Nearly two weeks ago, Broadcom was close to finalizing the acquisition of Symantec for more than $15 billion, the Financial Times reported. Eric Parizo, senior analyst with Ovum, said the move would be smart for Broadcom, but would prove to be a “disastrous event” for Symantec.
On Monday, CNBC reported that talks have ceased, saying Symantec wouldn’t accept less than $28 a share. Neither Broadcom nor Symantec could be reached for comment.
Wedbush analyst Daniel Ives says the end of talks will be a “shock” to Wall Street, which was expecting a deal to be announced this week.
“With no other strategic or financial bidders that we see throughout the landscape, we view this decision by Symantec and its board as a major ‘head scratcher’ given the myriad of challenges the company has on the horizon,” he said. “This is a game of high-stakes poker and ultimately Symantec’s board wanted a minimum of $28 per share in a bid which was at the high end of the range ($26-$28) that we believe would have been fair value in a transaction with Broadcom. While it is still possible these two eventually come back to the negotiation table, from a valuation basis we believed $26 – $28 per share … was the sweet spot that a deal would have been inked and a price tag many investors would have ultimately approved.”
With the stock under significant pressure Monday in light of reports this deal is off the table, Symantec now must “prove its fundamental valuation to the street, which remains an uphill battle in our opinion with a lot of frustration the way this Broadcom situation appears to have played out according to media reports,” Ives said.
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“With the company in the midst of coming off a sudden CEO departure, soft results/guidance, and a myriad of company specific/secular headwinds, in our opinion this was a golden opportunity to finally consider a sale of the business after what has been an arduous 14 years of ‘one step forward, two steps back’ history since the doomed Veritas acquisition in 2005,” he said.
Amy DeCarlo, GlobalData’s principal analyst of security and data-center services, said her guess is “during the due diligence process, Broadcom saw areas of uncertainty or weakness that caused concerns that didn’t justify the price.
“Symantec was unwilling to compromise on the per-share deal price so the deal fell apart,” she said.
While it’s always possible Broadcom and Symantec could restart negotiations, Monday’s news is a “gut punch” to those hoping Symantec would take a bid and end this saga, Ives said.
“We believe Symantec’s board with [investor] Starboard [board members] front and center appears to believe the value of this asset is worth $28-$30 per share, which is a bit of a glass-half-full view in our opinion given the inherent company specific and secular challenges currently on the horizon,” he said.