Informatica Goes Private in $5.3 Billion Buyout

Analysts say this private equity deal might be only one in a series of new capital IT market moves this spring.

All the new data and files pouring from PCs, servers and mobile devices into enterprise on-site and cloud storage need to be orderly, uniform, deduplicated and ready for business access, if they're going to be worth anything. Efficiency at doing exactly that is what made Informatica a world player as one of the IT world's most prominent data cleanup and quality specialists.

That proficiency is a major reason it was able to go private April 7 in a $5.3 billion buyout by private equity firms Permira Funds and Canada Pension Plan Investment Board. It is the largest U.S. leveraged buyout thus far this year.

A competing bid by a partnership of Thoma Bravo LLC and Ontario Teachers' Pension Plan had been submitted to add some drama to the transaction.

On the business side, Informatica shareholders will get $48.75 per share in cash in the buyout. The Redwood City, Calif.-based company's shares closed at $47.79, up almost $2 (4.3 percent) on the day.

Market Cap: $5.23 billion

Informatica's revenue rose 10.5 percent to $1.05 billion in 2014, while overall revenue climbed 21 percent to $170.3 million. The 22-year-old company, currently selling stock on the NASDAQ, has a market capitalization value of $5.23 billion.

Informatica's board unanimously approved the merger agreement and recommended that Informatica shareholders adopt the agreement. The transaction is expected to be completed in either Q2 or Q3 2015, subject to receipt of shareholder approval and regulatory approvals, Informatica Chairman and CEO Sohaib Abbasi said.

Reuters reported several weeks ago that Informatica was looking to hire financial advisers to help it defend itself from Elliott, a hedge fund that owns 8 percent of the company and was looking to maximize shareholder value. Jesse Cohn, head of U.S. equity activism at Elliott, told the news service April 7 that the hedge fund supported the going-private deal.

It remains to be seen if the ownership change will make an impact on the Informatica product line. On April 8, the company will unveil its new [email protected] cloud service, which will become available on that day. The company claims this is the first software to go beyond data perimeter security by providing a clear view of data inside and outside the corporate firewall.

"This (going private) was a good outcome for Informatica, their management team, and shareholders based on their situation," Mike Tuchen, CEO of Informatica competitor Talend, told eWEEK.

'Redefinition of the Entire Data Management Stack'

"What we're seeing is a once-in-a-generation redefinition of the entire data-management stack. A growing number of companies are migrating away from legacy, premise-based integration software sold on a license basis to more agile and modern solutions optimized for Hadoop and big data, open source, and the cloud. We anticipate companies that aren't well-positioned for this tectonic shift will continue to get sidelined as it accelerates."

CEO George Gallegos of cloud integration-API management provider Jitterbit told eWEEK that "the deal to take Informatica private underscores the major effect that cloud computing pioneers like Salesforce and NetSuite have had on legacy technology vendors, especially following last September’s news that TIBCO would undergo a similar leveraged buyout.
"Informatica and TIBCO were leaders in the on-premise integration market, but they have struggled to develop true cloud-focused solutions that deliver the scale, speed and reliability that companies need to conduct business in real time. It will be interesting to see how TIBCO and Informatica adapt under new ownership, which of their many disparate products they will focus on, and how that will affect their customers. Whatever their plans, it’s become clear that the integration landscape has already undergone a massive shift toward cloud-focused solutions," Gallegos said.

Informatica might be only one in a series of new capital IT market moves this spring. The Oppenheimer market analysis firm said in The Street that it believes the infrastructure software environment remains ripe for further consolidation. It added that capital continues to be inexpensive and that private equity funds are making moves to acquire legacy assets with strong technology and customer footholds that could be bought back to the market in coming years.

Analysts at the Stifel firm also told The Street that Citrix Systems, an Informatica peer, may be the next in line to be acquired. The firm believes the company could be bought for around $110 per share. The firm believes Teradata could also be a possible takeover candidate.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...