Carbonite Definitively Acquired by OpenText for $1.42 Billion

Press release from OpenText:

OpenText Corp. entered into a definitive agreement to acquire Carbonite, Inc., provider of cloud-based subscription data protection, backup, DR and end-point security to small and medium-sized businesses and consumers.

“Cloud platforms and secured, smart end-points are essential Information Management technologies as businesses transform into Industry 4.0,” said Mark J. Barrenechea, OpenText CEO and CTO. “This acquisition will further strengthen OpenText as a leader in cloud platforms, complete end-point security and protection, and will open a new route to connect with customers, through Carbonite’s marquee SMB/prosumer channel and products. We are very excited about the opportunities that Carbonite will bring, and I look forward to welcoming our new customers, partners and employees to OpenText.“

“We entered FY20 with a solid balance sheet and we are off to a strong start with the announced acquisition of Carbonite as part of our total growth strategy,” added OpenText EVP and CFO, Madhu Ranganathan. “We are excited by the opportunity to bring forth exceptional leadership in operational execution and integration capabilities to Carbonite. Once integrated, we expect to increase our annual recurring revenues, deliver strong cloud growth, and expand cloud margins and adjusted EBITDA. The resulting growth in cash flows will enable us to maintain a healthy balance sheet, deliver strong earnings, and continue to deliver consistent growth in dividends to shareholders.” 

The acquisition of is expected to extend OpenText’s leadership in the Enterprise Information Management (EIM) market by complementing its security offerings in data loss prevention, digital forensics, end-point detection and response with the addition of Carbonite’s data protection and end-point security solutions. The acquisition also adds to OpenText’s cloud business and further complements its routes to market, enterprise customer base in the Global10K, enhanced SMB and prosumer markets.

About Transaction and Terms of the Agreement:
• Tender offer to be commenced for all outstanding Carbonite shares for $23.00 per share in cash
• Total purchase price of approximately $1.42 billion, inclusive of cash and debt
• Total purchase price is approximately 2.8x T(Trailing Twelve Months) Carbonite GAAP revenues (as of September 30, 2019), inclusive of annualized full year reported Webroot GAAP revenues, an acquisition which closed in March 2019
• Expect significant expansion of cloud revenues, cloud margins, adjusted EBITDA and cash flows in FY21
• Current Carbonite Annual Recurring Revenues (ARR) of 90%
• Accretive, and targeting to be on the OpenText operating model by end of FY21
• Funded with OpenText’s existing cash on hand and revolver
• Estimated OpenText net leverage ratio at closing of approximately 2.5x, with a target to return to less than 2x net leverage during the 4-6 quarters post close of transaction
• Financial projections and target models will be provided upon closing of transaction
• Expect the transaction to close within 90 days of this announcement

OpenText, through a wholly-owned subsidiary, intends to commence the tender offer for all of the shares of common stock of Carbonite within 10 business days. Pursuant to the agreement, the tender offer will be followed by a merger to acquire any untendered shares. The tender offer is subject to the tender of a majority of Carbonite’s shares and certain other regulatory approvals and customary closing conditions. The transaction is expected to close within 90 days.

Lazard Frères & Co. LLC has acted as sole investment banker to OpenText in connection with the transaction.

Press release from Carbonite:
 
Carbonite, Inc. entered into a definitive agreement to be acquired by OpenText Corp. for $23.00 per Carbonite share in cash.

The transaction values Carbonite at an enterprise value of approximately $1.42 billion and represents a 78% premium to Carbonite’s unaffected closing stock price on September 5, 2019, the last trading day before a media report was published speculating about a potential sale process.

“Following expressions of interest from multiple parties, the Carbonite Board conducted a thorough and comprehensive process, which included contact with a number of strategic and financial parties, to identify the best way to maximize shareholder value,” said Steve Munford, interim CEO and president/executive COB, Carbonite. “The board strongly believes that a transaction with OpenText delivers compelling, immediate and substantial cash value to shareholders.”

He continued: “Carbonite has expanded its solutions to become a leader in cyber resiliency. We have grown through both organic and inorganic opportunities over the years, enhancing our routes to market, diversifying our customer base, and assembling a talented workforce, while adding meaningful scale. Joining with OpenText is an exciting next step for Carbonite.”

OpenText is in Enterprise Information Management (EIM), both on-premises and for cloud services, offering the only complete solution for EIM with a comprehensive view of all the information within an organization. OpenText operates in 40 countries, providing a tested platform for growth and new sales opportunities.

The transaction is subject to customary closing conditions, including the tender of a majority of the outstanding shares of Carbonite common stock and regulatory approvals.

J.P. Morgan Securities LLC acted as financial advisor to Carbonite, and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor.

3Q19 Results:
Carbonite also announced financial results for the third quarter ended September 30, 2019:
• Revenue of $125.6 million increased 62% Y/Y.
• Non-GAAP revenue of $135.0 million increased 71% Y/Y.1
• Net loss was ($14.0) million, compared to net income of $0.6 million in 2018.
• Net loss per share was ($0.40) (basic and diluted), as compared to net income per share of $0.02 (basic and diluted) in 2018.
• Non-GAAP net income per share was $0.61 (basic) and $0.60 (diluted), as compared to $0.53 (basic) and $0.48 (diluted) in 2018.2
• Adjusted EBITDA of $40.2 million, or 30% of non-GAAP revenue, compared to $23.0 million, or 29% of non-GAAP revenue in 2018.3