The Ontario-based software company Open Text Corp., based in Ontario, has agreed to purchase cloud-based security company Carbonite Inc. for $ 1.42 billion, including debt.
The agreement will assess the Boston-based company at $ 23 US per share, a 25% premium over Friday's closing price on Nasdaq. But that price also represents a 22% discount from Carbonite's US $ 29.45 share price last February, shortly before it bought IT security company Webroot Inc., for $ 618.5 million, which caused analysts to raise concerns about Carbonite's debt burden. Open Text has declared that it will make the purchase with cash and its credit line and expects to close within 90 days.
Open Text has become one of Canada's largest software companies through regular mergers and acquisitions, focusing primarily on business-to-business software with a growing emphasis on the cloud. Its suite of business services includes customer management software, process automation and IT security.
Carbonite, which takes its name from the impenetrable imaginary substance used to trap Han Solo's character in the Star Wars movie The Empire Strikes Back, claims to make its customers' data as impenetrable with secure backups. It focuses on small and medium enterprises and professional consumers: the target markets to which Open Text hopes to extend its wider suite of services.
"We believe it is an excellent way for the market," said Mark Barrenechea, CEO of Open Text, in an interview. He added that the purchase of Carbonite would further strengthen its security offerings for company "endpoints" – connected devices ranging from mobile devices to sensors connected in industrial machines. Steve Munford, president of Carbonite and interim CEO, was not available for an interview.
Open Text announced the purchase before the opening of the markets on Monday. His shares listed in Toronto opened 3.1 percent, at $ 56.69. Shares listed on the Nasdaq of Carbonite increased by 24.4 percent on the news, to $ 22.89.
The analyst Gabriel Leung of Beacon Securities Ltd. stated that it is a good acquisition for Open Text, highlighting recurring revenues that would lead to 300,000 small and medium-sized businesses and eight million professional users.
Despite its continued growth focused on acquisition, investors have become frustrated in recent months with slower organic growth than Open Text. When the company reported negligible organic revenues in the quarter ending in June of this year and stated that the organic revenues of the fourth quarter of 2019 would be low, its shares fell by 9%.
Barrenechea said that the purchase of Carbonite is part of Open Text's "total growth strategy", not only through the value of the acquisition, but also through its potential organic growth in revenue, which the CEO said which would be low.
The largest acquisition of Open Text came in 2016 when it bought the corporate content division of Dell Technologies Inc. for $ 1.62 billion. Since then the company has maintained its strategy of mergers and acquisitions with minor purchases. In October 2018, it announced that it would purchase the Atlanta data management company Liaison Technologies Inc. for $ 310 million. And in February, he revealed that he would spend $ 75 million on Colorado's legal company Catalyst Repository Systems Inc.
The company did not disclose the cash value for the Carbonite transaction, but in its most recent quarterly report it said it had $ 1 billion in cash and a $ 750 million credit line for acquisitions. Barrenechea stated that, despite the value of US $ 1.42 billion for the purchase of Carbonite, it would not exclude further short-term acquisitions.
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