Avast to acquire AVG for $1.3 billion

Avast Software and AVG Technologies have entered into a purchase agreement in which Avast will offer to purchase all of the outstanding ordinary shares of AVG for $25.00 per share in cash, for a total consideration of approximately $1.3B.

Both companies are industry pioneers founded in the Czech Republic in the late 1980s and early 1990s, that expanded internationally in the 2000s, and now will be combining complementary strengths to position Avast for continued growth in the security industry.

Increase in scale

Combining Avast’s and AVG’s users, the organization will have a network of more than 400 million endpoints, of which 160 million are mobile, that act as de facto sensors, providing information about malware to help detect and neutralize new threats as soon as they appear. This increase in scale will enable Avast to create more technically advanced personal security and privacy products.

“We are in a rapidly changing industry, and this acquisition gives us the breadth and technological depth to be the security provider of choice for our current and future customers,” said Vince Steckler, CEO of Avast Software. “Combining the strengths of two great tech companies, both founded in the Czech Republic and with a common culture and mission, will put us in a great position to take advantage of the new opportunities ahead, such as security for the enormous growth in IoT.”

“We believe that joining forces with Avast, a private company with significant resources, fully supports our growth objectives and represents the best interests of our stockholders,” said Gary Kovacs, CEO, AVG. “Our new scale will allow us to accelerate investments in growing markets and continue to focus on providing comprehensive and simple-to-use solutions for consumers and businesses alike. As the definition of online security continues to shift from being device-centric, to being concerned with devices, data and people, we believe the combined company, with the strengthened value proposition, will emerge as a leader in this growing market.”

The transaction

The transaction is structured as an all-cash tender offer for all outstanding ordinary shares of AVG at a price of $25.00 per share in cash. Avast plans to finance the transaction using cash balances on hand and committed debt financing from third party lenders.

Avast has received a financing commitment of $1.685 billion from Credit Suisse Securities, Jefferies and UBS Investment Bank. In addition, Avast has contributed $150 million in equity investment to fund the transaction. The proposed transaction is not subject to a financing condition.

The offer price represents a 33% premium over the July 6, 2016 closing price and a premium of 32% over the average volume weighted price per share over the past six months.The contemplated tender offer will be subject to certain shareholder approvals, the receipt of regulatory clearances, the tender of at least 95% of the outstanding ordinary shares of AVG or, if AVG shareholders approve the asset sale contemplated in the purchase agreement, the tender of at least 80% of the outstanding ordinary shares of AVG, and other customary closing conditions.

Additionally, certain shareholders including funds affiliated with TA Associates, who hold approximately 13% of the issued and outstanding shares of AVG, respectively, have committed to support the transaction and tender their shares in the offer.