Citrix Systems(CTXS) Taken Private In Highly-Anticipated Deal, But Purchase Price Disappoints
3:39 pm Tuesday, January 18th, 2022
After several months of speculation that Citrix Systems (NASDAQ:CTXS) would soon be acquired, an agreement with Evergreen Coast Capital and Vista Equity Partners was announced this morning: CTXS will be taken private for $104/share in cash. The buy-out price is slightly below Friday’s closing price, but that’s because an acquisition premium had already been factored in as investors anticipated a deal. In September, Bloomberg planted the first seed, reporting that the beleaguered workplace software developer was exploring a potential sale. That seed blossomed in late December when Reuters broke the story that Evergreen parent Elliot Capital Management and Vista were teaming up to buy CTXS. Shares have moved higher by 26% since then.
CTXS’s struggles, missteps, and careening stock price made it a prime target for a private equity takeout. In what should have been a period of breakout growth for the company, CTXS’s quarterly revenue increased by a paltry average of 3.5% since 1Q20. That lackluster performance is especially disappointing given that the company’s offerings, like cloud-based file sharing and storage applications, are ideally suited for the work-from-home transition.
A much-needed shakeup began last October, when former CEO David Henshall, who had acknowledged during the 2Q21 earnings call that CTXS’s sales execution wasn’t sharp enough, stepped down. Bob Calderoni, Chairman of the Board, took the reins as interim CEO, opening the door for CTXS to put itself up for sale. While excitement for a deal grew over the past month, there’s a sense of some disappointment today as investors absorb the final terms. In our view, the transaction offers pluses and minuses, including:
Free from trying to meet investors’ short-term financial expectations, CTXS can now fully focus on its SaaS transformation and its longer-term growth opportunities. At the top of the list is expanding its Desktop-as-a-Service (DaaS) offerings and its secure hybrid work platform.
Once the acquisition is completed, CTXS will combine with Vista’s TIBCO Software, an enterprise data management and analytics company. With a broader range of products, the combined company should be better positioned to accelerate customers’ digital transformations, allowing it to gain market share.
The combination of the two items about should produce stronger growth for CTXS, potentially positioning it to reenter the public markets at a higher valuation down the road.
On the negative side, the buyout price looks underwhelming considering that the stock was trading at $160 last July. While CTXS argues that the offer represents a 24% premium over the closing price on December 20, 2021 — the day before the aforementioned Reuters article — the $16.5 bln price tag also seems relatively inexpensive from a forward P/S perspective. Specifically, Vista and Evergreen are paying about 5x forecasted FY22 revenue.
Still, most of the company’s main competitors, such as Nutanix (NTNX), Box (BOX), and Dropbox (DBX), are trading higher following the news.
It was nearly a forgone conclusion that CTXS would be taken private, and now that the transaction has come to fruition, a buzzkill is settling in. From a longer-term perspective, the deal with Vista and Evergreen could help CTXS get back on track, perhaps setting it up to be spun-off in a future IPO. For the moment, though, the reality of a disappointing acquisition price is hanging over the stock.
