Sovereign Wealth Funds Help Take McAfee Corp Private

Posted on 11/08/2021

Cybersecurity and software protection company McAfee Corporation (NASDAQ:MCFE, McAfee) entered into a definitive agreement to be acquired by an investor group led by Advent International Corporation and Permira Advisers LLC, Crosspoint Capital Partners (Crosspoint Capital), Canada Pension Plan Investment Board (CPP Investments), Singapore’s GIC Private Limited, and a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA). McAfee was founded in 1987 by John McAfee.

As part of the transaction, the Investor Group will acquire all outstanding shares of McAfee common stock for $26.00 per share in an all-cash transaction valued at approximately $12 billion on an equity value basis, and over $14 billion on an enterprise value basis after giving effect to repayment of McAfee debt. The purchase price represents a premium of approximately 22.6% over McAfee’s closing share price of $21.21 on November 4, 2021, the last trading day prior to media reports regarding a potential sale of McAfee.

Upon completion of the transaction, the Investor Group will take ownership of McAfee. As a privately held company, McAfee will continue building on its success and proven track record of growth as a pure-play consumer cybersecurity leader following the sale of McAfee’s Enterprise business, and the associated one-time dividend of $4.50 per share, to private equity firm Symphony Technology Group for $4.0 billion, which closed on July 27, 2021.

In 2017, TPG Capital partnered with Intel Corporation to carve out McAfee from Intel’s core operations to establish a pure-play cybersecurity company with access to significant capital, operational and technology resources. McAfee completed its initial public offering in 2020, with TPG and Intel remaining as shareholders in the company.

Collectively, the Investor Group will provide McAfee with both financial and operational resources to further enhance its consumer offering and capture the rapid growth in consumer demand for digital protection services. McAfee’s strong brand awareness, diversified distribution model and customer-centric approach has made it a clear leader in the rapidly evolving consumer online protection space. The Investor Group will support McAfee as it continues to broaden its differentiated online protection solutions and drive long-term value through market expansion.

Under the terms of the agreement, which has been approved by the McAfee Board of Directors, McAfee shareholders will receive $26.00 in cash for each share of common stock they own.

The transaction is expected to close in the first half of 2022, subject to customary closing conditions, including, among others, approval by McAfee shareholders, receipt of regulatory approvals, and clearance by the Committee on Foreign Investment in the United States. Intel Americas, Inc. and certain funds affiliated with TPG Global, LLC have entered into a voting agreement pursuant to which they have agreed, among other things, to vote their shares of company stock in favor of the transaction, subject to certain conditions. The voting support under the voting agreement ceases automatically if the merger agreement is terminated or if the McAfee board makes an adverse recommendation change. These stockholders currently represent approximately 67.9% of the current outstanding voting power of the McAfee common stock.

The buyer entity in the merger, Condor BidCo, Inc. (Parent), has obtained equity financing and debt financing commitments for the purpose of financing the transactions contemplated by the merger agreement. Funds advised by the Investor Group have committed to capitalize Parent at the closing of the merger with an aggregate equity contribution equal to US$ 5.2 billion on the terms and subject to the conditions set forth in signed equity commitment letters.

Upon completion of the transaction, McAfee common stock will no longer be listed on any public securities exchange.

PSP Investments Credit USA LLC and NB Andes LP (investment funds managed by Neuberger Berman)are the Preferred Equity Financing Sources and they have agreed to provide Condor BidCo with preferred equity financing in an aggregate principal amount of up to US$ 800 million on the terms and subject to the conditions set forth in a preferred equity commitment letter.

JPMorgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citibank, N.A. (and/or its affiliates), HSBC Bank USA, National Association, Royal Bank of Canada, CPPIB Credit Investments III Inc., UBS AG, Stamford Branch and PSP Investments Credit II USA LLC (collectively, the “Debt Arrangers”) have agreed to provide Parent with debt financing consisting of a $6.66 billion first lien term loan facility, a $1 billion first lien cash flow revolving facility and a $2.32 billion senior unsecured bridge facility (which may be replaced with senior notes issued through a Rule 144A or other private placement) on the terms and subject to the conditions set forth in a debt commitment letter. The obligations of the Debt Arrangers to provide the debt financing under the debt commitment letter is subject to a number of customary conditions.

Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC are serving as financial advisors to McAfee and Ropes & Gray and Moulton Moore Stella are serving as legal counsel. JP Morgan Securities LLC, BofA Securities, Inc., Barclays Capital Inc. and Citigroup Global Markets Inc. are serving as financial advisors, with Bryant Stibel Group serving as strategic operating advisors to the Investor Group. Fried, Frank, Harris, Shriver & Jacobson are acting as M&A legal counsel and Kirkland & Ellis are acting as Finance legal counsel to the Investor Group.

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