FleetMatics Group PLC (NYSE: FLTX) is soaring this morning in trading – why? As Mario Gabelli would say deals, deals, and….. Verizon Communications Inc. (NYSE:VZ) offered to buy the GPS maker at a huge premium (to what shares were trading at). FleetMatics Group are up about 40 percent at the time of this article on the merger news. So what are the details? Synergy Galore? Here is what the sell side is saying.
FleetMatics Group PLC (NYSE: FLTX)
On Monday, August 1, before the market open, Verizon announced it will acquire Fleetmatics Group for $60/share, for a total deal value of ~$2.4 billion. As we don’t believe a higher bid is likely, we are downgrading shares to Hold from Buy. The deal values the company at 17.2x 2017E EBITDA, 6.0x 2017E EV/Sales and 29x 2017E EPS. Although the story has been under pressure this year on fears of rising churn and a net add slowdown, the fundamentals of the business have delivered over a long period of time and the company has maintained market leadership in a rapidly consolidating space. We note that Verizon also recently bought Telogis, the leading enterprise grade, long-haul fleet management company, drawing a clear line in the sand that Verizon aspires to dominate the rapidly growing connected vehicle trend, especially in the fleet management segment.
In our mind, Fleetmatics was well positioned with a long run-way of new product opportunities to expand their reach both domestically and abroad. They were also going through a CEO transition that was to take place at the end of 2016. In our mind we always thought the company could be acquired, but the timing was always difficult to predict. The deal with Verizon makes strategic sense to us and we would view the company as the most obvious buyer given its recent acquisition of Telogis (more of a large enterprise solution), which incidentally just closed on July 29, and internal presence in the space through Verizon Telematics. With the acquisition of Fleetmatics, the company now has a sizable presence in the fleet management software market, an area it has obviously deemed of strategic importance.
Additionally, the analysts from both RBC and Stifel are downgrading FLTX and do not expect a bidding war here.
More from the press release below
NEW YORK and DUBLIN, Aug. 1, 2016 /PRNewswire/ — Verizon Communications Inc. (NYSE, Nasdaq: VZ) and Fleetmatics Group PLC (NYSE: FLTX) today announced they have entered into a definitive agreement under which Verizon will acquire Fleetmatics, a leading global provider of fleet and mobile workforce management solutions, for $60.00 per share in cash – representing a value of approximately $2.4 billion.
“Fleetmatics is a market leader in North America — and increasingly internationally — and they’ve developed a wide-range of compelling SaaS-based products and solutions for small- and medium-sized businesses,” said Andrés Irlando, CEO of Verizon Telematics.
“The powerful combination of products and services, software platforms, robust customer bases, domain expertise and experience, and talented and passionate teams among Fleetmatics, the recently-acquired Telogis, and Verizon Telematics will position the combined companies to become a leading provider of fleet and mobile workforce management solutions globally,” Irlando added.
“Verizon and Fleetmatics share a vision that the SaaS-based fleet management solution market is extraordinarily large, lightly penetrated, global and fragmented which can best be attacked together with a world class product offering and the largest distribution channel in the industry,” said Jim Travers, Chairman and CEO of Fleetmatics.
“Fleetmatics brings over 37,000 customers, approximately 737,000 subscribers, a broad portfolio of industry leading products, and a team of 1,200 professionals focused on solving the critical challenges of businesses that deploy mobile workforces. We are excited to partner with Verizon in fulfilling the mission of becoming the largest mobile workforce management company in the world,” Travers added.
In June, Verizon Telematics also announced the acquisition of Telogis, Inc., a global, cloud-based mobile enterprise management software company based in Aliso Viejo, Calif. That transaction closed on July 29.