Are Barracuda Shareholders Getting Enough in the Buyout?

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Barracuda Networks Inc. (NYSE: CUDA) shares made an impressive gain to kick off the week, after it was announced that it would be taken private by private equity investment firm Thoma Bravo in an all-cash transaction. While this is a solid gain for the stock, it begs the question whether shareholders are getting enough out of this deal.

According to the agreement, Barracuda shareholders of record will receive $27.55 in cash for each share of Barracuda common stock they hold. This price exceeds Barracuda’s 52-week high but still falls short of its all-time high of $46.78 in March 2015. The entire deal is valued up to approximately $1.6 billion.

The price represents a 17.6% premium from the 50-day moving average of $23.42 and a premium of 20.0% from the 200-day moving average of $22.96.

Excluding Monday’s move, the stock is only up about 10.6% year to date, compared to the S&P 500, which is up over 16% in this time. However, over the past 52 weeks Barracuda shares are actually down a little more than 1%.

While many investors might hope for more, the numbers appear to be fair, considering its performance in 2017.

The transaction is expected to close at Barracuda’s fiscal year end in February. This is still subject to shareholder and regulatory approval.

Barracuda’s board of directors unanimously approved the agreement, and it believes the transaction maximizes shareholder value. Upon the close of the transaction, Barracuda will operate as a privately held company with a continued focus on email security and management, network and application security, and data protection solutions that can be deployed in cloud and hybrid environments.

B.J. Jenkins, CEO of Barracuda, commented:

We believe the proposed transaction offers an opportunity for us to accelerate our growth with our industry-leading security platform that’s purpose-built for highly distributed, diverse cloud and hybrid environments. We will continue Barracuda’s tradition of delivering easy-to-use, full-featured solutions that can be deployed in the way that makes sense for our customers.

Shares of Barracuda were last seen up about 16% at $27.52, with a consensus analyst price target of $28.71 and a 52-week range of $19.06 to $27.67.