Symantec will buy Veritas in an all-stock transaction, the companies announced Thursday (December 16). Based on Wednesday's closing stock prices, the deal values Veritas at around US$13.5 billion, they said.
The deal is expected to close in the second quarter of 2005, subject to customary closing conditions. Symantec shareholders will own around 60 percent of the merged company, which will retain the Symantec name, the companies said in a joint announcement.
Veritas, based in Mountain View, California, sells backup, archiving and file system software. Symantec, of Cupertino, California, sells software to protect home and office computer systems and networks, including firewalls and tools to detect viruses and network intrusions. By joining forces, they will be able to help enterprise customers secure their information better, the companies said. About three-quarters of the combined company's revenue will come from enterprise products and services, they said.
Symantec Chairman and Chief Executive Officer John Thompson will continue in that role, while his opposite number at Veritas, Gary Bloom, will become vice-chairman and president of the combined company. The new board will be composed of 10 members, six chosen from Symantec's board and four from the Veritas board, the companies said.
A combined company has greater opportunities for growth than either company separately, Thompson said in a conference call with journalists and analysts Thursday. "This is not your typical merger focused on removing cost and redundant infrastructure," he said.
Bloom will take day-to-day responsibility for sales, service and support, Thompson said.
For his part, Bloom said that a single company that can both secure its customers' data, and make that data more available, represents a unique value proposition. Giving an example of how the companies' products could work together in response to a virus outbreak, he suggested that backup software could be triggered to automatically restore clean software and data.
How long such integration will take is an unanswered question, as the people who will do the programming have been kept in the dark about the deal until now, according to Thompson. "Now that the transaction is public, we can start the integration process, and start getting some of our engineers together," he said.
Nevertheless, Thompson expects the companies' 13,000 staff will be "jazzed up" about the deal, and will have plenty of ideas for what they can do together. "Within a few weeks, the ideas will be all over the place," he said. After that will come the task of identifying which ideas can be implemented, he said.
"Putting integration aside, the number one focus is on this quarter," he said.
The companies expect to report $5 billion in combined revenue in their first financial year together, from April 2005 to March 2006, according to Symantec's Chief Financial Officer Greg Myers.
Both boards of directors have approved the deal, which now requires the approval of regulators, and of the shareholders of both companies. Symantec has offered Veritas stockholders 1.1242 Symantec shares for each Veritas share they hold. With Symantec's stock price standing at $27.38 when the market closed Wednesday, that values the deal at around $13.5 billion, the companies said.
Symantec reported revenue of $1.87 billion in its last fiscal year, the period to March 31, and $618 million for the quarter ended Sept. 30. Veritas reported revenue of $1.75 billion for the year to Dec. 31, 2003, and $497 million for the quarter to Sept. 30.
This is not Symantec's first acquisition this year -- although it is by far the largest. It announced plans to acquire antispam software company Brightmail Inc. of San Francisco for $370 million in May, and security consultant @Stake Inc. of Cambridge, Massachusetts in September. Last week, it announced plans to acquire intrusion system Platform Logic of Glenwood, Maryland.
This latest deal dramatically extends and strengthens Symantec's offering to enterprises, according to Richard Ptak, an analyst with Ptak, Noel & Associates, commenting on the deal via e-mail.
Veritas has so far failed to capitalize on its 2002 acquisitions of Jareva Technologies Inc. and Precise Software Solutions Ltd., but the deal with Symantec will give it a second chance to apply these technologies, drawing on the greater experience and financial resources of the merged company, Ptak said.
The companies are a good fit, with no significant product overlaps to cause problems, but this also means that both sides will face a learning curve, he said.
"It will take some time for both sides to learn the idiosyncrasies of the different markets," Ptak said.
Ptak wondered whether Computer Associates International Inc. or BMC Software Inc. would have been a better target. BMC, in particular, would have given Symantec a solid position in the systems management market -- and may still be a target if it is on the market by the time Symantec swallows Veritas.
"We would bet they will acquire again," Ptak said.
Symantec will announce results for its fiscal third quarter on Jan. 19, and Veritas will announce its results for the fourth quarter on Jan. 27.