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Citrix stock price stuck below CTXS buyout level as debt funding is sold at steep discount

By Jenny McCall

14:00, 20 September 2022

A image of Citrix offices in Silicon Valley
It was stated that this would be one of the largest buyouts in tech history - Photo: Shutterstock

The software company, Citrix (CTXS), which announced in January 2022 that it had entered into a definitive agreement to be acquired by Elliott Investment Management and Vista Equity Partners to be taken private in a $16.5bn (£14.4bn) deal, has seen its stock price fall below its buyout level. 

It was stated that this would be one of the largest buyouts in tech history, and Citrix shareholders will receive $104 per share in cash. However, its stock price has since fallen and was standing at $103.72 in early trade on 20 September. 

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Citrix (CTXS) share price chart

Investors are cautious 

“In connection with the transaction, Vista and Evergreen intend to combine Citrix  (CTXS) and TIBCO Software, one of Vista’s portfolio companies. TIBCO is a global leader in enterprise data management, empowering its customers to connect, unify, and confidently predict business outcomes,” a statement from Citrix said.

“The combination brings together Citrix’s secure digital workspace and application delivery suite with TIBCO’s real-time intelligent data and analytics capabilities to empower customers and users with the secure application and information access and insights they need to accelerate digital transformation and navigate the hybrid workplace.”

The deal means that all of Citrix (CTXS) debt will also be acquired and the transaction is set to close at the end of September 2022.

It is also thought that the reason for the drop in Citrix's (CTXS) share price could be due to the banks and investors showing little enthusiasm for the deal.

The banks involved in the transaction, such as Goldman Sachs (GS), Bank of America (BAC), and Credit Suisse (CS), arranged $15bn in debt financing to fund the leveraged buyout of Citrix (CTXS) in January before the US Federal Reserve started an aggressive campaign to rein in US inflation by raising interest rates, thus making it more expensive to fund takeovers with borrowed money.

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Last week it was revealed in the FT, that as the banks attempted to sell the bonds and loans, prospective investors were shocked as it became apparent that the company would need to borrow more money soon after the deal is closed.

Bank of America (BAC) share price chart

Demand is lukewarm

Both Vista Equity Partners and Elliott Management stated that once the transaction closes the company would need more financing to help fund $200m in cost-cutting initiatives.

“They don’t have cash on hand and cash in the business to pay for severance and other wind-down cash expenses. It was lousy,” said one investor on the call.

Bankers backing the buyout of Citrix (CTXS) are discussing new ways to sell chunks of the $15bn financing to soften potential losses, including splitting a huge $7bn loan between themselves, private-credit funds, and other investors.

The debt financing will include a $4.55bn term loan and $4bn secured bond. Demand has been lukewarm, commitments for the loan are more than $4bn and orders for the bond have exceeded $3bn, but bankers were hoping for at least twice as much.

To get investors on side, the banks are now offering discounts in an attempt to increase interest.

Markets in this article

BAC
Bank of America Corp (Extended Hours)
42.75 USD
-0.45 -1.050%
GS
Goldman Sachs
485.02 USD
-1.17 -0.240%

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