Partners Not Rattled As Symantec, Carlyle Group Agree To Lower Veritas Sale Price

As the close date of the sale approaches, Symantec and private equity firm The Carlyle Group have put in some last-minute changes, amending the price agreed upon for the security vendor’s information storage business Veritas to $7.4 billion from $8 billion.

The shift is the second major change in the deal since it was unveiled in August, coming on the heels of the December news that the close date of the deal had been pushed from Jan. 1 to Jan. 29.

In August, Symantec and Carlyle Group said the private equity firm planned to buy Veritas for $8 billion in cash, with Symantec expecting to receive $6.3 billion in net cash proceeds. Under the terms of the new agreement, Carlyle Group will pay $6.6 billion in cash and $400 million in equity interest for the information storage division. Symantec will now receive $5.3 billion in cash proceeds and equity interest, the company said, and has agreed to increase the offshore cash remaining in Veritas from $200 million to $400 million.

[Related: 10 Things To Expect From Symantec In Coming Months]

The companies said the changes were due to ’uncertainties developed regarding the transaction.’ Shares of Symantec stock dropped 3.55 percent on the news to $19.03.

’In a difficult environment, we can move forward with a high degree of certainty around closing a transaction that represents attractive value for shareholders. In addition, this transaction will allow Symantec to further focus and accelerate its strategy as the world’s leading cybersecurity company,’ President and CEO Michael Brown said in a statement about the changes.

Symantec, Mountain View, Calif., declined to comment beyond the information provided in its announcement of the news.

At the same time the changes were announced, Symantec provided an update on its third-quarter earnings, saying that it expects GAAP revenue, non-GAAP operating margin and non-GAAP diluted EPS to be above the midpoint of the guidance. The third-quarter revenue guidance from November was between $890 million and $920 million.

Jason Eberhardt, vice president of strategic alliances at Conventus, a longtime Chicago-based Symantec partner, said he doesn’t expect the sale changes will have any impact on partners in the long run.

’This has absolutely no effect on our business and, from our perspective, should not be looked at as a negative impact to Symantec,’ Eberhardt said. ’We are just as excited today as we were yesterday.’

Daniel Ives, managing director and senior research analyst at FBR, in a research report about the news, said the overarching positive impact of the split trumps any small hiccups that might come along the way.

’While the revised deal terms may disappoint some investors, given market conditions, we still view this deal as a major victory for Symantec as the company finally unloads this 'decade of agita' since the Veritas acquisition was done and can laser-focus efforts on beefing up its legacy security platform through aggressive M&A with cash from this transaction. While Symantec has been a roller-coaster ride with some ups and many downs over the years, it appears the company strategically and financially is on the right path to bring stability (and better margins) back to the story,’ Ives wrote in the report.

A vocal supporter of the split, Conventus' Eberhardt said he is looking forward to the upcoming closing date and the big changes that could come along with it. CEO Brown has said that the security company plans, among other things, to use the cash from the deal to make acquisitions in the areas of threat protection, information protection and cybersecurity services.

’We are excited to see the terms are finalized and that Symantec will have an influx of funds to focus on innovation and strategic acquisitions,’ Eberhardt said.

Peter Clare, Carlyle Group managing director and co-head of U.S. buyouts, said in a statement, ’Carlyle remains excited about the long-term value creation opportunity at Veritas and looks forward to closing the acquisition on Jan. 29.’