Elliott Management Corporation, the hedge fund that owns Vista Land and Development Company has agreed to acquire Citrix Systems in a deal worth $6.2 billion with an enterprise value of approximately $27.9 billion. Elliott will pay for the company with preferred equity securities redeemable at a 15% discount from their current trading price on Feb 5th 2020 if not redeemed by then.),
According to sources familiar with the issue, Evergreen Coast Capital, the private-equity arm of Elliott Management Corp., and Vista Equity Partners are close to reaching a deal to buy the software business for $104 per share.
The agreement might be revealed on Monday, according to the sources, if the discussions don’t break down or drag on.
Should the deal go through, it would be the largest leveraged buyout in recent months, breaking a pause that began after a rush of them in 2021.
With interest rates reaching record lows, private equity companies have collected billions of assets from investors, which they must put to work in order to start earning fees.
According to Dealogic, private equity firms disclosed more than $900 billion in transactions in the United States last year, including buyouts and exits.
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Because they can handle huge levels of debt, software businesses like Citrix have become some of the most sought-after targets for private equity investors due to their dependable income.
Vista is a software buyout specialist, and this would be one of its largest transactions. Vista, based in Austin, Texas, manages more than $86 billion in assets, and its CEO, Robert Smith, is the richest Black person in the United States, according to Forbes, with a net worth of $6.7 billion. Vista, which was founded in 2000, is recognized for following a specific playbook to maximize earnings at the firms it acquires.
Since October 2020, when Mr. Smith pleaded to criminal tax fraud and agreed to pay $139 million in back taxes and penalties, the business has been largely quiet on the buyout front.
Citrix develops software that enables users to remotely access desktops and other cloud computing services.
Citrix, like many legacy software businesses, has struggled to shift its core virtual-desktop services to a subscription-based model. More recurring income is generated by converting consumers into subscribers rather than licensees, which investors like and have grown to anticipate from software businesses.
Citrix’s David Henshall resigned as president and chief executive in October, citing investor pressure to sell the firm. He also stepped down as a director, along with another board member, reducing the board’s membership to eight members. Chairman Bob Calderoni has been named temporary CEO of the firm.
Citrix, on the other hand, has had some recent success, benefitting alongside peers as more everyday life moves to the cloud and the number of individuals working remotely grows. In November, the firm said that annualized recurring revenue increased 13% year over year in the third quarter.
Its stock ended Friday at $105.55, up from $105.55 a few months ago on anticipation of a transaction. According to Bloomberg on January 14, Elliott and Vista were in advanced discussions to purchase Citrix.
The cloud refers to the hardware and software infrastructure provided by companies such as Amazon.com Inc., Microsoft Corp., Google, and others.
Businesses have been migrating to the cloud for almost a decade, opting to forego expensive investments in in-house information technology infrastructure in favor of renting gear and software from companies like Amazon and Microsoft and paying as they go for storage and data processing. As a result, cloud computing has become one of the most hotly fought battlegrounds among business-IT suppliers, as well as a hot commodity for investors and acquirers.
This pattern looks to be set to continue.
Citrix has been the subject of recurrent buyout rumors due to its small size relative to rivals such as VMware Inc. and patchy performance over the years. In the past, it drew the interest of private equity companies and industry rivals, but no agreement was reached.
Citrix is set to be merged with Tibco, a software business that Vista agreed to purchase for $4 billion in 2014 and has sought to sell many times since then, according to several of the sources. This might allow for cost savings from overlapping tasks, making the business more appealing to a future acquirer or public investors if and when the buyout companies decide to take it public again.
Elliott, founded by billionaire Paul Singer, manages roughly $48 billion in assets and has been one of the most visible activist investors in recent years, challenging companies including AT&T Inc. and Duke Energy Corp.
While best known for its activist investments, Elliott has been expanding its private-equity practice. Outside of Evergreen, which focuses on technology investments, Elliott owns other companies including bookseller Barnes & Noble Inc.
Citrix has a long history with Elliott. The Wall Street Journal revealed in September that it had a more than 10% investment in the company worth more than $1 billion and has been pressuring it to take actions to increase its stock price.
Elliott invested in Citrix in 2015 and served on its board of directors until this spring. Other firms that the hedge fund chastised have since been purchased, including health-data provider Athenahealth Inc., which it agreed to sell last year.
Cara Lombardo and Miriam Gottfried may be reached at [email protected] and [email protected], respectively.
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