed for the company is $1 below the $25 target price set for the company by analysts in July. Equally, the company’s Q3 2014 results reported strong increases in subscriptions and related revenue. TIBCO’s non-GAAP subscription revenue increased 76 percent in Q3 from the second quarter, rising to $13.2m. Accordingly, Robbins Arroyo is querying the company’s decision to sell, rather than allow shareholders to participate in any future successes.

Richard Summerfield