One of the S&P 500 companies, Citrix Systems, Inc. (NASDAQ: CTXS), is the subject of a cash deal involving two private companies, Vista Equity Partners and Elliott Investment Management. They will acquire Citrix for $16.5 billion, including the assumption of its debt.
Following the news, shares of the cloud computing and virtualization technology company fell 3.4% on Monday to close at $101.94.
Benefits of the Transaction
Through this deal, Citrix Systems will become private and enhance its SaaS transformation, increase investment, and expand its platform for secure hybrid work.
Vista Equity Partners and Evergreen Coast Capital Corporation intend to combine Citrix and TIBCO Software, one of Vista’s portfolio companies. TIBCO specializes in enterprise data management, through which customers connect and predict business outcomes. In combination with Citrix Systems, it will create a global digital workspace and data analytics.
The combined entity is likely to be one of the largest software providers globally. It is expected to serve 400,000 customers, including 98% of the Fortune 500, with 100 million users in 100 countries.
Terms of the Deal
Per the terms of the agreement, Vista and Evergreen will pay $104 in cash for each share of Citrix Systems. The price tag represents a 24% premium to CTXS’s closing price on December 20, the last trading day prior to which news related to potential bids from Vista and Evergreen was revealed publicly.
The transaction, which awaits shareholders’ approval and certain regulatory approvals, is expected to close in mid-2022. After closure, shares of Citrix Systems will not trade on the Nasdaq, as it will become a private company. Headquartered in Fort Lauderdale, FL, the company will continue to operate under the Citrix name and brand.
Interim CEO and President of Citrix Systems, Bob Calderoni, said, “Our market-leading platform provides secure and reliable access to all of the applications and information employees need to get work done, wherever it needs to get done. By combining with TIBCO, we will expand this platform and the outcomes our customers achieve.”
“Together with TIBCO, we will be able to operate with greater scale and provide a larger customer base with a broader range of solutions to accelerate their digital transformations and enable them to deliver the future of hybrid work. As a private company, we will have increased financial and strategic flexibility to invest in high-growth opportunities, such as DaaS, and accelerate its ongoing cloud transition,” Calderoni added.
In a separate release, Citrix Systems reported fourth-quarter and 2021 results. Adjusted earnings of $1.47 per share inched up marginally from $1.46 per share on a year-over-year basis and handily beat the Street estimates of $0.43 per share. Net revenues increased 5% to $850.8 million and outpaced analysts’ expectations of $829.83 million.
For 2021, adjusted earnings came in at $5.33 per share, down from $6.10 reported in the prior year. Net revenues were $3.22 billion, slightly down from the prior year.
Wall Street’s Take
The rest of the Street is bearish on the stock with a Moderate Sell consensus rating. That’s based on 1 Buy, 3 Holds, and 4 Sells. The average Citrix Systems price target of $93.50 implies 8.28% downside potential to current levels. Shares have fallen 19.4% over the past year.
TipRanks’ Stock Investors tool shows that investors currently have a Very Negative stance on Citrix Systems, with 3.9% of investors maintaining portfolios on TipRanks decreasing their exposure to CTXS stock over the past 30 days.
It seems that investors were already wary after media reports related to the potential bids for the deal were floating around the market.
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