Symantec Corp. (Nasdaq: SYMC) and VERITAS Software Corp. (Nasdaq: VRTS) announced that the companies have entered into a definitive agreement to merge in an all-stock transaction. Based on Symantecs stock price of $27.38 at market close on December 15, 2004, the transaction is valued at approximately $13.5 billion.
The leader in storage software and the leader in security software will provide enterprise customers with a more effective way to secure and manage their most valuable asset, their information. The combined company will be uniquely positioned to deliver information security and availability solutions across all platforms, from the desktop to the data center, from consumers and small businesses to large organizations and service providers.
Under the agreement, which has been unanimously approved by both boards of directors, VERITAS stock will be converted into Symantec stock at a fixed exchange ratio of 1.1242 shares of Symantec common stock for each outstanding share of VERITAS common stock. Upon closing, Symantec shareholders will own approximately 60 percent and VERITAS shareholders approximately 40 percent of the combined company. The transaction is expected to be tax-free to shareholders of both companies for U.S. federal income tax purposes.
The combined company will operate under the Symantec name. John W. Thompson, Chairman and Chief Executive Officer of Symantec, will continue as Chairman and CEO of the combined company. Gary L. Bloom, Chairman, President and Chief Executive Officer of VERITAS, will be Vice-Chairman and President of the combined company. The board directors of the combined company will include 6 members of Symantecs current board and 4 from VERITAS current board for a total of 10 members.
Customers are looking to reduce the complexity and cost of managing their IT infrastructure and drive efficiency with fewer suppliers, said John W. Thompson, Chairman and CEO, Symantec. The new Symantec will help customers balance the need to both secure their information and make it available, thus ensuring its integrity. We believe that information integrity provides the most cost-effective, responsive way to keep businesses up, running and growing in the face of system failures, Internet threats or natural disasters.
Our customers have told us that one of their most critical needs is to enable 24x7 access to information. At the same time, they must maintain tight security, comply with all regulatory requirements and operate within their existing budget constraints, said Gary L. Bloom, Chairman, President and CEO of VERITAS Software. Through our unique portfolio of solutions, Symantec and VERITAS are best positioned to address the ever-growing needs of our customers. Based on IDC data, the total market opportunity for the combined company today is approximately $35 billion and is expected to grow to $56 billion by 2007.
By merging with VERITAS, Symantec will expand its combined revenue base and create an entity with significantly greater financial scale and resources. The aggregate revenue of the combined company is expected to be approximately $5 billion for fiscal year 2006, which begins in April 2005 and ends in March 2006. Approximately 75 percent of the revenue of the combined company is expected to come from the enterprise business and 25 percent from the consumer business. In addition, the combined company will have approximately $5 billion in cash.
The combination will create significant benefits for the customers and partners of both companies, including:
Breadth A broad range of leading security and storage solutions at every tier of the enterprise end point, gateway, and application across all platforms from a single vendor;
Depth Leading-edge technology combined with expertise to architect, design, and manage security, storage, and IT infrastructures; and
Global Reach Worldwide sales, service, and channel partner organizations supporting millions of consumers, and small, medium, and large enterprise customers.
The transaction is expected to close in the second calendar quarter of 2005 and is subject to customary closing conditions, including approval by the shareholders of both companies and regulatory approvals. Non-GAAP earnings per share for this transaction, which exclude the amortization of deal-related intangibles, the write-down of VERITAS deferred revenue, restructuring charges, amortization of deferred compensation, and any one-time costs associated with the merger, will be accretive in the first combined year of operations as compared to the Thomson Financial First Call mean estimate of $0.98 for Symantec in fiscal year 2006.
Lehman Brothers acted as exclusive financial advisor to Symantec. Fenwick & West LLP served as legal counsel to Symantec. Goldman Sachs acted as exclusive financial advisor to VERITAS. Simpson Thacher & Bartlett LLP acted as legal counsel to VERITAS.