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CPP Investments and OTPP Cash In on the $7.3 Billion Viasat-Inmarsat Merger

Jason Rainbow of Space News reports Viasat buying Inmarsat in $7.3 billion deal:

Viasat has agreed to buy British satellite fleet operator Inmarsat in a $7.3 billion deal to expand its broadband network globally in multiple orbits and spectrum bands.

Buying private equity-backed Inmarsat would transform U.S.-based Viasat into an operator of 19 satellites across Ka, L and S-band spectrum — with another 10 spacecraft set to launch in the next three years for a market that has been shaken up by SpaceX’s Starlink and other incoming megaconstellations.

“The unique fusion of teams, technologies and resources provides the ingredients and scale needed for profitable growth through the creation and delivery of innovative broadband and IoT services in new and existing fast-growing segments and geographies,” Viasat executive chair Mark Dankberg said in a statement. 

“Inmarsat’s dual-band global mobile network, unique L-band resources, skills and capabilities in the U.K. and excellent technical and operational talent worldwide, are powerful complements to Viasat’s business.”

Merging their satellites and spectrum assets into a hybrid space and terrestrial network positions the combined company for a transforming industry, Inmarsat CEO Rajeev Suri said during a conference call.

“It’s clear the satellite communications sector is entering an era of dynamic new market demand that is growing fast, remains highly fragmented and is attracting new entrants who see new opportunities,” Suri said.

“Given these factors, scale and scope are important, and that is exactly what this transition offers.”

The boards of both companies unanimously approved the transaction. The Baupost Group, which is publicly listed Viasat’s largest shareholder, has also given its approval. 

Viasat expects to close the acquisition in the second half of next year after getting the approval of other shareholders, in addition to regulatory clearances.

The deal comprises $850 million in cash, about $3.1 billion in Viasat equity and the assumption of $3.4 billion of net debt.

Inmarsat’s private equity owners, a consortium led by Apax and Warburg Pincus which bought the British company in 2020, would take about 37.5% of the combined group.

Viasat said it had obtained commitments for $2.3 billion in new debt to finance the deal. 

Industry transformation 

The transformative acquisition comes as SpaceX prepares to launch Viasat’s first high-capacity Ka-band ViaSat-3 satellite to geostationary orbit (GEO), using a Falcon Heavy rocket in the first half of next year.

The first ViaSat-3 aims to cover the Americas with significantly faster broadband speeds than the rest of Viasat’s fleet, to be followed by another ViaSat-3 targeting Europe six months later and then a third for Asia to globalize the U.S.-based company’s services for the first time.

Inmarsat already provides worldwide connectivity services with 14 satellites in orbit, giving Viasat points of presence and distribution channels to support its international expansion plans. 

The British company also has seven more satellites under construction, five in GEO and two in highly elliptical orbit (HEO). 

In July, Inmarsat unveiled plans to add at least 150 low Earth orbit (LEO) satellites to a multi-orbit constellation it calls Orchestra.

Those plans include investing $100 million over the next five years as it prepares to deploy 150-175 LEO spacecraft from 2026.

Dankberg said on the conference call that the Ka-band satellites Inmarsat has under construction would add redundancy for Viasat’s fleet, noting that several of the spacecraft the U.K.-headquartered group has ordered feature software-defined payloads, meaning they can be reprogrammed in orbit if needed.

“One of the really attractive things about this combination is … the satellite systems are essentially interoperable,” he said.

“We both use Ka-band, and terminals from one network can be made to [operate] on the others. So that is a big advantage when you consider the synergies that can be had by different combinations in this sector.”

LEO also makes a good augmentation for GEO, Dankberg added, primarily for low-latency applications.

Viasat and Inmarsat expect to realize $1.5 billion in synergies from their merger, and project the combined company will make more than $4 billion in combined revenues and $1.4 billion in adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization. 

In particular, Viasat sees opportunities to leverage Inmarsat’s global L-band spectrum for new solutions in the rapidly growing internet of things (IoT) market.

The total addressable market for broadband and IoT is close to one trillion dollars and is forecast to grow to $1.6 trillion by 2030, according to Dankberg.

“Collectively, that’s good secular growth at a 5% compounded annual growth rate [CAGR], and we believe we can grow faster than that because so much of this market is either underserved or totally unserved now,” he said.

“While Viasat was well-positioned before, now we’re even stronger in the fast growing space-centric global mobility and government markets.”

Competition is also intensifying in these markets as new megaconstellations come online, however, and legacy satellite operators that have traditionally focused on broadcast are increasingly branching out into connectivity amid changing TV trends.

Inmarsat’s sale could be the start of a wave of industry consolidation as operators jostle for position in this shifting landscape, although regulatory hurdles have historically been difficult to clear in a sector riddled with national interests.

Eutelsat, which has been investing in LEO broadband startup OneWeb as part of its connectivity growth strategy, rejected an unsolicited $3.2 billion takeover offer from telecom magnate Patrick Drahi in September. 

Viasat said it plans to build on Inmarsat’s U.K. presence as part of its deal, committing to support the British government’s recently published National Space Strategy.

Consistent with the commitments made by Inmarsat’s current private equity owners when they bought the operator last year in a deal valued at $3.3 billion, delisting it from London’s stock exchange in the process, Viasat said it plans to preserve and grow Inmarsat’s London headquarters.

Viasat will also expand its board of directors from eight to 10 members under the plan. Inmarsat chair Andrew Sukawaty is in line to be one of the two new directors on the combined company’s board.

The California-based operator said other decisions about the combined company’s management will be made during the integration planning process.

Pushkala Aripaka of Reuters also reports Viasat buys Britain's Inmarsat in $7.3 bln satellite play:

Viasat (VSAT.O) agreed to buy British rival Inmarsat on Monday in a $7.3 billion deal to broaden the U.S. based company's satellite and land-based communications services.

The takeover of London-based Inmarsat comes just two years after it was taken private in a $3.4 billion deal by a consortium of British-based Apax partners, U.S.-based Warburg Pincus and two Canadian pension funds.

While Viasat offers connectivity and communications services to residential, aviation and defence customers in North America, Inmarsat is a provider of satellite-based communications services to shipping, aviation and government departments, including Britain's Ministry of Defence.

Viasat's shares fell sharply and were down nearly 13% at 1815 GMT following news of the cash and equity acquisition, which is likely to attract the attention of British regulators, who have probed transatlantic takeover such as Ultra Electronics (ULE.L) and Meggit (MGGT.L) on security grounds.

"The combined company will cooperatively engage with the U.K. government with a view to operating in the U.K. consistent with the commitments previously made by Inmarsat," the companies said in a joint statement announcing the transaction.

The deal to buy Inmarsat includes $850 million in cash, about 46.4 million of Nasdaq-listed Viasat's shares valued at roughly $3.1 billion and the assumption of the British firm's $3.4 billion net debt, the companies said in a joint statement.

Viasat said it has signed up for $2.3 billion of new debt facilities to partially fund the deal as it also reported its second-quarter results.

"Joining with Viasat is the right combination for Inmarsat at the right time," said Rajeev Suri, a former Nokia executive who became Inmarsat Chief Executive in February. Inmarsat was subject of an investigation in 2019 when it was taken private.

"The deal suggests ViaSat is very serious about its ambitions of rolling out its cutting-edge high throughput satellite technology globally instead of using regional partnerships," Armand Musey, founder of financial consulting firm Summit Ridge Group said.

"The big question is whether we will see a counter bid from another operator."

Thomas Seal of Bloomberg also reports Viasat to buy Inmarsat for $4 billion in satellite deal boom:

Viasat Inc. has agreed to purchase Inmarsat Group Holdings Ltd for $4 billion, creating the world’s biggest geostationary satellite company.

Carlsbad, California-based Viasat will buy Inmarsat for $850 million in cash and $3.1 billion in stock, and will assume $3.4 billion in debt, according to a statement from the companies Monday.

Bloomberg reported Wednesday that Inmarsat’s private equity owners were exploring a sale.

The satellite industry is responding to an unprecedented challenge from Starlink, a fleet of more than 1,500 spacecraft launched in the last few years by Elon Musk’s Space Exploration Technology Inc. Starlink and other well-funded low-earth orbit constellations like OneWeb and Amazon.com Inc.’s Project Kuiper promise faster connections from a lower orbit than traditional satellite firms. 

The combination of Viasat and Inmarsat will have a fleet of 19 satellites, with 10 more under construction for launch in the next three years. Viasat has already obtained commitments for $2.3 billion of debt, and the deal is expected to close in the second half of next year. It will also issue 46.4 million new shares. 

The deal will position the companies for growth in the “very competitive” communications market, Mark Dankberg, executive chairman of Viasat, said in an interview. “We want to be positioned to grow fast.”

Buying Inmarsat will also help Viasat diversify its revenues away from a heavy reliance on the U.S. 

Viasat shares traded down 11.9% at 11:16 a.m. in New York, the most in 19 months. 

Inmarsat will appoint two members to a newly expanded board of directors, including Andrew Sukawaty, the London-based company’s current chairman. 

Inmarsat’s owners, private equity firms Apax Partners LLP and Warburg Pincus LLC and two pension funds, have received hundreds of millions of dollars from the London-based company in delayed spectrum payments, giving them a speedy return on the $3.4 billion they paid for Inmarsat just last year. 

The consortium of investors will retain a 37.5% stake in the combined company’s equity, according to the statement. 

Inmarsat CEO Rajeev Suri has been focused on returning the company to revenue growth after Covid-19 hammered its previously fast-growing in-flight aviation business in 2020. He’s recruited new executives in a push to launch a new network using similar technology to Musk’s StarLink, and expects full-year sales to beat last year’s. He told Bloomberg Television in July these moves could help position the company to participate in dealmaking.

“Inmarsat is in the sweet spot,” Suri said at the time. The company “is likely to have many interested dance partners.”

Other satellite deals are in the offing. French billionaire Patrick Drahi recently offered 3.2 billion euros ($3.7 billion) for France’s Eutelsat SA, which the company’s board rejected.

Alright, merger Monday didn't disappoint today as news of this deal hit the wires into what is turning out to be a blockbuster merger in the satellite space. 

What is interesting about this deal is apart from the great synergies, as Ed Cropley of Reuters reports, the deal gives private equity a partial win:

Like its satellites, Inmarsat keeps going round and round in circles. The telecommunications firm, which started life in the 1970s as a system to locate shipping distress signals, is returning to public markets via a $7.4 billion cash-and-shares offer from U.S. rival Viasat (VSAT.O). The deal comes only two years after it left the London Stock Exchange’s orbit in a $6.1 billion buyout by Apax Partners, Warburg Pincus and two Canadian pension funds.

As a provider of inflight broadband to airlines, Inmarsat suffered a proper pandemic whack. This year’s adjusted EBITDA is estimated at $740 million, less than 2018’s $770 million. And the gradual recovery in air passenger traffic probably means more sedate growth forecasts than the ones Warburg and Apax were contemplating two years ago. Viasat at least reckons it can make savings worth $1.5 billion in today’s money. It’s paying a rich 10 times this year’s EBITDA, more than Inmarsat’s 2019 buyout multiple, despite the bleaker outlook. For the buyout barons, that’s partial relief.

Guess who else is benefiting from this deal?

Two large, well-known Canadian pensions, CPP Investments and Ontario Teachers' Pension Plan.

CPP Investments and OTPP put out a press release on this deal:

The shareholder group of Inmarsat (“Inmarsat” or the “Company”) – which comprises Canada Pension Plan Investment Board (“CPP Investments”), Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”), Warburg Pincus LLC (“Warburg Pincus”) and funds advised by Apax Partners LLP (“Apax”), (together, the “Consortium”) acting through their jointly-owned entity, Connect BidCo – today welcomes the announcement of a definitive agreement between Viasat, Inc. (NASDAQ: VSAT) (“Viasat”) and the shareholders of Inmarsat to combine and create a leading global communications innovator with enhanced scale and scope to affordably, securely and reliably connect the world.

The proposed combination integrates two businesses headquartered in the United Kingdom (“U.K.”) and United States, respectively, which together generate $4.1 billion in annual revenues and operate a premier fleet of 19 in-orbit satellites with 10 more spacecraft under construction for planned launch in the next three years. It brings together two organisations with highly complementary technology assets, resources, capabilities and service portfolios.

Together, Viasat and Inmarsat are positioned to deliver an improved communication offering to customers globally. The combined business will have the resources to accelerate innovation, delivering enhanced quality of service (speed, bandwidth, flexibility, reliability, low latency, coverage, security), product choice, and greater value to existing and new customers. Together, Viasat and Inmarsat will enable the availability of advanced new services in mobile and fixed segments, driving greater customer choice in broadband communications and narrowband services (including Internet of Things or “IoT”).

The Consortium has accepted Viasat’s offer for the entire ordinary share capital of Inmarsat and will retain a significant minority stake in the combined company. Under the terms of the agreement, Inmarsat shareholders will receive $4.0 billion composed of $850 million in cash, subject to adjustments, and approximately 46.36 million newly issued Viasat shares, which represent a 37.5% ownership on a fully diluted basis, valued at $3.1 billion, based on the closing price of $67.00 per Viasat share on November 5, 2021.

The Consortium expects the combined company to build on the strategic and operational progress achieved at Inmarsat to date, and by remaining significant minority shareholders, it is backing a transaction which presents strong industrial logic. Under the Consortium’s ownership, Inmarsat has invested to enhance its go-to-market, product and network capabilities, including the recent launch of GX-5 and the upcoming launches of the I-6 satellites serving the Company’s L-band business for the next 15 years.

Inmarsat has an exceptional presence in the growing global mobility segment and is at the forefront of network design, including its recently announced multi-dimensional mesh network. The Company is preparing to expand its global network later this year with its most powerful and advanced commercial communications satellite ever.

Viasat plans to build on Inmarsat’s presence in the U.K. and is committed to preserving and growing the investment of the combined company in U.K. space communications, as well as supporting the recently published National Space Strategy. The combined company will cooperatively engage with the U.K. government with a view to operating in the U.K. consistent with the commitments previously made by Inmarsat/Connect BidCo and expects continued constructive engagement across the U.K.’s thriving innovation ecosystem. It further intends to work closely with the U.K. government to bring additional space capabilities and other advanced technologies to the country as well as long-term, highly skilled engineering and related jobs for U.K.-based employees. Viasat plans to preserve and grow Inmarsat’s London headquarters, as well as its footprint in Australia and Canada and across Europe, the Middle East and Africa and Asia Pacific.

Rajeev Suri, Chief Executive Officer of Inmarsat, said: “I am pleased our shareholders have supported a combination that enables Inmarsat to join forces with Viasat, a recognized global innovator in space and broadband communications. With our shareholders backing, Inmarsat has successfully returned to strong growth, weathered the pandemic and renewed its technology capabilities. I want to thank our shareholders for enabling Inmarsat to enter this transaction from a position of strength, as well as for their vote of confidence in the combination by becoming equity holders in the combined group.”

The transaction is subject to customary closing conditions including Viasat shareholder approval and regulatory approvals.

ENDS

ABOUT THE CONSORTIUM

About Canada Pension Plan Investment Board

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2021, the Fund totalled $519.6 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

About Ontario Teachers’ Pension Plan Board

Ontario Teachers’ Pension Plan Board (“Ontario Teachers’”) is the administrator of Canada’s largest single-profession pension plan, with C$227.7 billion in net assets (all figures at June 30, 2021 unless noted). It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an annual total-fund net return of 9.6% since the plan’s founding in 1990. Ontario Teachers’ is an independent organization headquartered in Toronto. The defined-benefit plan, which is fully funded as at January 1, 2021, invests and administers the pensions of the province of Ontario’s 331,000 active and retired teachers. For more information, visit www.otpp.com and follow us on Twitter @OtppInfo

About Warburg Pincus

Warburg Pincus LLC is a leading global growth investor. The firm has more than $67 billion in private equity assets under management. The firm’s active portfolio of more than 215 companies is highly diversified by stage, sector, and geography. Warburg Pincus is an experienced partner to management teams seeking to build durable companies with sustainable value. Founded in 1966, Warburg Pincus has raised 20 private equity funds, which have invested more than $97 billion in over 960 companies in more than 40 countries. The firm is headquartered in New York with offices in Amsterdam, Beijing, Berlin, Hong Kong, Houston, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai, and Singapore. For more information, please visit http://www.warburgpincus.com/

About Apax

Apax Partners LLP (“Apax”) is a leading global private equity advisory firm. For nearly 50 years, Apax has worked to inspire growth and ideas that transform businesses. The firm has raised and advised funds with aggregate commitments of more than $60 billion. The Apax Funds invest in companies across four global sectors of Healthcare, Tech, Services, and Internet/Consumer. These funds provide long-term equity financing to build and strengthen world-class companies. For further information about Apax, please visit www.apax.com

Safe Harbor

Forward-looking statements in this release are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including without limitation, continued acceptance of the products of Viasat and the Company, increased levels of competition for Viasat and the Company, new products and technological changes, the dependence of Viasat and the Company on third-party suppliers, and other risks detailed from time to time in Viasat’s periodic reports filed with the U.S. Securities and Exchange Commission.

This is a fantastic deal for the consortium made up of CPP Investments, OTPP and their PE partners,  Warburg Pincus and Apax Partners.

The combination of Viasat and Inmarsat will create a leading global communications innovator with enhanced scale and scope to affordably, securely and reliably connect the world. The complementary assets and resources of the new organization will enable the availability of advanced new services in mobile and fixed segments, driving greater customer choice in broadband communications and narrowband services (including the Internet of Things or "IoT"):

The combined company intends to integrate the spectrum, satellite and terrestrial assets of both companies into a global high-capacity hybrid space and terrestrial network, capable of delivering superior services in fast-growing commercial and government sectors. This advanced architecture will create a framework incorporating the most favorable characteristics of multi-band, multi-orbit satellites and terrestrial air-to-ground systems that can deliver higher speeds, more bandwidth, greater density of bandwidth at high demand locations like airport and shipping hubs and lower latency at lower cost than either company could provide alone.

Both companies have proven track records of product and service innovation. Viasat has advanced North American residential and aviation connectivity and defense communications with technology and business models embraced by customers. Viasat is also recognized for driving change through its pioneering ultra-high-capacity satellite technology, which has delivered superior value at attractive, affordable economics.

Inmarsat has an exceptional presence in the growing global mobility segment and is at the forefront of network design with its recently announced multi-dimensional mesh network. It is preparing to expand its global network later this year with its most powerful and advanced software-defined commercial communications satellites ever, offering both Ka- and L-band capabilities. Inmarsat has a global presence, a robust distribution channel spanning the rapidly growing mobility, government, IoT and enterprise sectors and currently provides safety and connectivity services to more than one million mobility and defense platforms.

The combined company will be able to offer:

  • A broad portfolio of spectrum licenses across the Ka-, L- and S-bands and a fleet of 19 satellites in service with an additional 10 spacecraft under construction and planned for launch within the next three years.
  • A global Ka-band footprint, including planned polar coverage, to support bandwidth-intensive applications, augmented by L-band assets that support all-weather resilience and highly reliable, narrowband and IoT connectivity.
  • The ability to unlock greater value from Inmarsat's L-band spectrum and existing space assets by incorporating Viasat's state-of-the-art beamforming, end-user terminal and payload technologies and its hybrid multi-orbit space-terrestrial networking capabilities.
  • Viasat's highly vertically-integrated technology and service offerings, along with Inmarsat's extensive eco-system of technology, manufacturing and service distribution.

"This is a transformative combination that advances our common ambitions to connect the world. The unique fusion of teams, technologies and resources provides the ingredients and scale needed for profitable growth through the creation and delivery of innovative broadband and IoT services in new and existing fast-growing segments and geographies," said Viasat's Executive Chairman Mark Dankberg. "Inmarsat's dual-band global mobile network, unique L-band resources, skills and capabilities in the U.K. and excellent technical and operational talent worldwide, are powerful complements to Viasat's business. Together, we can advance broadband communications and create new hybrid space and terrestrial networks that drive greater performance, coverage, speed, reliability and value for customers. We look forward to welcoming the Inmarsat team into the Viasat family."

"Joining with Viasat is the right combination for Inmarsat at the right time," said Rajeev Suri, CEO of Inmarsat. "Viasat is a terrific innovator and Inmarsat brings some powerful additions: global reach, a broad distribution channel, robust business momentum and a presence in highly attractive global mobility segments. Together, the two companies will create a new global player with the scale and scope to help shape the future of a dynamic and growing industry. The combination will create a strong future for Inmarsat and be well-positioned to offer greater choice for customers around the world, enhanced scope for partners and new opportunities for employees. The industrial logic is compelling and ensures that the U.K. has a strong and sustainable presence in the critical space sector for the long term."

Rick Baldridge, Viasat's president and CEO added, "This strategic move gives Viasat the scale to increase the pace of innovation that drives new and better services for our customers, broadens the opportunities for our employees and provides a foundation for significant positive free cash flow, with potential upside from a revitalization of L-band and IoT service growth. Plus, we will have expanded scale and presence in the $1.6 trillion broadband and IoT sectors. I'm excited about the opportunities ahead and looking forward to setting up the combined organization for long-term success."

Driving increased innovation and sustainability in the U.K. space sector Viasat plans to build on Inmarsat's presence in the U.K. and is committed to preserving and growing the investment of the combined company in U.K. space communications, as well as supporting the recently published National Space Strategy. The combined company will cooperatively engage with the U.K. government with a view to operating in the U.K. consistent with the commitments previously made by Inmarsat/Connect BidCo, and expects continued constructive engagement across the U.K.'s thriving innovation ecosystem. It further intends to work closely with the U.K. government to bring additional space capabilities and other advanced technologies to the country as well as long-term, highly skilled engineering and related jobs for U.K.-based employees. Viasat plans to preserve and grow Inmarsat's London headquarters, as well as its footprint in Australia and Canada and across Europe, the Middle East, Africa and Asia Pacific.

And keep in mind, the consortium of investors will retain a 37.5% stake in the combined company’s equity, according to the statement.

That's great news for CPP Investments, OTPP and their members.

In related news today, a group of investors comprised of Advent, Permira, Crosspoint Capital, CPP Investments, GIC and ADIA just acquired McAfee, a leading digital protection provider for $14 billion:

McAfee Corp. (NASDAQ:MCFE, “McAfee”), a global leader in online protection, today announced it has entered into a definitive agreement to be acquired by an investor group led by Advent International Corporation (“Advent”) and Permira Advisers LLC (“Permira”), Crosspoint Capital Partners (“Crosspoint Capital”), Canada Pension Plan Investment Board (“CPP Investments”), GIC Private Limited (“GIC”), and a wholly owned subsidiary of the Abu Dhabi Investment Authority (“ADIA”) (collectively, “the Investor Group”).

As part of the transaction, the Investor Group will acquire all outstanding shares of McAfee common stock for $26.00 per share in an all-cash transaction valued at approximately $12 billion on an equity value basis, and over $14 billion on an enterprise value basis after giving effect to repayment of McAfee debt. The purchase price represents a premium of approximately 22.6% over McAfee’s closing share price of $21.21 on November 4, 2021, the last trading day prior to media reports regarding a potential sale of McAfee.

Upon completion of the transaction, the Investor Group will take ownership of McAfee. As a privately held company, McAfee will continue building on its success and proven track record of growth as a pure-play consumer cybersecurity leader following the sale of McAfee’s Enterprise business, and the associated one-time dividend of $4.50 per share, to private equity firm Symphony Technology Group for $4.0 billion, which closed on July 27, 2021.

“This transaction is a testament to McAfee’s market-leading online protection solutions, our talented employees, and outstanding customers and partners,” said McAfee President and Chief Executive Officer, Peter Leav. “We want to thank our employees for their continued hard work and commitment to McAfee. We are thrilled to be partnering with premier firms who truly understand the cybersecurity landscape and have a proven track record of success.”

In 2017, TPG partnered with Intel to carve out McAfee from Intel’s core operations to establish a pure-play cybersecurity company with access to significant capital, operational and technology resources. McAfee completed its initial public offering last year, with TPG and Intel remaining as shareholders in the company.

Jon Winkelried, Chief Executive Officer of TPG and Chair of the McAfee Board, commented: “Today’s announcement signals continued growth and opportunity for McAfee. Over the last four years, the company has expanded its product portfolio, enhanced its go-to-market strategy, and pursued strategic M&A, including the divestiture of its enterprise business. We’re proud that today McAfee is a leading consumer cybersecurity franchise, protecting the digital lives of 20 million subscribers across the globe.”

Tim Millikin, Partner at TPG and McAfee Board member, added: “It’s been a privilege to have partnered with McAfee and its leadership team to help navigate the company’s transformation and growth over the last four years. Our partnership with McAfee reflects TPG’s focus on investing in growth to build companies that are driving differentiated value in their markets.”

“McAfee is one of the most trusted brands in the essential business of consumer digital protection,” said Bryan Taylor, Head of Advent’s Technology Investment Team and a Managing Partner in Palo Alto. “As consumers face new and complex cyber risks, we see tremendous opportunity to build on McAfee’s differentiated technology platform to continue delivering innovative solutions that can protect all facets of the digital lives of people around the world. We look forward to working alongside our investment partners and the talented McAfee team to continue setting the bar for consumer digital protection.”

Brian Ruder, Co-Head of Technology at Permira, commented: “The need for personalized, innovative, and intuitive online protection services has never been greater. McAfee boasts an enviable brand, extensive partner ecosystem, loyal customer base and a rigorous commitment to product development. With our extensive experience in scaling global consumer technology and cybersecurity businesses, we are excited to work closely with McAfee and our fellow investors to help position the company for even greater heights.”

Greg Clark, Managing Partner at Crosspoint Capital and former Chief Executive Officer of Symantec added: “The risks that consumers face from all aspects of their digital lives is immense, and these risks are unprecedented and rapidly increasing. Consumers buy from brands they trust, and with the globally recognized brand of McAfee, we see the long-term opportunity to deliver products and services to address these risks in all aspects of their digital presence.”

“Over the years, McAfee’s brand has become synonymous with security. Coupled with the Company’s strong financial profile and scalable business model, we see further potential to build on this brand, which is well-suited to our long-term investment strategy,” said Geoff McKay, Managing Director and Head of Direct Private Equity North America, CPP Investments. “We look forward to supporting the business, as McAfee’s management team continues on its growth trajectory.”

Collectively, the Investor Group will provide McAfee with both financial and operational resources to further enhance its consumer offering and capture the rapid growth in consumer demand for digital protection services. McAfee’s strong brand awareness, diversified distribution model and customer-centric approach has made it a clear leader in the rapidly evolving consumer online protection space. The Investor Group will support McAfee as it continues to broaden its differentiated online protection solutions and drive long-term value through market expansion.

Transaction Details

Under the terms of the agreement, which has been approved by the McAfee Board of Directors, McAfee shareholders will receive $26.00 in cash for each share of common stock they own.

The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including, among others, approval by McAfee shareholders, receipt of regulatory approvals, and clearance by the Committee on Foreign Investment in the United States. Intel Americas, Inc. and certain funds affiliated with TPG Global, LLC have entered into a voting agreement pursuant to which they have agreed, among other things, to vote their shares of company stock in favor of the transaction, subject to certain conditions. The voting support under the voting agreement ceases automatically if the merger agreement is terminated or if the McAfee board makes an adverse recommendation change. These stockholders currently represent approximately 67.9% of the current outstanding voting power of the McAfee common stock.

Consistent with the McAfee Board’s commitment to maximizing stockholder value, under the terms of the definitive merger agreement, McAfee’s Board and advisors may actively initiate, solicit and consider alternative acquisition proposals during a 45-day “go shop” period. McAfee has the right to terminate the merger agreement to accept a superior proposal during the go-shop period, subject to the terms and conditions of the merger agreement. There can be no assurances that this process will result in a superior proposal, and McAfee does not intend to disclose developments with respect to this solicitation process unless and until McAfee’s Board makes a determination requiring further disclosure.

The buyer entity in the merger, Condor BidCo, Inc. (“Parent”), has obtained equity financing and debt financing commitments for the purpose of financing the transactions contemplated by the merger agreement. Funds advised by the Investor Group have committed to capitalize Parent at the closing of the merger with an aggregate equity contribution equal to $5.2 billion on the terms and subject to the conditions set forth in signed equity commitment letters.

The Investor Group has obtained a commitment from JPMorgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citibank, N.A. (and/or its affiliates), HSBC Bank USA, National Association, Royal Bank of Canada, CPPIB Credit Investments III Inc., UBS AG, Stamford Branch and PSP Investments Credit II USA LLC to provide debt financing consisting of a $6.66 billion first lien term loan facility, a $1 billion first lien cash flow revolving facility and a $2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement), subject, in each case, to customary conditions. PSP Investments Credit USA LLC and investment funds managed by Neuberger Berman have agreed to provide the Investor Group with preferred equity financing with an aggregate liquidation preference of up to $800 million, subject to customary conditions.

Upon completion of the transaction, McAfee common stock will no longer be listed on any public securities exchange.

Third Quarter Earnings Conference Call Update

Separately, McAfee will announce today its third quarter financial results, which will be available on the “Investor Relations” section of the McAfee website. In light of the announced transaction with the Investor Group, McAfee has cancelled the earnings call previously scheduled for Tuesday, November 9, 2021.

Advisors

Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC are serving as financial advisors to McAfee and Ropes & Gray and Moulton Moore Stella are serving as legal counsel. JP Morgan Securities LLC, BofA Securities, Inc., Barclays Capital Inc. and Citigroup Global Markets Inc. are serving as financial advisors, with Bryant Stibel Group serving as strategic operating advisors to the Investor Group. Fried, Frank, Harris, Shriver & Jacobson are acting as M&A legal counsel and Kirkland & Ellis are acting as Finance legal counsel to the Investor Group.

The debt financing for the transaction is being provided by JPMorgan Chase Bank, N.A., Bank of America, N.A., BofA Securities, Inc., Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC, Barclays Bank PLC, Citigroup Global Markets Inc., HSBC Securities (USA) Inc., HSBC Bank USA, National Association, Royal Bank of Canada, RBC Capital Markets LLC, CPPIB Credit Investments III Inc., UBS AG, Stamford Branch, UBS Securities LLC and PSP Investments Credit II USA LLC, and the preferred equity financing is being arranged and provided by PSP Investments Credit USA LLC and investment funds managed by Neuberger Berman.

About McAfee

McAfee Corp. (Nasdaq: MCFE) is a global leader in online protection for consumers. Focused on protecting people, not just devices, McAfee consumer solutions adapt to users’ needs in an always online world, empowering them to live securely through integrated, intuitive solutions that protect their families and communities with the right security at the right moment. For more information, please visit https://www.mcafee.com/consumer

About Advent International

Founded in 1984, Advent International is one of the largest and most experienced global private equity investors. The firm has invested in over 380 private equity investments across 42 countries, and as of June 30, 2021, had $81 billion in assets under management. With 15 offices in 12 countries, Advent has established a globally integrated team of over 245 private equity investment professionals across North America, Europe, Latin America and Asia. The firm focuses on investments in five core sectors, including business and financial services; health care; industrial; retail, consumer and leisure; and technology. After 35 years dedicated to international investing, Advent remains committed to partnering with management teams to deliver sustained revenue and earnings growth for its portfolio companies.

For more information, visit
Website: www.adventinternational.com
LinkedIn: www.linkedin.com/company/advent-international

About Permira

Permira backs growth at scale. Founded in 1985, the firm advises funds with total committed capital of approximately US$50bn (€44bn) and makes long-term majority and minority growth investments. The Permira funds have an extensive track record in tech and tech-enabled investing with a particular focus on digital consumer and enterprise cloud end markets. Permira employs over 350 people in 15 offices across Europe, North America, and Asia. The Permira funds have previously backed and helped scale some of the largest and fastest growing software, e-commerce and consumer technology businesses globally, including Exclusive Group, Ancestry.com, LegalZoom, Adevinta, Klarna, Genesys, Informatica and many others. For more information, visit www.permira.com.

About Crosspoint Capital Partners

Crosspoint Capital Partners is a private equity investment firm focused on the cybersecurity, privacy and infrastructure software markets. Crosspoint has assembled a group of highly successful operators, investors and sector experts to partner with foundational technology companies and drive differentiated returns. Crosspoint has offices in Menlo Park, CA and Boston, MA. For more information visit: www.crosspointcapital.com.

About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. On June 30, 2021, the Fund totaled C$519.6 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

About TPG

TPG is a leading global alternative asset firm founded in San Francisco in 1992 with $108 billion of assets under management and investment and operational teams in 12 offices globally. TPG invests across five multi-product platforms: Capital, Growth, Impact, Real Estate, and Market Solutions. TPG aims to build dynamic products and options for its clients while also instituting discipline and operational excellence across the investment strategy and performance of its portfolio. For more information, visit www.tpg.com or @TPG on Twitter.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains “forward-looking statements.” Such forward-looking statements include statements relating to McAfee’s strategy, goals, future focus areas, and the value of, timing and prospects of the proposed merger (the “Merger”). These forward-looking statements are based on McAfee management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “expects,” “believes,” “plans,” or similar expressions and the negatives of those terms. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements, expressed or implied by the forward-looking statements, including: (a) risks related to the satisfaction of the conditions to Closing (including the failure to obtain necessary regulatory approvals and the requisite approval of the stockholders) in the anticipated timeframe or at all; (b) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (c) risks related to disruption of management’s attention from McAfee’s ongoing business operations due to the Merger; (d) disruption from the Merger making it difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with McAfee’s customers, vendors and others with whom it does business; (e) significant transaction costs; (f) the risk of litigation and/or regulatory actions related to the Merger; (g) the possibility that general economic conditions and conditions and uncertainty caused by the COVID-19 pandemic, could cause information technology spending to be reduced or purchasing decisions to be delayed; (h) an increase in insurance claims; (i) an increase in customer cancellations; (j) the inability to increase sales to existing customers and to attract new customers; (k) McAfee’s failure to integrate recent or future acquired businesses successfully or to achieve expected synergies; (l) the timing and success of new product introductions by McAfee or its competitors; (m) changes in McAfee’s pricing policies or those of its competitors; (n) developments with respect to legal or regulatory proceedings; (o) the inability to achieve revenue growth or to enable margin expansion; (p) changes in McAfee’s estimates with respect to its long-term corporate tax rate; and (q) such other risks and uncertainties described more fully in documents filed with or furnished to the SEC by McAfee, including under the heading “Risk Factors” in McAfee’s Annual Report on Form 10-K previously filed with the SEC on March 1, 2021 and under Item 1A “Risk Factors” in its Quarterly Report on Form 10-Q previously filed with the SEC on August 10, 2021. All information provided in this Current Report on Form 8-K is as of the date hereof and McAfee undertakes no duty to update this information except as required by law.

Additional Information and Where to Find It

In connection with the Merger, McAfee will file with the SEC a preliminary Proxy Statement of McAfee (the “Proxy Statement”). McAfee plans to mail to its stockholders a definitive Proxy Statement in connection with the Merger. McAfee URGES YOU TO READ THE PROXY STATEMENT AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MCAFEE, THE INVESTOR GROUP, THE MERGER AND RELATED MATTERS. You will be able to obtain a free copy of the Proxy Statement and other related documents (when available) filed by McAfee with the SEC at the website maintained by the SEC at www.sec.gov. You also will be able to obtain a free copy of the Proxy Statement and other documents (when available) filed by McAfee with the SEC by accessing the Investor Relations section of McAfee’s website at https://ir.mcafee.com/.

Participants in the Solicitation

McAfee and certain of its directors, executive officers and employees may be considered to be participants in the solicitation of proxies from McAfee’s stockholders in connection with the Merger. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the stockholders of McAfee in connection with the Merger, including a description of their respective direct or indirect interests, by security holdings or otherwise will be included in the Proxy Statement when it is filed with the SEC. You may also find additional information about McAfee’s directors and executive officers in McAfee’s proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the SEC on April 22, 2021 and in subsequently filed Current Reports on Form 8-K and Quarterly Reports on Form 10-Q. These documents (when available) may be obtained free of charge from the SEC’s website at www.sec.gov and McAfee’s website at www.mcafee.com.

Wow, talk about a massive deal, taking McAfee private to unlock unrealized value is a massive undertaking and it looks like CPP Investments and other well known institutional investors have partnered up with the right funds to do this properly. 

Below, Mark Dankberg, Viasat co-founder and executive chairman, joins 'Squawk on the Street' to explore the details behind Viasat's acquisition of Inmarsat.

Also, discover more about Inmarsat's $1 million facility in Ottawa, reinforcing their commitment to Canada. The purpose-built, state-of-the-art building has been designed to meet the needs of the Canadian Armed Forces and to deliver a full Managed Service experience for government clients. 

Lastly, a little over a year ago, McAfee CEO and president Peter Leav joined CNBC's "Squawk Alley" to discuss why the company chose to go public again after 20 years of being a private company. 

Well, I guess McAfee is headed back to being a private company after this latest blockbuster deal.

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