McAfee, a global provider of online protection, entered into a definitive agreement to be acquired by an investor group led by Advent International and Permira Advisers, Crosspoint Capital Partners, Canada Pension Plan Investment Board, GIC Private Limited and a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA).
The investor group obtained a commitment from JPMorgan Chase Bank, Bank of America, Credit Suisse, Barclays Bank, Citibank, HSBC Bank, Royal Bank of Canada, CPPIB Credit Investments III, UBS and PSP Investments Credit II to provide debt financing consisting of a $6.66 billion first lien term loan facility, a $1 billion first lien cash flow revolving facility and a $2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement), subject, in each case, to customary conditions. PSP Investments Credit and investment funds managed by Neuberger Berman agreed to provide the investor group with preferred equity financing with an aggregate liquidation preference of up to $800 million, subject to customary conditions.
As part of the transaction, the investor group will acquire all outstanding shares of McAfee common stock for $26 per share in an all-cash transaction valued at approximately $12 billion on an equity value basis and more than $14 billion on an enterprise value basis after giving effect to repayment of McAfee debt. The purchase price represents a premium of approximately 22.6% over McAfee’s closing share price of $21.21 on Nov. 4, the last trading day prior to media reports regarding a potential sale of McAfee.
Upon completion of the transaction, the investor group will take ownership of McAfee. As a privately held company, McAfee will continue building on its track record as a consumer cybersecurity company following the sale of McAfee’s enterprise business and the associated one-time dividend of $4.50 per share to private equity firm Symphony Technology Group for $4 billion, which closed on July 27.
“This transaction is a testament to McAfee’s market-leading online protection solutions, our talented employees and outstanding customers and partners,” Peter Leav, president and CEO of McAfee, said. “We want to thank our employees for their continued hard work and commitment to McAfee. We are thrilled to be partnering with premier firms who truly understand the cybersecurity landscape and have a proven track record of success.”
In 2017, TPG partnered with Intel to carve out McAfee from Intel’s core operations to establish a cybersecurity company with access to significant capital, operational and technology resources. McAfee completed its initial public offering last year, with TPG and Intel remaining as shareholders in the company.
“Today’s announcement signals continued growth and opportunity for McAfee,” Jon Winkelried, CEO of TPG and chair of McAfee’s board, said. “Over the last four years, the company has expanded its product portfolio, enhanced its go-to-market strategy and pursued strategic M&A, including the divestiture of its enterprise business. We’re proud that today McAfee is a leading consumer cybersecurity franchise, protecting the digital lives of 20 million subscribers across the globe.”
“It’s been a privilege to have partnered with McAfee and its leadership team to help navigate the company’s transformation and growth over the last four years,” Tim Millikin, partner at TPG and a McAfee board member, said. “Our partnership with McAfee reflects TPG’s focus on investing in growth to build companies that are driving differentiated value in their markets.”
“McAfee is one of the most trusted brands in the essential business of consumer digital protection,” Bryan Taylor, head of the technology investment team and a managing partner at Advent, said. “As consumers face new and complex cyber risks, we see tremendous opportunity to build on McAfee’s differentiated technology platform to continue delivering innovative solutions that can protect all facets of the digital lives of people around the world. We look forward to working alongside our investment partners and the talented McAfee team to continue setting the bar for consumer digital protection.”
“The need for personalized, innovative and intuitive online protection services has never been greater,” Brian Ruder, co-head of technology at Permira, said. “McAfee boasts an enviable brand, extensive partner ecosystem, loyal customer base and a rigorous commitment to product development. With our extensive experience in scaling global consumer technology and cybersecurity businesses, we are excited to work closely with McAfee and our fellow investors to help position the company for even greater heights.”
“The risks that consumers face from all aspects of their digital lives is immense, and these risks are unprecedented and rapidly increasing,” Greg Clark, managing partner at Crosspoint Capital and former CEO of Symantec, said. “Consumers buy from brands they trust, and with the globally recognized brand of McAfee, we see the long-term opportunity to deliver products and services to address these risks in all aspects of their digital presence.”
Under the terms of the agreement, which McAfee’s board of directors approved, McAfee shareholders will receive $26 in cash for each share of McAfee common stock they own.
The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including, among others, approval by McAfee shareholders, receipt of regulatory approvals and clearance by the committee on foreign investment in the United States. Intel Americas and certain funds affiliated with TPG Global entered into a voting agreement pursuant to which they have agreed, among other things, to vote their shares of company stock in favor of the transaction, subject to certain conditions. The voting support under the voting agreement ceases automatically if the merger agreement is terminated or if the McAfee board makes an adverse recommendation change. These stockholders currently represent approximately 67.9% of the current outstanding voting power of the McAfee common stock.
Under the terms of the definitive merger agreement, McAfee’s board and advisors may actively initiate, solicit and consider alternative acquisition proposals during a 45-day “go shop” period. McAfee has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement. There can be no assurances that this process will result in a superior proposal, and McAfee does not intend to disclose developments with respect to this solicitation process unless and until McAfee’s board makes a determination requiring further disclosure.
The buyer entity in the merger, Condor BidCo (parent), obtained equity financing and debt financing commitments for the purpose of financing the transactions contemplated by the merger agreement. Funds advised by the investor group committed to capitalize Condor BidCo at the closing of the merger with an aggregate equity contribution equal to $5.2 billion on the terms and subject to the conditions set forth in signed equity commitment letters.
Upon completion of the transaction, McAfee common stock will no longer be listed on any public securities exchange.
Goldman Sachs and Morgan Stanley are serving as financial advisors to McAfee and Ropes & Gray and Moulton Moore Stella are serving as legal counsel. J.P. Morgan Securities, BofA Securities, Barclays Capital and Citigroup Global Markets are serving as financial advisors, with Bryant Stibel Group serving as strategic operating advisors to the investor group. Fried, Frank, Harris, Shriver & Jacobson are acting as M&A legal counsel and Kirkland & Ellis are acting as finance legal counsel to the investor group.