- Software company New Relic and two San Francisco-based private equity companies, Francisco Partners and TPG, have reached an agreement on a $6.5 billion takeover.
- The acquisition was revealed on the same day, despite New Relic’s most recent quarterly financial figures indicating a loss of about $33 million.
- New Relic’s shares would be purchased for $87 each, removing it from the open market.
- New Relic has 45 days to look into alternative bids, and the acquisition is anticipated to close in late 2018 or early 2019.
- Bill Staples, the CEO of New Relic, alluded to recent layoffs as “restructuring” and expressed confidence in the company’s future, although he made no mention of the pending transaction.
A $6.5 billion takeover of the software company New Relic has been agreed to. This San Francisco tech megadeal involves a 15-year-old company and two powerful local private equity firms.
On the same day that New Relic released its quarterly financial results and less than a month after announcing the layoff of more than 200 employees, a deal was revealed. New Relic nonetheless lost almost $33 million from April to June, despite a rise in revenue.
The buyout agreement was coordinated by Francisco Partners and TPG, two significant San Francisco-based private equity firms with strong ties to the technology industry.
Software giant New Relic agrees to $6.5 billion takeover deal
Engineers can use the data products produced by New Relic to manage their software. The business, which has its headquarters at 188 Spear St. in the heart of San Francisco, went public in 2014. Its stock increased by 13% on Monday after the acquisition was announced, although former “Relics” who sold their business shares as they left the company in the previous month won’t benefit from the merger.
In late June, CEO Bill Staples referred to the job cuts of 200+ employees as “restructuring,” marking New Relic’s third round of layoffs in three years. He spoke at the time in a positive manner about the company’s future and its road to profitability, but he omitted to mention the upcoming deal.
Reuters said in May that Francisco Partners and TPG had terminated negotiations to purchase New Relic because they were unable to secure money to cover the valuation, but it is apparent that the two private equity companies returned to the table.
The acquisition, which is anticipated to be completed in late 2018 or early 2019, would pay New Relic stockholders $87 per share and remove the firm from the public markets. Even though New Relic isn’t profitable, the investing goliaths may have been drawn to its steady expansion and employment reduction. The acquisition rules provide that the corporation has 45 days to look around for alternative offers.
Francisco Partners, a San Francisco-based company that was started in Menlo Park, has invested in a number of software businesses, including GoodRX, Eventbrite, and Zocdoc. TPG, a company with $137 billion in assets and a local office, has invested in Uber, Spotify, and Airbnb.
In a public statement to consumers on Monday, Staples stated, “This change in ownership does not impact our strategy, who we are, how we do business with you, or how we feel about you. Private equity firms typically use loans to purchase businesses they think can be improved and eventually partially or completely sold for a profit.
Lew Cirne, the creator of New Relic and master of anagrams, stands to gain financially from the buyout if it goes through. Cirne still owns 10% of the business, according to a June filing. According to the declaration made on Monday, Cirne would transfer 40% of his interests to the private company.
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