Is SendGrid Getting Enough Out of the Twilio Acquisition?

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Twilio Inc. (NYSE: TWLO) shares dropped on Tuesday after the company announced that it has entered into a definitive agreement to acquire SendGrid Inc. (NYSE: SEND) in an all-stock transaction valued at roughly $2 billion. The transaction is expected to close in the first half of 2019 and is subject to the satisfaction of customary closing conditions, including shareholder approvals.

Under the terms of the transaction, Twilio Merger Subsidiary will be merged with and into SendGrid, with SendGrid surviving as a wholly-owned subsidiary of Twilio.

At closing, each outstanding share of SendGrid common stock will be converted into the right to receive 0.485 shares of Twilio Class A common stock, which represents a per share price for SendGrid common stock of $36.92 based on the closing price of Twilio Class A common stock on October 15.

Compared to SendGrid’s 50-day and 200-day moving averages of $34.18 and $28.44, the transaction is offering premiums of 8.0% and 29.8%, respectively.

Both companies are scheduled to report their respective financial results for the September quarter on November 6. However, both Twilio and SendGrid already have announced that they have exceeded their respective guidance provided earlier this summer.

Jeff Lawson, Twilio’s co-founder and CEO, commented:

Increasingly, our customers are asking us to solve all of their strategic communications challenges – regardless of channel. Email is a vital communications channel for companies around the world, and so it was important to us to include this capability in our platform. The two companies share the same vision, the same model, and the same values. We believe this is a once-in-a-lifetime opportunity to bring together the two leading developer-focused communications platforms to create the unquestioned platform of choice for all companies looking to transform their customer engagement.

Shares of Twilio were last seen down about 11% at $67.31 on Tuesday, with a consensus analyst price target of $85.73 and a 52-week trading range of $23.25 to $88.88.

SendGrid traded up 3.5% at $32.01 per share, in a 52-week range of $13.61 to $38.66 and with a consensus price target of $37.71.

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