Riverbed Sold to Equity Firms for $3.6 Billion

The company, under pressure from activist investor Elliott for a year, will be taken private by the new owners after the deal closes in 2015.

tech business

Riverbed Technology, which has been under pressure for more than a year from investor Elliott Management to reduce its costs and return more money to shareholders, is being bought by private equity firms and will be taken private.

Riverbed officials announced Dec. 15 that the company will be sold to Thoma Bravo and the investment arm of Ontario Teachers' Pension Plan for $3.6 billion in a deal that they said will close in the first half of 2015.

The announcement comes almost a year after Elliott, the largest Riverbed shareholder, announced a $3 billion bid for the application performance infrastructure vendor. Elliott's proposal in January came after several months of speculation in 2013 about the company's future, including rumors of possible sales. In making its bid, Elliott officials lauded Riverbed's technology but said the company was underperforming and needed to increase its value to shareholders.

Riverbed didn't sell to Elliott, but it has struggled through a couple of disappointing quarters, and in October, Chairman and CEO Thomas Kennelly announced it was restructuring in hopes of cutting as much as $25 million from expenses. In addition, Riverbed's board of directors undertook a comprehensive review of the company, with the sale being the result.

"Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximize value, the board unanimously concluded that partnering with Thoma Bravo was the best choice for Riverbed, as this transaction will provide our stockholders with significant and immediate cash value," Kennelly said in a statement. "Further, Thoma Bravo is a highly regarded private equity firm with deep experience in the technology industry and a 30-year track record of helping companies like ours flourish."

Riverbed has been working to expand beyond its roots as a WAN optimization technology vendor to become more of an application performance infrastructure company. It was an effort first announced in November 2013, and over the course of this year, Riverbed took several steps, including renaming its offerings to better reflect what each product does and how they work together. The renamed products are housed under the name the Riverbed Application Performance Platform.

Jesse Cohn, portfolio manager at Elliott, said in a statement that "as Riverbed's largest shareholder, we're delighted with this outcome that gives shareholders immediate, premium value. Elliott offered to buy Riverbed nearly one year ago and we commend Jerry and the rest of Riverbed's board for taking this bold step."

Elliott has been a vocal shareholder investor at a range of tech companies, including Novell and BMC Software. Most recently, the investment has had its focus on EMC and Juniper Networks. Elliott officials have been pushing EMC to shed its 80 percent interest in VMware, saying the storage giant would be better off without the virtualization technology vendor. The pressure ramped in October, after Hewlett-Packard announced it was splitting in two. Elliott officials, in a letter to EMC's board and to CEO Joe Tucci, said VMware is a drag on EMC's core business and that VMware is increasingly competing with EMC in some areas.

They also want EMC to get rid of the federation management model adopted by Tucci. The CEO has been resistant to both ideas.

In addition, Elliott has been pushing Juniper to cut costs to increase the return to shareholders. The Wall Street Journal, quoting unnamed sources, reported that Juniper and Elliott officials were discussing Elliott's idea of putting more people of its choosing on Juniper's 11-member board of directors. The sources said Elliott may begin to pressure Juniper directors to sell the company.