Cyber security specialist FireEye (NASDAQ: FEYE) announced Wednesday evening that it would sell its FireEye product business, including the FireEye brand name, to a consortium of investors led by Symphony Technology Group (STG) for $ 1.2 billion in cash.
The company certifies that the deal will allow it to focus on its much faster-growing Mandiant Solutions segment.
Investors weren’t too happy with news that sent stocks down 16% at 1:15 p.m. EDT Thursday.
Sale of the core business
STG has agreed to acquire the product business, which includes email, endpoint and cloud security offerings, for $ 1.2 billion. That price is lower than some analysts expected, especially considering FireEye has yet to work with Mandiant’s subscription business. STG had previously acquired the corporate business of McAfee for $ 4 billion in March to expand its cybersecurity portfolio.
“We believe this separation will unlock our high-growth Mandiant Solutions business and enable both companies to better serve their customers,” said Kevin Mandia, CEO of FireEye, in a statement. “Upon completion, we will be able to focus solely on scaling our frontline intelligence and expertise through the Mandiant Advantage platform, while the FireEye product business will be able to invest in its cloud-first security product portfolio to prioritize. “
FireEye believes the divestment of the product business will allow management to focus on innovating its Mandiant Advantage platform, a software-as-a-service (SaaS) offering that enables companies to obtain threat intelligence, among other things and validate security controls. The company wants Mandiant to become a vendor independent provider.
Upon completion of the transaction (which is expected to occur by the end of the fourth quarter), FireEye and Mandiant will maintain the longstanding partnership that originally brought the two companies together. The companies will develop a series of market cooperation, strategic collaboration and transition services agreements that will benefit mutual customers.
A failed merger?
The deal is also a bit ironic as FireEye acquired Mandiant back in 2014 before being named CEO of Mandia in 2016. Back then, FireEye hoped that the combination of two complementary companies would create a threat protection powerhouse.
Upon completion of the divestment, Mandia is likely to be in a similar position as it was prior to FireEye’s initial acquisition of Mandiant, which was a cash and stock transaction valued at approximately $ 1 billion. With the separation of the divisions, FireEye implicitly admits that the initial merger thesis may not have turned out as hoped.
How the remaining company uses the money
FireEye said the deal will allow it to invest in future growth, expand the platform and increase market awareness while entering new international markets. In addition, the company’s board of directors has approved a new share buyback program for up to $ 500 million.
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