In an effort to “to gain scale, technological depth and geographical breadth,” privately held Avast Software has signed a definitive agreement to acquire AVG(NYSE: AVG) for $25 a share in an all-cash deal that valuing the business, mobile, and PC security software provider at $1.3 billion. Not surprisingly, AVG stakeholders are celebrating its 30% plus jump in share price as it nears the purchase price.
The deal will be financed primarily by a recently completed $1.685 billion arrangement with several banking and investment firms. Avast said it added $150 million in equity investment. The acquisition is expected to close by mid-October at the latest, assuming customary regulatory and shareholder considerations are met.
According to Avast — which, like AVG, was launched in Prague in what was then Czechoslovakia — the companies’ “complementary strengths” will also put the post-merger business in a better position to gain share in emerging markets.
Given AVG’s recent second-quarter revenue guidance of between $104 million to $106 million (final numbers will be announced, “as soon as practicable”), it seems unlikely shareholders would veto the deal. At the midpoint of the now-Netherlands-based company’s quarterly forecast, it will report a nearly 3% year-over-year decline in sales.
With the rapid adoption of connected devices globally, security has become top-of-mind for both IT execs and the general public. The result is that some of the biggest names in tech are making life difficult for small-ish software security players such as AVG. IBM, for example, has made security an integral segment in its $29.8 billion “strategic imperatives” efforts. So don’t be surprised to see similar consolidations in the future as the market for digital security services continues to grow.
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Tim Brugger has no position in any stocks mentioned.
Avast Software Inks $1.3 Billion Deal to Buy AVG
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