Blue Coat Acquired by Thoma Bravo for $1.3 Billion, Will Go Private

Blue Coat Systems agreed to a $1.3 billion buyout by private equity firm Thoma Bravo, which already has four security companies in its portfolio, including competitor SonicWall.

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Blue Coat Systems has agreed to be acquired by a group of investors led by private equity firm Thoma Bravo, which intends to take the Internet networking and security vendor private, the two companies announced on Dec. 9.

Valued at approximately $1.3 billion, the deal would give Blue Coat shareholders $25.81 for each share they own, a 48 percent premium over the company's closing stock price on Dec. 8. The transaction has been approved by the Blue Coat board of directors but is subject to shareholder approval and requisite regulatory approvals. The acquisition is expected to close in the first calendar quarter of 2012, Blue Coat said.

"Our partnership with Thoma Bravo will assist Blue Coat in more aggressively realizing the opportunities in its two markets, by providing a platform that enables greater focus on the business that supports the future growth of the company," said Gregory Clark, Blue Coat's CEO.

Blue Coat has been struggling to turn itself around, as it has reported declining revenue for the past four quarters and had brought in new management. The company replaced CEO Michael Borman in August for failing to meet performance goals. The company also reorganized its product groups in May to boost innovation and focus.

The board "engaged in a comprehensive review" of all the "strategic options" available to Blue Coat before deciding to the deal with Thoma Bravo to go private was the best available option, Steve Daheb, chief marketing officer and senior vice president of Blue Coat Systems, told eWEEK. Daheb declined to discuss what some of the other options were, but emphasized "multiple" ones had been considered.

"As a private company, Blue Coat will be better positioned to innovate at an accelerated rate and achieve a higher level of growth," said Orlando Bravo, a managing partner at Thoma Bravo.

The acquisition will just be a change in ownership and will not affect the company's roadmap, market strategy or its product portfolio, Daheb said. "It will be business as usual" for both Blue Coat and its customers, according to Daheb.

Based in Sunnyvale, Calif., Blue Coat sells wide area network optimization technology to help businesses boost the speed and efficiency of applications and rich media content such as video over the Internet. Blue Coat's cloud-based security products help companies control and monitor the data flowing from the Web. It competes with Riverbed Technologies and F5 Networks in WAN optimization and with companies such as Cisco, Fortinet and Check Point in the security space.

Thoma Bravo, a technology investment firm specializing in revamping and growing established companies, has four other security companies in its portfolio, including Entrust, Hyland Software, SonicWall and TripWire.

Thoma Bravo has a "great view of security" because of its collection of companies, according to Daheb.

The firm is establishing an "increasingly provocative portfolio" of companies that offer security as a direct benefit of optimizing the IT infrastructure, Scott Crawford, managing research director in the security and risk management group at Enterprise Management Associates, wrote in a blog post. Blue Coat "fits this profile well," as it plays a role in both on- and off-premises Web optimization and security and has a "good footing across networks, applications and security priorities," according to Crawford.

"I personally expect WAN optimization to play a significant role in integrating on-premises IT with cloud technologies-particularly when security must be integrated inline," Crawford wrote.

Blue Coat has "excellent differentiated products in both areas," and the company plans to continue focusing on both going forward, Daheb said. Some technology trends, such as software as a service and the cloud, require organizations to think about securing the data as well as optimizing the delivery mechanism, he added.

The security sector has been rife with mergers and acquisitions over the past three years, according to a recent report from PricewaterhouseCoopers. IT vendors and investors spent $22 billion over the last three years on security deals, such as Intel buying McAfee for $8 billion and Symantec buying VeriSign for $1.3 billion.

IBM has also been focusing on security, buying up security capabilities such as the recent acquisition of Q1 Labs. The M&A activity is not expected to slow down anytime soon, as the industry undergoes consolidation and other technology companies try to pick up security to extend their offerings, according to the report.