Vista Equity to acquire Qualcomm unit in $800m deal

October 2013 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Mobile chipmaker Qualcomm Incorporated has agreed to sell its logistics unit Omnitracs Inc to private equity firm Vista Equity Partners in a deal worth around $800m in cash. The deal is subject to the customary closing conditions, including obtaining authorisation from relevant antitrust authorities. Qualcomm anticipates that the deal will be completed during the first quarter of the company’s next financial year.

The deal for Omnitracs, announced on 23 August, will include all of the unit’s operations in the US, Canada and Latin America, including Sylectus and FleetRisk Advisors, both of which were acquired by Qualcomm in 2011. Omnitracs Europe, however, is not included in the deal. Qualcomm has stated that all employees within the Omnitracs division will transfer to Vista Equity upon completion of the deal.

Qualcomm has been one of the main beneficiaries of the smartphone boom of recent years. The company supplies wireless processors to a number of businesses within the smartphone sector, including both Apple Inc and Samsung Electronic Company. Due to this continuing success the company felt now was the right time to divest the Omnitracs unit. According to figures released by Qualcomm in July, the company’s fiscal third quarter profits rose by 31 percent as sales of Qualcomm’s wireless chips continued to show strong growth.

Shares in Qualcomm climbed 11 cents in trading on the day of the sale announcement, reaching $67.24. The company’s stock has risen around 5 percent in the past three months.

Vistahas been a frequent and long term investor in the software and technology sectors. The firm, which has offices in San Francisco, Chicago and Austin, presently has investments of over $7.1bn in technology based companies worldwide. In 2012, the firm also acquired British financial services software company Misys in a deal worth £1.27bn. In a statement announcing the sale Vista expressed its commitment to the Omnitracs unit. Indeed, the firm fully intends to maintain and eventually expand Omnitracs’ existing product line. “We are long-term investors in enterprise software, data and technology enabled businesses that are committed to being leaders in their fields,” said Robert Smith, chief executive officer and founder of Vista Equity. “We are impressed with the compelling value proposition Omnitracs’ products and services offer their customers. We look forward to working with them and helping them to reach their full potential.”

Omnitracs was the first ever unit created by Qualcomm in the late 1980s. The unit’s role within the Qualcomm portfolio has evolved into a fleet management, vehicle application and logistics business that provides support to the trucking industry. The division also supplies devices for installation into fleet vehicles in order to collect data which can then be communicated via satellite. Omnitrac’s products support transport and logistics providers with data covering efficiency, safety, asset management and compliance.

The unit quickly became a strong revenue generator for Qualcomm, providing the company with much needed cashflow throughout the 1980s and 1990s. This strong revenue generation enabled Qualcomm to develop the Code Division Multiple Access (CDMA) which soon became the foundation of the company’s lucrative wireless chip business. Qualcomm expects to generate revenue of around $25bn through 2013, yet its Enterprise Services Division, which contained Omnitracs, saw sales of just $371m in 2012.

“Omnitracs has maintained a leadership position within the industry for 25 years. Today, the opportunity for fleet management and telematics is evolving rapidly, and we believe Omnitracs is well positioned to continue its leadership position as a stand alone entity,” said Derek Aberle, executive vice president and group president of Qualcomm. “Vista’s long term investment focus and experience helping software, data and technology enabled businesses drive growth and leadership positions is a great fit for the Omnitracs business and management team. We look forward to witnessing their continued success together.”

The acquisition of Omnitrac is the second sizeable deal that Vista has carried out in the San Diego region in recent months. In May the firm agreed to acquire internet security business Websense for $907m in cash.

Barclays Capital Inc served as financial advisers to Qualcomm during the sale.

Richard Summerfield