Google buys Mandiant for $5.4B

Google to acquire Mandiant for $23.00 per share in cash

Alphabet’s Google (GOOGL) announced that it has signed a definitive agreement to acquire Mandiant (MNDT) for $23.00 per share, in an all-cash transaction valued at approximately $5.4B, inclusive of Mandiant’s net cash.

Upon the close of the acquisition, Mandiant will join Google Cloud.

With the addition of Mandiant, Google Cloud will enhance offerings to deliver an end-to-end security operations suite with even greater capabilities to support customers across their cloud and on-premise environments.

The acquisition of Mandiant is subject to customary closing conditions, including the receipt of Mandiant stockholder and regulatory approvals, and is expected to close later this year.

Piper Sandler

Piper Sandler analyst Thomas Champion said he thinks the deal makes strategic sense given Google’s move further into the Enterprise. The Mandiant acquisition should complement Google Cloud Platform’s current security offerings, which include BeyondCorp Enterprise and VirusTotal, said Champion, who reiterates his Overweight rating and $3,475 price target on Alphabet shares.

Wedbush 

 Wedbush analyst Daniel Ives notes that this deal is all about Mandiant being further integrated into Google Cloud with more cyber threats facing enterprises/governments on the transformational shift to cloud and Mandiant establishing itself as “the Navy Seals of cyber security” over the last decade, the analyst contends.

#Ives believes this deal will have a major ripple impact across the cyber security space as cloud stalwarts Amazon (AMZN) and Microsoft (MSFT) will now be pressured into M&A and further bulk up its cloud platforms.

The analyst thinks cyber names such as Varonis (VRNS), Tenable (TENB), CyberArk (CYBR), Qualys (QLYS), Rapid7 (RPD), SailPoint (SAIL), and Ping (PING) standout as potential M&A candidates in cyber security given these vendors laser focus on protecting next generation cloud workloads from cyberattacks.

MNDT is down 50 cents to $21.99.

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NeoPhotonics sold for $918M

 Lumentum to acquire NeoPhotonics for $16 per share in cash

Lumentum (LITE) and NeoPhotonics (NPTN) announced that they have entered into a definitive agreement under which Lumentum will acquire NeoPhotonics for $16.00 per share in cash, which represents a total equity value of approximately $918M.

NeoPhotonics Corporation develops, manufactures, and sells optoelectronic products that transmit and receive high speed digital optical signals for cloud and hyperscale data center internet content provider and telecom networks worldwide.

Lumentum Holdings Inc. manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company operates in two segments, Optical Communications (OpComms) and Commercial Lasers (Lasers). 

Laser chips made by Lumentum

The transaction has been unanimously approved by the boards of directors of both companies.

The purchase price represents a premium of approximately 39% to NeoPhotonics’ closing stock price on November 3, 2021.

Laser chips made by NeoPhotonics

Lumentum intends to finance the transaction through cash from the combined company’s balance sheet.

Related to the transaction, Lumentum will provide up to $50M in term loans to NeoPhotonics to fund anticipated growth, which may require increased working capital and manufacturing capacity.

The transaction is expected to close in the second half of calendar year 2022, subject to approval by NeoPhotonics’ stockholders, receipt of regulatory approvals, and other customary closing conditions.

“With NeoPhotonics, we’re making another important investment in better serving our customers and expanding our photonics capabilities at a time when photonics are at the forefront of favorable long-term market trends. At the center of our strategy is a relentless focus on developing a differentiated portfolio with the most innovative products and technology in our industry so that we can help our customers compete and win in their respective markets.

Adding NeoPhotonics’ differentiated products and technology and innovative R&D team is consistent with this strategy and together, we will better meet the growing need for next generation optical networking solutions. We are confident this transaction will make us an even better partner to our customers, while enabling our team to deliver significant, long-term value to our stockholders. We look forward to welcoming NeoPhotonics’ talented team of employees to Lumentum,” said Alan Lowe, Lumentum President and CEO.

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Flying Prescriptions Are Coming!

Walgreens to deploy Wing drone deliveries in Dallas-Fort Worth area

In a blog post by Alphabet’s (GOOG, GOOGL) Wing, the company said, ” Today we’re unveiling a new model for drone delivery that will allow us to expand into densely-populated metropolitan areas in the United States.

Wing will stage delivery drones at retail locations; ready to fly directly to customers.

The aircraft will arrive in small containers that serve as tiny hangars, allowing each store to quickly and easily deploy a small, dedicated fleet from its parking lot, on its roof, or in small spaces adjacent to the building.

When this model launches, Walgreens (WBA) will be the first U.S. retailer to use this new approach.

Walgreens team members will process orders and load packages onto the delivery drones, and Wing will oversee operation of the delivery service.

Our first lightweight, co-located operation will be set up at a Dallas-Fort Worth area Walgreens store in its parking lot, serving parts of the city of Frisco and town of Little Elm.

In addition to the Walgreens store, Wing has teamed up with Hillwood to prepare a separate drone delivery facility within Frisco Station, an urban, mixed-used development located in Frisco.

Hillwood has a long track record supporting forward-thinking, innovative transportation initiatives across the region, most notably at its Alliance Texas development and its designated Mobility Innovation Zone.

We look forward to working with Hillwood as we deploy a facility at Frisco Station that has all the usual delivery capabilities, but will be dedicated to exploring new use cases, community demonstrations, school field trips and public tours…

In preparation for this launch, we’ve been conducting test flights since June at Hillwood’s AllianceTexas Flight Test Center, a drone testing facility in Fort Worth.

We’ll begin a small number of practice flights next week in Frisco and Little Elm, and hope to set up delivery demonstrations to get feedback from the community in the coming weeks.

In the coming months, we expect to launch a commercial service there that would be the first of its kind in a major U.S. metro.”

Google Wing delivers a package

Wing is a subsidiary of Alphabet Inc. that develops technology of drone-based delivery of freight. The company completed their first real-world deliveries in 2014. The company has operations in Australia, the United States, and Finland. 

In July 2018, Project Wing graduated from Google X to become an independent Alphabet company. As of January 2019, Wing began delivering take-out food and beverages out of its test facility in Bonython, Australia as part of a pilot program. In April 2019 Wing became the first drone delivery company to receive an Air operator’s certificate from the Federal Aviation Administration to allow it to operate as an airline in the USA.

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Consolidation in the media space!

AT&T, Discovery to create global DTC business through Reverse Morris Trust

AT&T (T) and Discovery (DISCA) announced a definitive agreement to combine WarnerMedia’s premium entertainment, sports and news assets with Discovery’s nonfiction and international entertainment and sports businesses to create a standalone global entertainment company.

ATT to merge it’s media assets with Discovery

Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T would receive $43B in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt, and AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company.

The boards of both AT&T and Discovery have approved the transaction.

Discovery to merge with ATT media

Bringing together the leadership teams, content creators, and series and film libraries.

The new company is projected for 2023 revenue of approximately $52B, adjusted EBITDA of approximately $14B, and free cash flow conversion rate of approximately 60%.

The transaction is expected to create at least $3B in expected cost synergies annually for the new company.

The new company will compete globally in the direct-to-consumer business bringing content to DTC subscribers across its portfolio, including HBO Max and the recently launched discovery+.

The transaction will combine WarnerMedia’s content library of IP with Discovery’s global footprint, local-language content and regional expertise across more than 200 countries and territories.

The companies announced that Discovery president and CEO David Zaslav will lead the proposed new company with a management team and operational and creative leadership from both companies.

Discovery’s current multiple classes of shares will be consolidated to a single class with one vote per share.

The new company’s board will consist of 13 members, seven initially appointed by AT&T, including the chairperson of the board; Discovery will initially appoint six members, including CEO David Zaslav.

The combination will be executed through a Reverse Morris Trust, under which WarnerMedia will be spun or split off to AT&T’s shareholders via dividend or through an exchange offer or a combination of both and simultaneously combined with Discovery.

The transaction is expected to be tax-free to AT&T and AT&T’s shareholders. In connection with the spin-off or split-off of WarnerMedia, AT&T will receive $43B in a combination of cash, debt securities and WarnerMedia’s retention of certain debt.

David Zaslav to head the new company

The new company expects to maintain investment grade rating and utilize the significant cash flow of the combined company to rapidly de-lever to approximately 3.0x within 24 months, and to target a new, longer term gross leverage target of 2.5x-3.0x.

WarnerMedia has secured fully committed financing for the purposes of funding the distribution.

The transaction is anticipated to close in mid-2022, subject to approval by Discovery shareholders and customary closing conditions, including receipt of regulatory approvals.

No vote is required by AT&T shareholders. Agreements are in place with John Malone and Advance to vote in favor of the transaction.

Elliott Management

Elliott Investment Management released a statement on behalf of Managing Partner Jesse Cohn and Portfolio Manager Marc Steinberg regarding AT&T’s plan to merge media assets with Discovery:

Elliott is a major shareholder in ATT

“It has been a transformational year at AT&T year since John Stankey took over as CEO, and today’s announcement represents another impressive step in the Company’s recent evolution.

AT&T has now executed on its promise to streamline operations and re-focus on its core businesses, all while improving operational execution, enhancing its financial position and advancing its corporate governance. As investors, Elliott supports AT&T in its efforts to best position the company for future success.”

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Uncertainty in economy pushes lawmakers to come up with stimulus bill!

Powell says outlook for economy is ‘extraordinarily uncertain’

In prepared remarks for the Senate Committee on Banking, Housing, and Urban Affairs, Federal Reserve Chair Jay Powell said:

Jerome Powell say economy is on shaky ground

“Economic activity has continued to recover from its depressed second-quarter level. The reopening of the economy led to a rapid rebound in activity, and real gross domestic product, or GDP, rose at an annual rate of 33 percent in the third quarter.

In recent months, however, the pace of improvement has moderated.

Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level.

In contrast, spending on services remains low largely because of ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality.

The overall rebound in household spending is due, in part, to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals…

As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check…

Covid-19 has caused a global slowdown

The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months.

A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.

Recent news on the vaccine front is very positive for the medium term. For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups.”

Meanwhile lawmakers in Washington have come up with a new stimulus plan.  

A bipartisan group of U.S. lawmakers announced a $908B COVID-19 aid package aimed to breaking a monthslong deadlock between Democrats and Republicans over new emergency relief for small businesses, unemployed people, airlines, and other industries during the coronavirus crisis, Reuters’ Richard Cowan and Doina Chiacu report.

The bill has not yet been written into legislation, nor has it been embraced by the Republican White House, Democratic President-elect Joe Biden, or leaders in the Senate or House of Representatives, the authors note.

The package, however, does come with the support of a group of conservatives and moderates who believe it will appeal to a broad swath of Congress, the authors note.

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Inphi Corp. sold for about $155 per share

Marvell to acquire Inphi in cash and stock deal

Marvell Technology Group (MRVL) and Inphi Corporation (IPHI) announced a definitive agreement, unanimously approved by the boards of directors of both companies, under which Marvell will acquire Inphi in a cash and stock transaction.

Israel’s Marvell buys rival Inphi Corp.

In conjunction with the transaction, Marvell intends to reorganize so that the combined company will be domiciled in the United States, creating a U.S. semiconductor powerhouse with an enterprise value of approximately $40B.

Under the terms of the definitive agreement, the transaction consideration will consist of $66 in cash and 2.323 shares of stock of the combined company for each Inphi share.

Inphi sold to Marvell

Upon closing of the transaction, Marvell shareholders will own approximately 83% of the combined company and Inphi stockholders will own approximately 17% of the combined company.

Marvell intends to finance the transaction with cash on hand, and additional financing. Marvell has obtained debt financing commitments from JPMorgan Chase Bank, N.A.

The transaction is not subject to any financing condition and is expected to close by the second half of calendar 2021, subject to the approval of Marvell shareholders and Inphi stockholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

“Our acquisition of Inphi will fuel Marvell’s leadership in the cloud and extend our 5G position over the next decade,” said Matt Murphy, president and CEO of Marvell.

“Inphi’s technologies are at the heart of cloud data center networks and they continue to extend their leadership with innovative new products, including 400G data center interconnect optical modules, which leverage their unique silicon photonics and DSP technologies.

We believe that Inphi’s growing presence with cloud customers will also lead to additional opportunities for Marvell’s DPU and ASIC products.”

“Our acquisition of Inphi will fuel Marvell’s leadership in the cloud and extend our 5G position over the next decade,” said Matt Murphy, president and CEO of Marvell.

“Inphi’s technologies are at the heart of cloud data center networks and they continue to extend their leadership with innovative new products, including 400G data center interconnect optical modules, which leverage their unique silicon photonics and DSP technologies. We believe that Inphi’s growing presence with cloud customers will also lead to additional opportunities for Marvell’s DPU and ASIC products.”

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Palantir becomes a public company

AOC flags ‘material risks’ to Palantir investors in SEC letter

Palantir Technologies Inc. (PLTR) builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations.

Palantir finally becomes a public company

It offers Palantir Gotham, a software platform for government operatives in the defense and intelligence sectors, which enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants, as well as facilitates the handoff between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform.

The company also provides Palantir Foundry, a platform that transforms the ways organizations operate by creating a central operating system for their data; and allows individual users to integrate and analyze the data they need in one place. 

Shares soared 34% on Wednesday on their debut.

In a newly released letter, New York Representative Alexandria Ocasio-Cortez issued words of warning to the SEC over Palantir’s efforts to take the company public, cautioning the regulatory body over details the progressive congresswoman says were “omitted” in the company’s disclosures, TechCrunch’s Taylor Hatmaker reports.

New York Representative Alexandria Ocasio-Cortez

Illinois Rep. Jesus “Chuy” Garcia

“Palantir reports several pieces of information about its company – and omits others – that we believe require further disclosure and examination, as they present material risks of which potential investors should be aware and national security concerns of which the public should be aware,” Ocasio-Cortez and Illinois Rep. Jesus “Chuy” Garcia wrote.

Palantir’s chairman, Peter Thiel

Palantir’s chairman, Peter Thiel, and its work for government agencies including U.S. immigration have sparked concerns among corporate watchdogs and human rights groups including Amnesty International. The company has also drawn rebukes from governance experts who point out that Thiel will have power with little accountability because of multi-class stock that grants him outsize power in perpetuity.

PLTR closed at $9.73, up $2.48 on heavy volume of 338,584,433.

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Altice USA to acquire Cogeco for $7.8B

Altice USA to acquire Cogeco, to sell Cogeco Canadian assets to Rogers

Altice USA (ATUS) announced that it has presented an offer to Cogeco, or CGO, and Cogeco Communications, or CCA, (CGEAF) to acquire 100% of the issued and outstanding shares of Cogeco.

COGECO sold and broken into pieces

Cogeco Inc. is a Canadian telecommunications and media company. The company operates Cogeco Communications Inc. which is structured into three strategic business units; Cogeco Connexion, Atlantic Broadband, and Cogeco Media.

Altice USA buys Cogeco and sells parts to Roger Comm.

Altice USA has also entered into an arrangement to sell all the Canadian assets of Cogeco to the largest long-term shareholder of Cogeco, Rogers Communications (RCI), if its transaction with Cogeco is completed.

Upon completion of the overall transaction, Altice USA would own all the U.S. assets of Cogeco, namely Atlantic Broadband.

The aggregate all-cash consideration offered for all of the outstanding shares of CGO and CCA, including those owned by Rogers, is approximately $7.8B.

This includes approximately $3.6B to be paid by Altice USA for the U.S. assets: All the multiple voting shares of CGO are held in a company controlled by Mr. Louis Audet, the Executive Chairman of Cogeco, and members of the Audet family.

Given the position of the controlling shareholder, its support is necessary to complete a transaction, and as such the Altice USA offer includes a sizeable premium on those shares.

Altice USA ends up with Atlantic Broadband

Specifically, the offer includes $612M to the Audet family for their ownership interests, which include 100% of the multiple voting shares of CGO, or CGO MVS, and approximately 0.9% of total outstanding CGO subordinate voting shares, or CGO SVS.

The offer also includes C$106.53 per share for the remaining CGO SVS and C$134.22 per share for each CCA subordinate voting share, or CCA SVS.

These offer prices represent a significant premium of 30% to each stock’s 1-month volume weighted average price, or VWAP, on the Toronto Stock Exchange (the offer prices also represent a 36% premium for CGO SVS and 37% premium for CCA SVS to the August 31 closing prices).

This offer is in line with Altice USA’s previously stated objective to opportunistically grow through value-accretive acquisitions.

The acquisition of Atlantic Broadband, if consummated, would allow Altice USA to build on its success with prior cable acquisitions in the United States and expand its operations across 11 states on the east coast of the United States, adjacent to its existing Optimum and Suddenlink footprints.

Altice USA’s share repurchase and net leverage targets for 2020 remain unchanged from this transaction.”

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Loral Space in ‘advanced talks’ to combine with Telesat

Loral Space & Communications declares $5.50 per share special dividend

Loral Space & Communications (LORL) announced that its board of directors has declared a special dividend of $5.50 per share for an aggregate dividend of approximately $170.5M.

The dividend is payable on May 28 to holders of record of Loral voting and non-voting common stock as of the close of business on May 14.

Loral declares a one time $5.50 special dividend, Stockwinners

Michael Targoff, Vice Chairman of Loral’s Board of Directors, explained that, “in an effort to maximize shareholder value, we have for some time been exploring, and are now in advanced discussions with our Canadian co-owner in Telesat, Public Sector Pension Investment Board, regarding the combination of Loral and Telesat into one public company.

Telesat to combine with Loral Space, Stockwinners

“Given the advanced state of the discussions regarding the combination transaction, it is now appropriate to pay to our shareholders a significant portion of the $243M cash distribution that we previously received from Telesat.”

“It is our intention,” Mr. Targoff continued, “to request that the Board declare an additional distribution to our shareholders in coordination with signing definitive agreements for the combination transaction.”

The company added: “Notwithstanding the advanced state of the discussions regarding the potential combination transaction, there can be no assurance as to whether or when Loral will be able to conclude the ongoing negotiations, that Loral will enter into any agreement that provides for a strategic transaction involving Telesat or Loral’s interest therein, that any strategic transaction will occur, or that any particular economic, tax, structural or other objectives or benefits with respect to any strategic transaction will be achieved.”

Loral Space & Communications Inc. offers satellite-based communications services to the broadcast, telecom, corporate, and government customers worldwide.

Telesat, formerly Telesat Canada, is a Canadian satellite communications company.  The company is now the fourth-largest fixed satellite services provider in the world. It owns a fleet of satellites, with others under construction, and operates additional satellites for other entities.

LORL is up 31% to $23.10.

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AVX sold for about $3.7B

AVX to be acquired by Kyocera for $21.75 per share in cash

AVX Corp. (AVX) announced that Kyocera and AVX have entered into a definitive merger agreement providing for the acquisition by Kyocera of all the outstanding shares of common stock of AVX not owned by Kyocera pursuant to an all-cash tender offer for $21.75 per share, followed by a squeeze-out merger in which all of the outstanding shares of AVX common stock not tendered in the Tender Offer will be converted into the right to receive $21.75 per share of common stock, in cash.

Kyocera currently owns approximately 72% of the outstanding shares of AVX common stock.

Following completion of the Transaction, AVX will become a wholly owned subsidiary of Kyocera.

Kyocera buys the rest of AVX shares that it did not own, Stockwinners

The $21.75 offer price represents a 44.6% premium over AVX’s closing price on November 26, 2019 and a 42.1%, 42.4%, and 34.9% premium over AVX’s 1-, 3- and 12- month average closing share price, respectively.

As previously announced, following receipt of a proposal from Kyocera to acquire all of the outstanding shares of AVX common stock that Kyocera does not own for a price of $19.50 in cash, the AVX board of directors appointed a special committee consisting of three independent directors of AVX for purposes of evaluating and negotiating a potential transaction with Kyocera.

AVX Corp. sold to Kyocera, Stockwinners

Following the formation of the Special Committee, Kyocera and the Special Committee have been in discussions and negotiations regarding Kyocera’s proposal to acquire all of the outstanding shares of common stock of AVX not owned by Kyocera.

The board of AVX, acting on the recommendation of the Special Committee, has approved the Transaction and determined to recommend that the AVX stockholders tender their shares in the Tender Offer.

The Transaction is subject to customary closing conditions and is not subject to any financing condition. Kyocera has announced that it currently expects the Transaction to close in the fourth quarter of Kyocera’s fiscal year ending March 2020.

The Tender Offer will be subject to customary conditions and will not be subject to any minimum condition.

AVX is a leading worldwide manufacturer, supplier, and reseller of a broad line of electronic components, interconnect, sensing and control devices, and related products. Electronic components and connector, sensing and control products manufactured or resold by AVX are used in many types of end use products, including those in telecommunications, automotive, transportation, energy harvesting, consumer electronics, military/aerospace, medical, computer, and industrial markets. 

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Gilat Satellite Networks sold for $532M

Comtech to acquire Gilat Satellite Networks for $10.25 per share

Comtech Telecommunications Corp. (CMTL) and Gilat Satellite Networks Ltd. (GILT) jointly announced that Comtech has agreed to acquire Gilat in a cash and stock transaction for $10.25 per Gilat ordinary share of which 70% will be paid in cash and 30% in Comtech common stock, resulting in an enterprise value of approximately $532.5 million.

Gilat sold for $522M, Stockwinners

Founded in 1987 with its headquarters in Israel, Gilat is a worldwide leader in satellite networking technology, solutions and services with market leading positions in the satellite ground station and in-flight connectivity solutions markets and deep expertise in operating large network infrastructures.

Comtech goes shopping by buying Gilat, Stockwinners

Based on Comtech’s fiscal year 2019 actual results and Gilat’s trailing twelve-month results through June 30, 2019, on a pro-forma basis, Comtech would have reported approximately $926.1M of revenue with Adjusted EBITDA of approximately $130.2M.

The combined companies would employ approximately 3,000 people and offer best-in-class satellite technology, public safety and location technology and secure wireless solutions to commercial and government customers around the world.

Fred Kornberg, Chairman of the Board and CEO of Comtech, said,

“I am excited to have reached this agreement with Gilat and believe this combination is beneficial to the stakeholders of both companies. The acquisition better positions Comtech to take advantage of key marketplace trends, particularly the growing demand for satellite connectivity and the enormous long-term opportunity set that is emerging in the secure wireless communications market.

I believe that the combination of accelerating satellite connectivity demand and the increasing availability of low-cost satellite bandwidth, makes this a perfect time to unify Comtech and Gilat’s solutions and offer our combined customers best-in-class platform-agnostic satellite ground station technologies.

Gilat is an exceptional business that has developed extraordinary technology and has a well-respected product portfolio supported by strong research and development capabilities. I welcome Gilat’s entire talented workforce to the Comtech family.”

Dov Baharav, Chairman of the Board of Gilat, said, “The Gilat Board of Directors and management believe this highly strategic combination is compelling.

Gilat equipment allows reliable communication, Stockwinners

It is an excellent outcome for our shareholders who receive both cash and an equity interest in a strong company with a broader range of products and the benefits of combined expertise and resources that is well positioned to create future value against a highly favorable industry backdrop.

I have long admired Comtech’s commitment to technology leadership and I firmly believe that employees will have expanded opportunities for career development. No doubt, the future will be very bright for Comtech and Gilat and all of our stakeholders.”

In light of the agreement between Comtech (CMTL) and Gilat (GILT), Gilat has cancelled its fourth quarter and fiscal 2019 year-end conference call and webcast previously scheduled for February 19, 2020. Once the transaction closes, Comtech will provide combined revenue, Adjusted EBITDA and diluted earnings per share guidance in a future announcement.

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Shape Security sold for $1B

F5 Networks to acquire Shape Security for approximately $1B in cash

F5 Networks (FFIV) and Shape Security announced a definitive agreement under which F5 will acquire all issued and outstanding shares of the privately held Shape for a total enterprise value of approximately $1B in cash, subject to certain adjustments.

F5 Networks purchases Shape Security, Stockwinners

Shape protects the largest banks, airlines, retailers, and government agencies with sophisticated bot, fraud, and abuse defense.

In particular, Shape defends against credential stuffing attacks, where cybercriminals use stolen passwords from third-party data breaches to take over other online accounts.

Shape has built an advanced platform, utilizing artificial intelligence and machine learning, supported by powerful cloud-based analytics to protect against attacks that bypass other security and fraud controls.

Shape Security sold for $1B, Stockwinners

Upon closing of the acquisition, Derek Smith, and the leadership team will join F5 in key management roles.

Shape will remain located in their current Santa Clara headquarters.

The acquisition of Shape is consistent with F5’s vision to build the best end-to-end multi-cloud application services company. It accelerates F5’s product and total revenue growth; speeds F5’s transition to a software- and SaaS-driven business model; and is expected to meaningfully increase F5’s software subscription mix in fiscal year 2020.

F5 expects to achieve breakeven non-GAAP EPS within 24 months of closing the acquisition and anticipates that the combination will be accretive to free cash flow per share within 12 months of closing.

F5 expects to fund the transaction through cash on its balance sheet and $400M in a Senior Unsecured Term Loan A. The acquisition has been approved by the boards of directors of both F5 and Shape.

The acquisition is subject to regulatory approvals and other customary closing conditions. The transaction is expected to close in the first calendar quarter of 2020.

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Enterprise Spending Drought

Forescout pummeled, Cisco falls amid weakening enterprise spending view

Shares of publicly-traded companies in the network security space are trading lower after Forescout Technologies (FSCT) announced preliminary results for its third quarter.

Forescout slashed its view on sales and profit for the quarter, as sales are seen getting pushed out to future quarters amid a weakening in the global macroeconomic environment.

Forescout shares tumble on weak demand, Stockwinners

EXPECTATIONS FALL

Forescout now sees total Q3 revenue of $90.6M-$91.6M as compared to its prior view of $98.8M-$101.8M. Non-GAAP operating loss for Q3 is expected to be in the range of $1.6M-$1.4M, compared to the company’s prior guidance range for an operating profit of $2.6M-$3.6M.

Forescout CEO Michael DeCesare said, “Q3 results were impacted by extended approval cycles which pushed several deals out of the third quarter.

This was most pronounced in EMEA against the backdrop of a challenging macro-economic environment. These deals were not lost to competitors and we are working to get them over the finish line.” JPMorgan analyst Sterling Auty downgraded ForeScout to Neutral from Overweight after the company announcement.

Auty cut his price target for ForeScout shares to $35 from $54. He also called this the “first notable negative preannouncement” in the software sector and thinks investors will be watching carefully to see if there are further issues that will cause multiples in the space to contract further.

ENTERPRISE SPENDING DROUGHT

Adding to the negativity in the Enterprise space was a Cisco Systems (CSCO) downgrade from Goldman Sachs.

Goldman Sachs downgrades Cisco Systems, Stockwinners

Goldman Sachs analyst Rod Hall downgraded Cisco Systems to Neutral from Buy with a price target of $48, down from $56.

Large enterprise spending will continue to weaken and telecom spending activity will remain depressed in the near term, Hall stated.

The analyst noted that Goldman’s Enterprise Activity Index deteriorated in September, while his latest reseller survey was also incrementally negative on enterprise spending trends. PRICE ACTION: Shares of Forescout are down over 35.5% to $25.26 while Cisco is down over 2%.

OTHER STOCKS TO WATCH

Other companies to watch in the enterprise and security space include A10 Networks (ATEN), Check Point (CHKP), CyberArk (CYBR), Cyren (CYRN), and Fortinet (FTNT).

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Acacia Communications sold for $2.6B

Cisco to acquire Acacia Communications for $70.00 per share in cash

Acacia Comms tumbles, Stockwinners.com
Acacia Comms. sold to Cisco, Stockwinners.com

Cisco (CSCO) and Acacia Communications (ACIA) announced they have entered into a definitive agreement under which Cisco has agreed to acquire Acacia.

An existing Cisco supplier, Acacia designs and manufactures high-speed, optical interconnect technologies that allow web scale companies, service providers, and data center operators to meet the fast-growing consumer demands for data.

Cisco buys Acacia Comms. at a 47% premium, Stockwinners

Under the terms of the agreement, Cisco has agreed to acquire Acacia for $70.00 per share in cash, or for approximately $2.6B on a fully diluted basis, net of cash and marketable securities.

The acquisition is expected to close during the second half of Cisco’s FY2020, subject to customary closing conditions and required regulatory approvals.

Cisco, whose equipment makes up the backbone of the internet and corporate networks, has recently rekindled growth by revamping existing products and adding new software and services under a corporate makeover by Chief Executive Officer Chuck Robbins. In May, the company gave a bullish sales and profit forecast for the current period, a sign that corporations continue to spend on computer networks despite the trade dispute between China and the U.S.

Bill Gartner, who heads Cisco’s Optical Systems and Optics, wrote that Acacia’s products “are designed to transform communications networks through improvements in performance, capacity and cost.” He added that Acacia’s coherent optics technology will build on Cisco’s strength in optical, silicon, and software technologies.

Upon completion of this transaction, Acacia employees will join Cisco’s Optical Systems and Optics business within the networking and security business under David Goeckeler.

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Cypress Semiconductor sold for $23.85 a share

Infineon to acquire Cypress Semi in deal with enterprise value of EUR9B

Infineon to acquire Cypress Semi in deal with enterprise value of EUR9B , Stockwinners

Infineon Technologies (IFNNY) and Cypress Semiconductor Corporation (CY) announced that the companies have signed a definitive agreement under which Infineon will acquire Cypress for $23.85 per share in cash, corresponding to an enterprise value of EUR9B.

The companies said that expected economies of scale will create cost synergies of EUR180M per annum by 2022.

The complementary portfolios will enable the offering of further chip solutions with a revenue synergies potential of more than EUR1.5B per annum in the long term.

The offer price represents a 46% premium to Cypress’s unaffected 30-day volume-weighted average price during the period from 15 April to 28 May 2019, the last trading day prior to media reports regarding a potential sale of Cypress.

Cypress expects to continue its quarterly cash dividend payments until the transaction closes.

This includes Cypress’s previously announced quarterly cash dividend of 11c per share, payable on July 18, 2019 to holders of record of Cypress’s common stock at the close of business on June 27, 2019.

The funding of the acquisition is fully underwritten by a consortium of banks. Infineon is committed to retaining a solid investment grade rating and, consequently, Infineon intends to ultimately finance approximately 30 percent of the total transaction value with equity and the remainder with debt as well as cash on hand.

The financial policy to preserve a strategic cash reserve remains in place. The acquisition is subject to approval by Cypress’s shareholders and the relevant regulatory bodies as well as other customary conditions.

The closing is expected by the end of calendar year 2019 or early 2020.

Hassane El-Khoury, President and CEO of Cypress, said:

“The Cypress team is excited to join forces with Infineon to capitalize on the multi-billion dollar opportunities from the massive rise in connectivity and computing requirements of the next technology waves. This announcement is not only a testament to the strength of our team in delivering industry-leading solutions worldwide, but also to what can be realized from uniting our two great companies. Jointly, we will enable more secure, seamless connections, and provide more complete hardware and software sets to strengthen our customers’ products and technologies in their end markets. In addition, the strong fit of our two companies will bring enhanced opportunities for our customers and employees.”

CY closed at $17.82. IFNNY closed at $17.77.

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