Websense investors will receive $24.75 a share in cash, a premium of about 29 percent over the stock’s closing price on its last trading day, according to a statement today. The deal will turn the San Diego company into a closely held business. JPMorgan Chase & Co., RBC Capital Markets and Guggenheim Partners are providing debt financing for the transaction.
The company is trying to transition from its roots blocking inappropriate websites in the workplace -- described by Chief Executive Officer John McCormack as the “porn-filtering market” -- into a provider of broader online-security services. Vista, an Austin, Texas-based firm that specializes in technology investments, will help bring “operational discipline” to the company, McCormack said in the statement.
“Vista shares a similar vision for the company, including a dedication to developing and delivering best-in-class cyber security to our customers,” he said.
Websense shares rose to $24.76 at the close in New York after the buyout was announced. Shares of the company, which has long been viewed as a takeover target, were already up 28 percent this year before today.
Today’s deal validates Websense’s new focus and the growing importance of the security software industry, said Daniel Ives, an analyst at FBR Capital Markets & Co. in New York.
“This morning’s acquisition speaks to the value of security software in the overall tech food chain as we believe a surge of M&A activity is poised to hit the sector over the next six to 12 months,” Ives said in a report.
Bank of America Corp.’s Merrill Lynch unit served as Websense’s financial adviser on the Vista buyout, while Cooley LLP was its legal adviser. Kirkland & Ellis LLP was Vista’s legal adviser.
Websense is refocusing on content security, including services that protect e-mail and other data. That market is worth about $5 billion to $6 billion, compared with less than $1 billion for Web-content filtering, McCormack said last week at a JMP Securities conference.
Sales and profit are both in decline as the company makes its transition. Revenue fell about 1 percent last year to $361.5 million, while net income dropped 41 percent to $18.3 million.
Still, demand for the new products is accelerating, McCormack said last week.
“We still are a company that has a bit of an identity crisis,” he said. “Websense is a well-known brand. It’s a beautiful brand. But it’s a brand that’s most likely thought of as a porn-filtering company, not a security company.”
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