Broadcom Acquiring Enterprise Security Assets of Symantec

Symantec Corp. entered into a definitive agreement to sell its enterprise security assets, which include the Symantec name, to Broadcom Inc., for $10.7 billion in cash.

The transaction, which was approved by Symantec’s board of directors, is expected to close before the end of the calendar year pending regulatory approvals.

“Symantec has a long history of offering unparalleled cyber technology,” said Daniel H. Schulman, COB, Symantec. “It is a testament to our market leadership and dedication to the mission of making the world a safer place, that Broadcom has chosen Symantec’s enterprise security assets to expand their reach into cyber security. By unlocking value from enterprise security, we are advancing our ongoing transformation strategy and positioning our consumer cyber safety business, Norton LifeLock, for success.“

“This is a transformative transaction that should maximize immediate value to our shareholders while maintaining ownership in a pure play consumer cyber safety business with predictability, growth and strong consistent profitability. In addition it allows the enterprise security business to grow and compete on an enterprise platform with a worldwide sales and distribution reach which can service our existing customers,” said Rick Hill, interim president and CEO. “It also allows our Norton LifeLock business, a world recognized leader in consumer and small business cyber safety to operate independently and give investors a clear understanding of the growth opportunity and strong financial performance.”

Announcement Highlights:
• Sale of enterprise security assets delivers $10.7 billion before tax
• The company expects to issue a special dividend of $12.00 per share for shareholders
• The board of directors approved an increase of $1.1 billion to our remaining share repurchase authorization, while maintaining our current debt levels; the total authorization is now $1.6 billion
• The company expects to increase the regular quarterly dividend to $0.125 per share after the close of the transaction, funded solely by consumer cyber safety’s on-going business and with the potential to increase future dividends, after the transition period and once stranded costs are eliminated
• The consumer cyber safety business is steady, predictable and the firm believes it can grow at mid-single digits, generating cash flow and earnings
• This sale leaves behind underutilized assets that were not part of the transaction, including owned properties that will be monetized to cover a large portion of the estimated $1 billion cash cost to shed the estimated $1.5 billion in stranded costs. The firm would have been monetizing these assets as part of our overall strategy, but now it can do it while not subjecting our shareholders to the execution risk of such a major undertaking
• This agreement is a win for both parties’ customers and shareholders

Upon closing of the transaction, Symantec expects to receive $10.7 billion, which is estimated to yield approximately $8.2 billion of after tax proceeds. It expects to return approximately 100% of its after-tax cash proceeds in the form of a $12.00 per share special dividend to shareholders after the close of the transaction. It expect to pay the special dividend in 4FQ20 and will update the expected dividend timing on its next quarterly earnings call. In addition, it expects to increase our regular dividend by 67% to $0.125 per share in the quarter following the close. The board of directors has approved an increase to our existing share repurchase authorization up to $1.6 billion. After the transition, it believes its Norton LifeLock business can generate $1.50 annual non-GAAP earnings per share and achieve mid-single digit revenue growth year over year.

Prior to closing Symantec will continue to manage the enterprise security business to serve its customers, while partnering with Broadcom to plan for a smooth transition.

At close, Broadcom will assume the enterprise security assets, including the Symantec name as part of their broad infrastructure software portfolio. In addition, at the close, Symantec will continue to operate its consumer cyber safety business which provides device security, identity threat protection and privacy software that protects consumers and small businesses from the increasing threats posed by cyber criminals around the globe.

“With a large and growing market, Norton LifeLock products address consumers’ increasing need for cyber safety,” continued Hill. “In 1FQ20, our consumer cyber safety segment contributed 90% of Symantec’s total company operating income. It is our view that with an operating model focused on increased marketing investments and product development for consumer privacy, we can simultaneously grow our subscriber base and increase our annual revenue per user. We expect this asset divestiture will enable our Norton LifeLock business to grow revenue in the mid-single digits, with continued strong cash flow from operations and expanded earnings growth. It has been my honor to work with employees from every area of the company. I can honestly say there are no more capable and driven people than these executives, managers, and employees. As we work toward closing this transaction with Broadcom, we remain committed to protecting our customers and continuing to focus on operational excellence.”

“This $10.7 billion agreement to sell our enterprise security assets to Broadcom delivers significant value to Symantec shareholders,” said Vincent Pilette, EVP and CFO. “In addition, we have identified approximately $1.5 billion of annual run rate expenses which we plan to eliminate over the next 12 months at a cash cost of approximately $1 billion. We believe these cash costs will be materially offset by the sale of underutilized assets such as real estate. We are focused on disciplined execution, developing a cost structure that allows us to fuel growth and continue innovation in our consumer business.”

The board of directors is conducting a search for a permanent CEO for the consumer business. It has engaged with a leading executive search firm and is considering both internal and external candidates.

Goldman Sachs & Co. LLC is serving as financial advisor, and Fenwick & West LLP is serving as legal advisor, to Symantec.

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