Symantec Corp announced that its Board of Directors has unanimously approved a plan to separate the company into two independent publicly traded companies: one business focused on security and one business focused on information management (“IM”).
Company’s decision to pursue a separation follows an extensive business review of the its strategy and operational structure. Creating two standalone businesses will allow each entity to maximise its respective growth opportunities and drive greater shareholder value.
“As the security and storage industries continue to change at an accelerating pace, Symantec’s security and IM businesses each face unique market opportunities and challenges. It has become clear that winning in both security and information management requires distinct strategies, focused investments and go–to- market innovation. Separating Symantec into two, independent publicly traded companies will provide each business the flexibility and focus to drive growth and enhance shareholder value,” said Michael A. Brown, President and CEO – Symantec.
The separation will allow each company to focus on its unique growth opportunities, R&D investments, and go-to-market capabilities, reduce operational complexity, enhance strategic flexibility, pursue partnerships, and develop independent M&A strategies and also set distinct capital allocation policies
“Taking this decisive step will enable each business to maximize its potential. Both businesses will have substantial operational and financial scale to thrive,” added Brown.
Security Business
Symantec is a trusted leader in security with leading overall market share—twice the nearest competitor—in a market projected to reach $38 billion in 2018. The company’s security business sees more, analyses more, and knows more about security threats than any other company in the world.
The security business generated $4.2 billion revenue in fiscal year 2014. The Security business will include: consumer and enterprise endpoint security; endpoint management; encryption; mobile; Secure Socket Layer (“SSL”) Certificates; user authentication; mail, web and data centre security; data loss prevention; hosted security; and managed security services.
Information Management Business
Symantec’s IM businesses compete in markets that were $11 billion in 2013 expanding to $16 billion by 2018. Its IM business is a market leader, serving 75% of theFortune 500. The company’s appliance products are outpacing the industry with 27% year-over-year growth, while its backup products rank first in the industry.
The IM business will allow organizations to harness the power of their information to enable highly informed decision making, no matter what system it resides on.
The IM business generated $2.5 billion revenue in fiscal year 2014. The Information Management business will include: backup and recovery; archiving; eDiscovery; storage management; and information availability solutions.
Organisation
Michael A. Brown will be the President and CEO of Symantec and Thomas Seifert will continue to serve as CFO. John Gannon will be General Manager of the new information management business and Don Rath will be its acting CFO.
Gannon served as President and COO of Quantum. Prior to Quantum, he led HP’s commercial PC business. Rath joined Symantec in August 2012 and previously held senior tax and finance roles with Synopsys, Chiron and VERITAS.
Transaction Details
The transaction is intended to take the form of a tax-–free distribution to Symantec shareholders of 100% of the IM business in a new, independent, publicly traded stock. The expected stock distribution ratio will be determined at a future date. The company expects to complete the spinoff by the end of December 2015. It expect to incur separation and restructuring charges through the completion of the transaction as it work to separate the two businesses.
The proposed separation is subject to customary conditions, including final approval by the company’s Board of Directors, the effectiveness of a Form 10 filing with the Securities and Exchange Commission, and satisfying foreign regulatory requirements.
There can be no assurance that any separation transaction will ultimately occur and, if one does occur, there can be no assurances as to its terms or timing. J.P. Morgan Securities LLC is serving as financial advisor to Symantec.
Business and Quarterly Outlook
Symantec reiterates the September quarterly guidance as stated on its August earnings call. The company intends to provide more detail about the quarter on its November 5th earnings call.
