Private equity grabs Informatica for $5.3 BEEEEEELLION

Activist investor Elliot Management hums the tune, execs dance along

Data management software player Informatica is now in the hands of private equity overlords, after an eye-watering $5.3bn buy-out was signed and sealed.

It seems company execs were listening to activist investor Elliott Management, which owned 9.4 per cent of Informatica's shares, and some months back had called for the business to go private again.

Under the terms of the agreement, stockholders will be paid $48.75 per common share in cash by Permira funds and Canada Pension Plan Investment Board (CPPIB).

Informatica has a set of data integration software products offering transformation, replication, event processing, quality processing, masking, exchange between businesses, messaging, integration and warehousing. It has nothing outstanding in the Big Data analytics department though.

There are more than 5,000 customers that use its wares and 2014 revenues were 11 per cent up on 2013 at $1.05bn, with profits of $114.1m. Net income was up 22 per cent on the prior year at $169.5m.

The firm's stock price peaked at $60.91 in July 2011, before falling to a trough of $25.11 in December 2012 and recovering to $42.06 when Elliott bought its shares in January this year. The share price stood at $46 this morning (April 7).

Assuming Elliot Management paid between $42 and $46 for Informatica shares, its actual profit could be $30m to $40m, which is nice money if you can get it.

Sohaib Abbasi, Informatica CEO and chairman, issued a canned statement:

"After careful consideration and deliberation of strategic alternatives, our board of directors unanimously concluded that the sale of Informatica to the Permira funds and CPPIB is in the best interest of all Informatica stakeholders... Permira and CPPIB share both our vision for Informatica to power the data-ready enterprise and our conviction in sustained long-term growth."

Translation: they can run the company better than I can.

Brian Ruder, a Permira Partner and Co-Head of the firm's Technology Sector Team, didn't want to miss the chance to talk up the cloudy element of Informatica.

"We are very excited about the company's ongoing transition to cloud and subscription-based services, as well as its continued pursuit of four separate billion-dollar market opportunities in cloud integration, master data management, data integration for next generation analytics, and data security."

A spokeperson for the other buyer, Mark Jenkins, a senior MD and big cheese at CPPIB, said:

"We look forward to partnering with the Informatica team and the Permira funds to accelerate the company's growth."

Accelerating the company's expansion is the key thing here.

Elliott is on a buy-out roll – its aggressive investing activities have it buying into companies, sometimes troubled ones, shaking up management with accusations that things could be better if changes were made, which can then prompt partial or total sell-offs.

It helped cause Compuware to be bought out by Thoma Bravo for $2.5bn in December and Riverbed to go private for $3.6bn. It was also involved in the $606m sale of Emulex to Avago in February.

Elliott currently has its hooks in both EMC, where it is pushing for Federation fission, and NetApp, which, with one major - ONTAP - and one minor - E-Series - product line, looks like another potential PE buyout target.

As NetApp has a market capitalisation of around $11.2bn, a buyout would be an impressive affair. Its shares peaked at $60 or so in 2011 and are currently trading at $36.

The Informatica leveraged buyout is expected to be completed in either the second or third quarter, subject to various closing conditions. ®

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