Melville, NY, USA, Dec 4, 2019 -- Verint Systems Inc. (NASDAQ: VRNT), announced that its Board of Directors has unanimously approved proceeding with a plan to separate Verint into two independent companies: one of which will consist of its customer engagement business, and one of which will consist of its cyber intelligence business. Verint expects to complete the separation shortly after the end of Verint’s next fiscal year ending January 31, 2021.
"With our customer engagement business approaching $1 billion in annual revenue and our cyber intelligence business approaching $500 million in annual revenue, we believe the two independent, publicly traded companies will both benefit from the separation and be well positioned to pursue their own strategies, drive opportunities to accelerate growth and extend their market leadership. The separation will make it easier for investors to evaluate and make independent investment decisions in each business. In preparation for the separation, we have taken steps over the last several years to strengthen the two businesses operationally and believe we are now well positioned to execute our separation plan," said Dan Bodner, Verint CEO.
Verint intends to implement the separation through a pro-rata distribution of common stock of a new entity that will hold the cyber intelligence business and expects the distribution to qualify as tax free to Verint shareholders for U.S. federal income tax purposes. The completion of the transaction is subject to certain customary conditions, including final approval of the Verint Board of Directors, receipt of tax opinions from counsel as well as rulings from the Internal Revenue Service and the Israeli Tax Authority with respect to tax treatment to Verint and its shareholders, and effectiveness of a registration statement to be filed with the U.S. Securities and Exchange Commission. The separation is not expected to require a shareholder vote. The separation structure is subject to change based upon various tax and regulatory factors and there can be no assurance that any separation transaction will ultimately occur or, if one does occur, of its terms or timing.
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Investment by Funds Advised by Apax Partners
Funds advised by Apax Partners (the "Apax Funds"), a global private equity advisory firm, have agreed to invest in Verint, subject to customary closing conditions including the receipt of required regulatory clearances. The Apax Funds have experience in the software sector, including through previous investments in TriZetto, Plex Systems, RealPage, Sophos, Epicor and Exact Software. The first tranche is targeted to close in our first quarter ending April 30, 2020. The second tranche, conditioned on and expected to close shortly following the separation (expected shortly after the end of Verint’s next fiscal year ending January 31, 2021), will be made into Verint, the entity holding the customer engagement business.
Mr. Bodner added, "Apax Partners has a proven track record of creating value by partnering with leading software companies around the world, including significant experience in both carve-outs and cloud transitions. The investment represents a strong vote of confidence in our strategy and future growth opportunities."
In connection with the closing of the first tranche of the investment, Jason Wright, Partner at Apax Partners, will be appointed to Verint’s Board of Directors. At the closing of the second tranche, the company will add a mutually agreed upon independent Director to Verint’s Board.
Mr. Wright said, "We are excited to partner with Verint and help the Company complete the separation, enabling both businesses to achieve their full potential. Verint’s Customer Engagement business is a market leader and we look forward to working with management to execute its cloud strategy and extend its market leadership."
Verint also announced that our Board of Directors has authorized a new share repurchase program whereby we may repurchase common stock over the period ending on February 1, 2021 (on or shortly before the planned business separation). Repurchases are expected to be financed with the proceeds of the first tranche of the Apax Funds investment and available cash, including possible borrowings under our revolving credit facility. We may utilize a number of different methods to effect the repurchases, including but not limited to, open market purchases and accelerated share repurchases, and some of the repurchases may be made through Rule 10b5-1 plans. The specific timing, price, and size of purchases will depend on prevailing stock prices, general market and economic conditions, and other considerations, including the amount of cash available in the U.S. and other potential uses of cash. The program may be extended, suspended or discontinued at any time without prior notice and does not obligate us to acquire any particular amount of common stock.
Customer Engagement and Cyber Intelligence Leadership
The separation will enable both companies to achieve even better performance over the long term, as the two companies will have:
separate boards with further differentiated skillsets to support tailored strategic plans;
specific incentive programs more closely aligned with standalone business performance;
capital structures tailored to the unique characteristics of each business; and
enhanced appeal to a broader set of investors suited to the strategic and financial characteristics of each company.
Mr. Bodner concluded, "Today’s announcements are consistent with our commitment to creating value for our shareholders. We have built two strong, but increasingly distinct businesses, and we believe that separating these two businesses at this stage of their evolution will allow each to unlock its full potential. Our customer engagement business will continue to focus on helping organizations elevate customer experience while reducing costs and our cyber intelligence business will continue to focus on helping make the world a safer place."
Jones Day is serving as legal advisor to Verint and Jefferies LLC is acting as financial advisor to Verint. Kirkland & Ellis LLP is serving as legal advisor to Apax Partners.
Posted by Veronica Silva Cusi, news correspondent
Verint Systems is a provider of analytic software-based solutions for the security and business intelligence markets. Verint solutions transform voice, video, and text into actionable intelligence - mission-critical insights for achieving strategic goals. Verint solutions are used in global and diverse markets, including: governments, law enforcement, and transportation; global corporations and financial institutions; retail and gaming establishments; and telecommunications and utility providers.
Published: Thursday, December 5, 2019
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