$10.7B Broadcom-Symantec Enterprise Deal Creates Software Titan

The massive Broadcom-Symantec enterprise acquisition will break up the world’s largest pure-play cybersecurity vendor, and is expected to deliver $1 billion in cost synergies in the year following close.

Broadcom has agreed to purchase Symantec's enterprise business in a massive $10.7 billion deal that will break up the world's largest pure-play cybersecurity vendor.

The San Jose, Calif.-based semiconductor manufacturer said the monster acquisition is expected to drive $2 billion of revenue and $1.3 billion of EBITDA (earning before interest, taxation, depreciation, and amortization), as well as upwards of $1 billion of cost synergies in the year following close. The Symantec name will be sold to Broadcom as part of the transaction.

"M&A has played a central role in Broadcom’s growth strategy and this transaction represents the next logical step in our strategy following our acquisitions of Brocade and CA Technologies," said Broadcom President and CEO Hock Tan in a statement. "Symantec’s enterprise security business is recognized as an established leader in the growing enterprise security space and has developed some of the world’s most powerful defense solutions."

[Related: Broadcom Close To Deal For Symantec Enterprise Business: Report]

Interim Symantec President and CEO Rick Hill said the remaining consumer business contributed 90 percent of the company's total operating income, and the company expects to be able to continue to grow revenue for its Norton LifeLock business in the mid-single digits going forward.

“This is a transformative transaction that should maximize immediate value to our shareholders while maintaining ownership in a pure play consumer cyber safety business with predictability, growth and strong consistent profitability," Hill said in a statement. "In addition it allows the Enterprise Security business to grow and compete on an enterprise platform with a worldwide sales and distribution reach which can service our existing customers."

The deal will bring Symantec's $2.5 billion enterprise unit together with the software capabilities inherited last year through its $19 billion acquisition of CA Technologies. Symantec's enterprise business includes its traditional strength around anti-virus and endpoint protection as well as the cloud security capabilities inherited through the 2016 acquisition of Blue Coat Systems.

Meanwhile, Symantec's consumer business – which includes its legacy Norton anti-virus capabilities as well as its more recent acquisition of Lifelock – will become a standalone company. Symantec's stock is up 13.4 percent to $23.15 per share since the Wall Street Journal reported after-hours Wednesday that a deal between the two companies was expected to be consummated.

Thursday's announcement caps off more than a month of speculation over the future of the Mountain View, Calif.-based cybersecurity giant. Media reports in early July indicated that Broadcom was looking to buy both Symantec's enterprise and consumer businesses, but the deal reportedly fell apart less than two weeks later when Symantec made it clean that an offer of less than $28 per share would be refused.

Broadcom's purchase of Symantec's enterprise business would be the second marriage between a chipmaker and an anti-virus vendor this decade, coming eight years after Intel purchased top Symantec competitor McAfee for $7.7 billion. The anticipated synergies never materialized, and Intel ended up spinning off McAfee to private equity firm TPG in a 2016 sale that valued the business at $4.2 billion.

The last 14 months have been tumultuous for Symantec, culminating in the sudden May 2019 resignation of company President and CEO Greg Clark from all roles effective immediately. Since then, Symantec has been led on an interim basis by former Novellus Systems Chairman and CEO Richard Hill.

Clark's departure continued the executive brain drain atop Symantec, with President and COO Michael Fey leaving in December to take the CEO position at Mesosphere and EVP and CFO Nicholas Noviello announcing plans to depart Symantec in January.

Bloomberg reported late last year that CMO Michael Williams and Brandon Rogers, senior vice president of the go-to-market team, had also left the company. Symantec declined to comment on that report.

Meanwhile, activist investor Starboard Value said in an August 2018 regulatory filing that it believed shares of Symantec were undervalued at the time of purchase, and that it hopes to change the makeup of Symantec's board to unlock more value. A month later, the company reached an agreement with Starboard to name three new independent members to the company's board of directors.

Symantec also announced in September that it had finished its internal probe into concerns raised by a former employee and deferred $12 million of revenue that had been recognized in the quarter ended March 2018. The probe identified certain behavior inconsistent with the company's code of conduct, and referred the matter to Symantec for appropriate action.