Autonomy buys Zantaz

Source: Autonomy Corporation

Autonomy Corporation (LSE: AU. or AU.L), a global leader in infrastructure software for the enterprise, today announced an agreement to acquire Zantaz, Inc., a global leader in content archiving and electronic discovery solutions and software as a service.

The combination of the two companies will redefine information risk management by proactively automating the full spectrum of consolidated archiving, e-discovery, analytics and real-time policy management uniquely in one system. Customers' information will simultaneously be available in operational systems and consolidated archives, allowing rapid e-discovery and analytics to be run seamlessly across all information sources using advanced methods such as conceptual search, clustering and alerting.

Acquisition Highlights
  • Purchase price of approximately $375 million in cash after certain deductions, funded by an underwritten placing, a term loan and a portion of Autonomy's cash reserves.
  • ZANTAZ customers include 9 of the top 10 global law firms, 11 of the Fortune 25 and 14 of the top 20 financial securities firms.
  • Customers will benefit from a powerful combination of technology leadership and customer-facing strengths in sales, support and professional services
  • Transaction will add significant scale to Autonomy's revenue and profitability
  • Expected to be accretive to earnings in the first six months.
  • Expected costs synergies of approximately $25 million per annum.
    • Brought forward tax loses will be assumed with a net present value of approximately $45 million.
  • Post-closing Autonomy expects to have a cash balance of at least $75 million.
  • Steve King, CEO of ZANTAZ, will retain his position as CEO of the ZANTAZ division of the Autonomy group.
  • Transaction is expected to complete by August 2007 and is subject to regulatory approvals and other customary closing conditions. Irrevocable commitment to vote in favor of the transaction delivered from sufficient shareholders.
  • The acquisition exploits Autonomy's skills and strong track record in integrating businesses, evidenced by the London Stock Exchange's '2006 Achievement of the Year Award' for the success of the Verity acquisition.

Commenting on the transaction, Dr. Michr. Michael Lynch, group CEO of Autonomy said, "The combination of Autonomy and ZANTAZ, market leaders in enterprise search and content archival respectively, expands the addressable market, distribution and reach for Autonomy's highly successful Aungate IDOL-based products. Aungate has proven itself particularly strong in light of recent regulatory changes, such as the revised Federal Rules of Civil Procedure governing lawsuits in the US, and we believe this acquisition will greatly speed the adoption of this next generation of real-time technology into the market. Additionally, our distribution for Aungate is now increased through an on demand, software as a service model and a larger sales organization with deep legal and compliance domain expertise while Autonomy will greatly increase the international distribution for ZANTAZ' products. We have been greatly impressed by ZANTAZ' products and will be continuing to develop and support the whole range. Our combined solution will be unique in offering our existing 17,000 customers end-to-end information rich risk management solutions - from hosted archiving to e-discovery, compliance, real-time governance and archive analytics - in one consolidated platform, including information from documents to applications and voice and video."

"Companies are rapidly recognizing the importance of being able to proactively retain, classify and quickly extract meaningful evidence from terabytes of email, documents, spreadsheets, audio, video and other unstructured data for compliance and litigation purposes," said Steve King, ZANTAZ president and CEO. "Together with Autonomy, we will deliver an unprecedented opportunity for customers - including 14 of the top 20 securities firms and 9 of the top 10 global law firms - to gain competitive advantage and streamline the management and control of these key business processes, eliminating multi-vendor solutions and redundant resources, and significantly reducing cost and risk. We are extremely excited with the unique possibilities for future product direction that will arise through the integration with Autonomy's IDOL technology."

Transaction Terms

Under the terms of the acquisition agreement, Autonomy Corporation plc will acquire all outstanding securities of ZANTAZ, Inc..

The transaction is conditional upon, inter alia: (i) approval by ZANTAZ shareholders (with sufficient irrevocable commitments to approve the transaction already delivered); and (ii) regulatory approvals, including antitrust approvals. The terms of the transaction have been unanimously approved by the Boards of Directors of both companies. ZANTAZ has agreed to pay a break-up fee to Autonomy of $10 million payable under the acquisition agreement upon certain termination events. Following completion of the transaction ZANTAZ will become a wholly owned subsidiary of Autonomy and will be led by current ZANTAZ CEO Steve King.

Based on ZANTAZ' audited accounts for the year ended December 31, 2006, the value of the gross assets the subject of the transaction are $119 million, and the EBITDA and profits attributable to the assets the subject of the transaction are $5.2 million (or $6.6 million excluding certain one-time charges) and $ (10.1) million, respectively. ZANTAZ' revenue for the year ended December 31, 2006, for the go-forward operational units was approximately $100 million. The consideration will be funded through the proceeds of an expedited underwritten placing of Autonomy ordinary shares to financial institutions, a term loan under a $98 million bank debt facility and Autonomy's existing cash reserves.

Deutsche Bank acted as financial advisor to Autonomy.

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