Networking company Riverbed Technology has agreed to be acquired for $3.6 billion after being unable to shake a challenge from an activist investor.
Riverbed announced Monday morning that it will accept a bid of $21 a share from private-equity firm Thoma Bravo, which will be joined by a Canadian teachers’ pension group. Thoma Bravo is an experienced hand at this kind of acquisition: The company recently purchased Compuware and took that company private after the venerable software firm came under attack from the same investment group that targeted Riverbed, Elliot Management.
Elliot, led by Paul Singer, launched an acquisition bid for Riverbed in January after acquiring about 10 percent of the company on the open market. The hedge fund offered $19 a share for the company at the time, which analysts said was too low but could spark higher offers that Riverbed would be forced to accept — a prediction that finally came true Monday.
“As Riverbed’s largest shareholder, we’re delighted with this outcome that gives shareholders immediate, premium value,” Elliot’s Jesse Cohn said in a news release.
Riverbed initially fought back against Elliot and private-equity suitors, but the 12-year-old company has failed to reach its internal earnings targets the past two quarters in a row, increasing pressure from stockholders to jump at an acquisition before offers began to shrink even more.
“It is nice to see the final chapter in the Elliott activism story closed, although we believe Riverbed could have ultimately seen a higher price in this bidding process if the company had sought out strategic alternatives before execution issues surfaced,” FBR Capital Markets analyst Daniel Ives wrote in a note Monday morning.
Riverbed increased revenues more than 22 percent in 2013, pushing the company’s annual sales higher than $1 billion and making it the 56th-largest technology company in Silicon Valley. Profits dove, however, as the company moved to a net loss for the year, and Riverbed’s growth has slowed this year: Revenues have grown 6 percent through the first nine months of this year, as the San Francisco company has tallied a net income of $21.5 million, or 13 cents a share.
Founded in 2002, Riverbed — which seeks to build networks that can be easily accessed from outside the office — went public in 2006 for $9.75 a share, and eventually topped $40 on Wall Street in 2011. Networking companies have faced skepticism as software-defined networking has gained a foothold, however, and Riverbed had neither the cachet of market leader Cisco Systems nor the benefit of being seen as new and advanced, like Arista Networks.
“We are extremely pleased with this transaction, which we believe will be a winning proposition for all of our stakeholders,” CEO Jerry Kennelly said in a prepared statement.
Kennelly will remain in charge of Riverbed after it becomes part of Thoma Bravo, which is expected to take place in the first half of next year if stockholders and regulatory agencies approve the deal, which is the largest in Thoma Bravo’s 30-plus-year history.
“We look forward to working with the talented team at Riverbed to strengthen their leadership position and the value they deliver to customers,” Thoma Bravo managing partner Orlando Bravo wrote in a statement. “All of us at Thoma Bravo are excited to help Riverbed reach its full potential.”
Riverbed moved closer to the acquisition price Monday on Wall Street, gaining $1.57, or 8.4 percent, to $20.31.