OpenText Outbids Private Equity for Data Security Firm Carbonite

About two months ago, data protection firm Carbonite Inc. (NASDAQ: CARB) was rumored to be in discussions with unnamed private equity firms about a possible sale of the company. The report turned out to be half-true.

OpenText Corp. (NASDAQ: OTEX) announced Monday morning that it has agreed to acquire Carbonite for $23.00 per share in a deal valued at around $1.42 billion, including debt of $590 million. The acquisition is all cash and represents a premium of 78% to Carbonite’s share price before the rumor surfaced in September.

Carbonite, which was scheduled to report quarterly results on Tuesday, instead reported third-quarter results Monday morning. The company posted adjusted diluted earnings per share (EPS) of $0.60 on revenues of $125.6 million. The company’s GAAP net loss totaled $13.96 million ($0.40 per share).

In its reconciliation of GAAP to adjusted EPS, Carbonite wrote down $19.21 million in amortization of intangibles, more than double a similar write-down in the year-ago quarter of $8.24 million. For the first nine months of 2019, the company has written off $24.74 billion in intangible assets. Adjusted net income for the quarter totaled $21.19 million and for the year to date, $56.47 million.

Carbonite lost its CEO, Mohamed Ali, in July when he took the reins at International Data Group Inc. (IDG). To compound the company’s problems, Carbonite lowered its revenue forecast for the 2019 fiscal year at the same time. Earlier in the year, Carbonite acquired cloud-based security and threat intelligence firm Webroot for $618 million.

That combination had caused a drop of about 40% in Carbonite’s share price when the rumor began floating around about a possible sale. Following a blizzard of shareholder lawsuits, shares dropped to a 52-week low less than $12 in late August.

Carbonite’s interim CEO and executive chair commented on the acquisition:

Following expressions of interest from multiple parties, the Carbonite Board conducted a thorough and comprehensive process, which included contact with a number of strategic and financial parties, to identify the best way to maximize shareholder value. The Board strongly believes that a transaction with OpenText delivers compelling, immediate and substantial cash value to shareholders.

Carbonite stock traded up more than 24% early Monday, at $22.93 in a 52-week range of $11.86 to $30.06.

OpenText was up less than 2% to $42.22 a share, in a 52-week range of $30.99 to $44.49. The stock’s 12-month consensus price target is $47.00.

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