SailPoint Technologies Holdings, Inc. (NYSE: SAIL) has agreed to combine its business with a private-equity firm, Thoma Bravo, in a $6.9-billion cash transaction. The news lifted the shares of SailPoint to its 52-week high of $64.39 on Monday. It closed the trading session at $64.05.
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While the board of directors has given its green light to the deal, the company has yet to bag shareholders’ approval. Contingent upon this approval and fulfillment of other customary conditions, the takeover of SailPoint by Thoma Bravo is expected to conclude in the second half of 2022.
The Austin, TX-based company has expertise in providing enterprise identity security solutions. Its customer base, including financial institutions and system integrators, is spread across the Middle East, the United States, and other countries.
Rationale of the Transaction
As noted, SailPoint’s shareholders will receive cash of $65.25 for every share held by them. This compensation values SailPoint at a 48% premium over the volume-weighted average closing price for the past three months.
Upon the closing of the transaction, SailPoint will cease trading on the NYSE and will operate as a private company. Its headquarters will remain in Austin, TX.
The CEO and Founder of SailPoint, Mark McClain, believe that the company’s takeover by Thoma Bravo will yield cash benefits immediately for shareholders as well as help boost the value of their holdings.
He opines that the takeover will put SailPoint on a “long-term growth trajectory with greater flexibility and effectiveness” as well as “boost customer experience, enlarge market presence, and accelerate innovation in identity security.”
Wall Street’s Take
Following the announcement, Joshua Tilton of Wolfe Research downgraded the rating on SailPoint to Hold from Buy. The analyst, however, kept the price target intact at $65 (1.48% upside potential).
In addition to the above downgrade, the TipRanks data reveals that four other analysts lowered their ratings on SailPoint from Buy to Neutral on Monday.
The only exception was Wedbush analyst Daniel Ives, who maintained a Buy rating on the stock on Monday with a price target of $60 (6.32% downside potential).
Overall, the Street has a Moderate Buy consensus rating on SailPoint based on five Buys, six Holds, and one Sell. SailPoint’s average price forecast of $59.39 suggests 7.28% downside potential from current levels. Over the past year, shares of SailPoint have gained 31.1%.
Risk Analysis
Per the TipRanks Risk Factors tool, SAIL is at risk mainly from three factors: Finance & Corporate, Tech & Innovation, and Ability to Sell. While the Finance & Corporate risk category contributes 13 risks to the total 35 risks identified for the stock, Tech & Innovation and Ability to Sell account for eight and seven risks, respectively.
Conclusion
Mark McClain is optimistic about the growth prospects of SailPoint as, “Identity security is core to cyber security and businesses have realized that to fuel business growth and success, they must start with identity as the foundation for secure business transformation.”
Further, the takeover is expected to unlock more values and innovation capabilities for the company.
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