McAfee To Divest Enterprise Business For $4B In Cash, Stock Gains 13%

Shares of McAfee Corp. jumped 12.7% on Monday after the cybersecurity company announced the divestment of its enterprise business to a consortium led by Symphony Technology Group. The all cash deal worth $4 billion is expected to close by the end of 2021.

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McAfee (MCFE) said that the deal will help it become a “pure play consumer cybersecurity company.” CEO, Peter Leav, said, “This transaction will allow McAfee to singularly focus on our consumer business and to accelerate our strategy to be a leader in personal security for consumers.”

The company expects to use some of the deal proceeds to reduce debt by approximately $1 billion and pay customary transaction expenses and other one-time costs. McAfee plans to issue a special dividend of about $4.50 per share after the conclusion of the transaction. Furthermore, McAfee will continue to retain its name, while the Enterprise business will be re-branded in the coming months. (See McAfee stock analysis on TipRanks)

Following the announcement, Mizuho Securities analyst Gregg Moskowitz raised the stock’s price target to $28 (17.3% upside potential) from $26 and maintained a Buy rating. In a note to investors, the analyst said that the unit sale can be viewed as a “favorable” decision, as the divestiture will allow McAfee to increase its focus on “its far more attractive Consumer business.”

Overall, the Street has a Moderate Buy consensus rating on the stock based on 4 Buys and 4 Holds. The average analyst price target of $23.44 implies downside potential of 1.80% to current levels. Shares have gained 28.3% since listing on the NASDAQ on Oct. 22, 2020.