Avast/AVG Deal: Why Should It Interest Intel?

Avast/AVG Deal: Why Should It Interest Intel?
By The original uploader was VD64992 at English Wikipedia [Public domain], via Wikimedia Commons

Intel Corporation (NASDAQ:INTC) will be very interested in the details of a recent Avast/AVG deal as recently there were reports about it exploring options for selling its security unit. Following a slow start to the year, the tech M&A scene, much like the IPO market, is heating up, and security tech companies are the biggest beneficiaries of this trend.

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Why is Intel interested in Avast/AVG deal?

Last month, Symantec revealed its intention of buying Blue Coat Systems, a security hardware/software firm, for $4.65 billion, equaling 6.2 times Blue Coat’s trailing sales and well above the $2.4 billion which Bain, a private-equity firm, paid for the company a year earlier. Then a few weeks ago, Cisco said it is acquiring CloudLock, a company that provides software for securing cloud apps, for $293 million.

On Thursday, Avast Software, a Czech antivirus software firm, announced plans to acquire rival Dutch PC/mobile security software provider AVG Technologies for $1.3 billion, representing a 33% premium over AVG’s Wednesday closing price. The drop in AVG’s traditional search toolbar business negatively affected its strike price as it only equals a modest 12 times AVG’s 2017 EPS consensus estimate.

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Despite this, Intel will be very pleased with the premium AVG received. The chip maker is reportedly planning to sell its Intel Security unit, which was the result of its 2010 acquisition of McAfee for $7.7 billion. Intel’s Security unit competes with AVG, Avast and Symantec, and though it has seen a rebound in sales of late, it has been marred by execution and competitive issues in recent years. The AVG deal could surely help the chip maker during negotiations with potential buyers.

FireEye a potential takeover target

In addition to Intel, FireEye will also happy with the Avast/AVG deal, reports The Street. The cyber-security firm, which is trading 84% below its 2014 high, reportedly turned down a buyout offer earlier this year as it was below its expectations of $30 or more per share, according to Bloomberg.

FireEye is struggling due to competition from cheaper network security offerings and sales execution issues, but it is still regarded to have the best solutions for endpoint device protection and network malware-detection. It is also known for services related to threat intelligence and probing security breaches. All of this fueled speculations that IT giants IBM, HP, or Cisco would make a bid for FireEye, provided they hadn’t already made one before.

At 10:15 a.m. Eastern, Intel shares were up 1.97% at $33.85. Year to date, the stock is down more than 3%, while in the last year, it is up almost 15%.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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