Carlyle, Symantec Agree to Lower Price for Veritas Deal

  • Purchase price will be reduced to $7.4 billion from $8 billion
  • Symantec will keep a stake in the business worth $400 million

Carlyle Group LP and Symantec Corp. agreed to revise the terms of a deal for Symantec’s Veritas data-storage unit, lowering the purchase price for the biggest announced U.S. leveraged buyout of 2015 amid strains in the debt markets.

Under the terms of the agreement the price will be reduced to $7.4 billion from $8 billion, according to a statement from the companies Tuesday. Symantec will keep a stake in the business worth $400 million while an additional $200 million in cash will be put on the company’s balance sheet, the statement shows.

Carlyle agreed to buy Veritas for $8 billion last August. The transaction surpassed the $5.3 billion LBO of software company Informatica Corp. announced in April, according to data compiled by Bloomberg.

The new agreement will boost the equity portion of the deal to 40 percent from 33 percent, and reduce leverage to 5.8 times earnings from 6.7 times earnings, people familiar with the matter said, asking not to be identified as the details are private. The changes reflect the deterioration in credit markets since the deal was signed in August, the people said.

Symantec and Carlyle entered into the amended terms after uncertainties developed regarding the transaction, according to the statement. A representative for Carlyle didn’t comment on the equity and leverage ratios under the new terms, and a spokeswoman for Symantec declined to comment.

Offloading Debt

Wall Street banks have struggled to offload more than $15 billion of debt they’ve committed to fund mergers and acquisitions, amid a selloff in markets globally. Investors have either shunned the debt or demanded huge discounts to buy it, as the average price for leveraged loan prices plunged by the most since the 2008 financial crisis.

Lenders led by Bank of America Corp. and Morgan Stanley shelved a $5.5 billion debt offering in November backing the Veritas acquisition amid concerns that global growth was slowing, people with knowledge of the matter said at the time. Since then debt markets have deteriorated further.

In 2007, Carlyle was part of a group of buyers who renegotiated the purchase price for Home Depot Inc.’s construction-supply unit amid a credit squeeze in the lead up to the financial crisis that curbed demand for buyout debt. The group, which included Bain Capital LLC and Clayton Dubilier & Rice, struck a deal that reduced the purchase price for HD Supply by 18 percent to $8.5 billion.

Data Storage

Veritas is a provider of a range of storage and server management software products, used by more than 86 percent of Fortune 500 companies, Carlyle said in a statement in August. Bill Coleman will become Veritas chief executive officer, while Bill Krause, a Carlyle operating executive, will be chairman.

Many Symantec investors and analysts had called for years for the company to sell its data-storage division, and CEO Michael Brown made the fulfillment of those pleas a cornerstone of his administration. He was named permanent CEO in September 2014, after serving in an interim role for seven months before that.

In order to get the deal done with Carlyle, Brown had few options other than a price cut. Symantec has already effectively split in two in preparation for the deal to go through, and if it had fallen apart it could expose the company to activists and potentially put his job at risk.

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