U.S. private equity firm Thoma Bravo made an offer to buy Sophos, the U.K.-based maker of antivirus and encryption products, for $7.40 in cash per share, a 37% premium on the Sophos market price at the end of trading Friday, the companies said.
Sophos board of directors said they plan to unanimously recommend the deal, which values the company at $3.9 billion including debt, to shareholders. The exact amount received by investors depends on the exchange rate at the time of completion, subject to regulatory clearance.
The company was first approached by Thoma Bravo in June, said Kris Hagerman, the chief executive officer of Sophos.
“The (Sophos) board ultimately concluded that this offer and the acquisition can accelerate Sophos’ progress in next-generation cybersecurity,” Hagerman said.
The company’s stock dropped 27%, a two year low, after a tough 2018. After the announcement of the takeover, shares jumped by 38% in early trading.
The deal is expected to close in the first quarter of 2020.
Thoma Bravo has been an active player in cybersecurity and technology in recent years. In November 2017, it acquired security appliance vendor Barracuda Networks for $1.6 billion. It acquired Imperva, which offers protection services that mitigate impacts of distributed denial of service attacks, for $2.1 billion in January 2019.
Hargreaves Lansdown analysts cautioned on potential currency risks associated with the dollar-denominated offer.
“One thing worth bearing in mind is that the offer is denominated in dollars, and given the volatility we’ve seen in sterling recently that means the final pounds and pence value of the deal could end up being significantly different to that reported today,” said Nicholas Hyett, an equity analyst at Hargreaves Lansdown. “If sterling weakens, then that’s good news for U.K. investors, but should a Brexit deal be agreed, a rally in sterling could leave investors out of pocket.”
Sophos raised $125 million in a public offering in 2015 that valued the company at $1.6 billion. Its customers include Under Armour, Ford Motor, and Toshiba. It has some 400,000 customers in 150 countries, 47,000 channel partners, and more than 100 million users, according to public filings.