VeriSign Inc. (VRSN) rose 7.6 percent on the Nasdaq Stock Market after canceling appearances at two investment conferences, fueling speculation that the company is in talks to be acquired.
Pulling out of two events without explanation suggests that a “significant corporate action may be pending,” said Ed Maguire, an analyst at Credit Agricole Securities Inc. in New York. While the company may be preparing to announce a new chief executive officer, a management change alone wouldn’t warrant the stock surge, he said.
The likely buyer would be a private-equity firm, which could shake up the company to boost profit, Maguire said. There have been more than 380 private-equity deals announced in the U.S. technology industry in the past year, with an average size of about $102 million and a premium of 48 percent, Bloomberg data show. VeriSign, which operates computers that direct Internet traffic, has a market value of $5.74 billion.
“VeriSign is an attractive (albeit expensive) target for private equity, given the highly recurring cash flows and untapped earnings leverage in the model,” Maguire, who recommends buying the shares, said in a report to clients.
VeriSign rose $2.44 to $34.50 at 4 p.m. New York time, following a jump of 6.8 percent yesterday. Before this week, the shares had dropped 8.1 percent this year.
VeriSign backed out of an appearance at a ThinkEquity LLC conference next week, following a cancellation of its presentation at a Citigroup Inc. gathering. Ben Petro, who runs the company’s security services unit, had been scheduled to appear at the ThinkEquity event, with Chief Financial Officer Brian Robins handling the Citigroup meeting.
VeriSign has been without a CEO since Mark McLaughlin left last month to take the top job at Palo Alto Networks Inc. Dan Cummins, an analyst at ThinkEquity in New York, said the leadership change may be at the root of the cancellations.
The company didn’t give a reason for backing out of the meetings. Jeannie McPherson, a spokeswoman for the Dulles, Virginia-based company, didn’t respond to a call or e-mail seeking comment. After the Citigroup cancellation yesterday, she said “there is no reason to report.”
After McLaughlin announced plans to leave VeriSign, founder and Chairman Jim Bidzos took over as interim CEO. Bidzos also served as interim CEO in July 2008, when former chief William Roper unexpectedly quit.
In May 2010, VeriSign canceled a presentation at a JPMorgan Chase & Co. conference, citing a scheduling conflict. A day later, it announced plans to sell its authentication-services unit to Symantec Corp. for $1.28 billion.
VeriSign has unloaded about a dozen of its “non-core” businesses since November 2007, an effort to focus on its main operations. The company manages the Internet’s dot-com and dot- net addresses.
Blackstone Group LP led the biggest private-equity acquisition of a technology company in the past year, when it agreed to buy Emdeon Inc. (EM) last month for $3 billion. Other deals include Golden Gate Capital Corp.’s acquisition of Lawson Software Inc. and Providence Equity Partners Inc.’s plan to purchase Blackboard Inc.
Private-equity firms often borrow funds to acquire company, seeking to turn around the business and make a return on the investment.
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