SYMC - Symantec

[valueinvestor]

Buyout offer from Broadcom for enterprise and offers from PE for consumer, where the company is planning to distribute a one-time special dividend of $12 per share. Post business to earn $1.50 per share, which will peg a less than 10 multiple on the business (which maybe generous due to the rate of decline in revenue). Could this be the largest disconnect ever or where the markets are truly demonstrating efficiency?

 

 

[Fat Pitch]

Management is pounding table saying they have a valuable asset, while market thinks it's a melting ice cube. You have some PE firms tossing low-ball offers ($26-$27) which completely negates the value extracted from selling the enterprise portion.

 

I think the consumer business might have been neglected by previous management focusing on enterprise. The ball is in Starboard's court (30%+ of AUM is in the stock). If LifeLock is a growth asset no way they'll accept low $30s, but if management is full of it they can probably exit at $29-30 to the PE firms. One thing you have going for you is the remain co is yielding ~14% FCF at current prices with a large addressable market for their product.

[valueinvestor]

Management is pounding table saying they have a valuable asset, while market thinks it's a melting ice cube. You have some PE firms tossing low-ball offers ($26-$27) which completely negates the value extracted from selling the enterprise portion.

 

I think the consumer business might have been neglected by previous management focusing on enterprise. The ball is in Starboard's court (30%+ of AUM is in the stock). If LifeLock is a growth asset no way they'll accept low $30s, but if management is full of it they can probably exit at $29-30 to the PE firms. One thing you have going for you is the remain co is yielding ~14% FCF at current prices with a large addressable market for their product.

 

I'm still waiting on the side lines trying to figure this out - when Broadcom announced the deal, the stock was hovering around the purchase price. Why didn't Broadcom go for the entire company? Maybe there's a reason that the consumer + enterprise is worth less than only enterprise? Not a huge objection, but one I'd like to figure out, as I agree, I do not think the consumer business is really dead.

[Fat Pitch]

Management is pounding table saying they have a valuable asset, while market thinks it's a melting ice cube. You have some PE firms tossing low-ball offers ($26-$27) which completely negates the value extracted from selling the enterprise portion.

 

I think the consumer business might have been neglected by previous management focusing on enterprise. The ball is in Starboard's court (30%+ of AUM is in the stock). If LifeLock is a growth asset no way they'll accept low $30s, but if management is full of it they can probably exit at $29-30 to the PE firms. One thing you have going for you is the remain co is yielding ~14% FCF at current prices with a large addressable market for their product.

 

I'm still waiting on the side lines trying to figure this out - when Broadcom announced the deal, the stock was hovering around the purchase price. Why didn't Broadcom go for the entire company? Maybe there's a reason that the consumer + enterprise is worth less than only enterprise? Not a huge objection, but one I'd like to figure out, as I agree, I do not think the consumer business is really dead.

 

Consumer businesses isn't Broadcom's wheel house as they only focus on enterprise. They also reported offered $26 for the entire business, but management (Starboard) refused and instead pieced out enterprise for a nice price and it only accounted for 10% of their FCF. This deal made sense since Broadcom has the enterprise infrastructure in place. This leaves 1 billion in stranded costs (employees,vendors, etc) that will be paid for by selling off the remaining enterprise real estate by Symantec.

 

Going forward, management will focus on direct to customer marketing effort and launching offerings outside North America. If there's any growth in the subscriber base this will become a very valuable asset that has 50%+ margins and scale (SaaS business model trading at 6-7x FCF??). So I think you have the put option of the PE bids and the upside of market repricing if management isn't lying about obtaining mid digit growth going forward.

[Gregmal]

Ive been flirting with some $20 calls. Looks like a good way to juice any further M&A developments.

[Stuart D]

after 12 months

 

If the deal goes through; and

If they earn $1.50 (non-GAAP); and

If we assume a 13x multiple (that does not include the ~$4.7/share in net debt),

 

Then a $23.50 stock (today's price) gets a ~30% boost. @Gregmal, isn't that what you make each week buying and selling DDS?  ;)

 

Seems like a lot of assumptions/if's... but hey, perhaps management is being conservative. Do you know if management has a history of over or under delivering on their promises?

[Fat Pitch]

Done deal! 10.7 billion in the bank!

 

https://www.crn.com/news/security/done-deal-10-7-billion-broadcom-symantec-enterprise-acquisition-closes