Web Security Firm Blue Coat Will Be Bought by Thoma Bravo for $1.3 Billion

By Devin Banerjee and Cecile Daurat - Dec 10, 2011 4:28 AM GMT+0700

Blue Coat Systems Inc. (BCSI), a maker of Internet-security software, agreed to be bought by an investor group led by led by Thoma Bravo LLC for about $1.3 billion.

Stockholders will receive $25.81 in cash for each share, Sunnyvale, California-based Blue Coat said today in a statement. That’s a premium of 48 percent over yesterday’s closing price and 52 percent over the 20-day trailing average price before today.

The deal is the fourth-largest Internet-security acquisition since December 2006, according to data compiled by Bloomberg. The average premium of 120 U.S. Internet-security companies acquired since then was 24 percent, the largest being McAfee Inc.’s $7.7 billion sale to Intel Corp. last year, the data show. Blue Coat is Thoma Bravo’s fifth security-technology investment, the firms said in the statement.

“This is a terrific outcome for shareholders,” Jesse Cohn, a portfolio manager at Elliott Management Corp., wrote in an e-mail. The New York-based hedge fund owns 13 percent of the company, he said. “Blue Coat has leading technology in good markets, and we are pleased this compelling value was recognized.”

Blue Coat rose 44 percent to close at $25.11 in New York, the biggest increase in 10 years. The shares fell 41 percent this year before today.

‘Ill Patient’

Founded in 1996, the firm makes software that it says increases Web security and runs faster video applications. The company has struggled this year to maintain sales. In August, it replaced then-CEO Michael Borman with Gregory Clark after reporting an 81 percent drop in first-quarter profit from a year before.

“It was clear over 18 months that the product inefficiencies and lack of execution in the field at Blue Coat were not fixable without an outsider doing a serious operation on this ill patient,” Daniel Ives, an analyst at FBR Capital Markets & Co. in New York, wrote in a note to clients today. “In a very competitive security landscape we believe today’s deal was the right move at the right time.”

The group of buyers, which included the Ontario Teachers’ Pension Plan, made the agreement a day after International Business Machines Corp. said it will buy the Web analytics company DemandTec Inc. for $440 million. On Dec. 3, SAP AG agreed to buy SuccessFactors Inc. for $3.4 billion in cash to boost its Internet-computing, or so-called cloud, offerings.

Software Focus

“Our partnership with Thoma Bravo will assist Blue Coat in more aggressively realizing the opportunities in its two markets, by providing a platform that enables greater focus,” Clark, the CEO, said in the statement.

Thoma Bravo, a private-equity firm with offices in Chicago and San Francisco, focuses on software and business-services investments, according to its website. Those have included Datatel Inc., maker of software for university administrations; VECTORsgi Inc., maker of e-commerce software; and Prophet21 Inc., maker of software for durable-goods distribution companies.

Goldman Sachs Group Inc. (GS) advised Blue Coat and Jefferies Group Inc. advised Thoma Bravo. Thoma Bravo also received financing commitments from Jefferies Finance LLC. The transaction is expected to be completed before April 2012.

To contact the reporters on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net; Cecile Daurat in Wilmington at cdaurat@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net