Private equity firms buying Forescout Technologies for $1.9b

ForeScout Photo: Prospectus
ForeScout Photo: Prospectus

Advent International and Crosspoint Capital have agreed to pay $33 per share for US-Israeli company Forescout, which made its Nasdaq IPO just over two years ago.

Just over two years have gone by since cybersecurity company Forescout Technologies, Inc. (Nasdaq: FSCT) made its IPO in New York, and it is about to become a privately-held company again. The company announced today that it will be sold to private equity firms Advent International and Crosspoint Capital Partners for $1.9 billion, or $33 per share.

The price represents a premium of 18% over the company's closing price yesterday, and today the share price rose 19%, surpassing the acquisition price. In its announcement, of the deal, Forescout states that "the purchase price represents a premium of approximately 30% over Forescout’s closing share price of $25.45 on October 18, 2019, the last full trading day prior to the release of the 13-D filings by Corvex Management L.P. and Jericho Capital Asset Management L.P. on October 21, 2019, which disclosed they had formed a partnership to approach Forescout and accumulated a combined 14.5% ownership in the company." The implication is that the acquisition of stakes by these two firms, which came shortly after Forescout's share price plummeted following a profit warning, was an important factor in pushing Forescout in the direction of a sale.

Forescout was floated on Nasdaq in October 2017 at $22 per share, so that for anyone who invested in the IPO, a $33 per share acquisition price is positive. At its peak, however, the share price reached $46, in March 2019. A secondary offering in early 2018 was at $29 per share. Shareholders that had been invested in the company since its days as a private company sold parts of their stakes at that time, among them the Accel, Amadeus Capital, Pitango and Meritech funds.

According to recent reports, Israeli fund Pitango and British fund Amadeus still hold shares in Forescout, and will sell their holdings in the current deal for $138 million (Amadeus) and $100 million (Pitango). Pitango partner Rami Kalish is a director of Forescout.

Forescout, founded by Israelis and with a development center in Tel Aviv, is headed by Michael DeCesare. It provides security and control solutions for connected devices in enterprises. The company does not install its security solution on end devices, but provides solutions that give its customers visibility on what happens on their networks and enables them to set security policy. It was founded by its Hezy Yeshurun, Oded Comay, Dror Comay, Doron Shikmoni, and Noga Alon. DeCesare will continue to head the company after the sale.

"Forescout has established itself as a leader in device visibility and control, with the most advanced platform in the market," DeCesare said today. "We are still in early innings of a large market opportunity as every organization needs visibility into what is connecting to their network and how to mitigate against high risk devices, including non-traditional IoT and OT devices. This transaction represents an exciting new phase in the evolution of Forescout. We are excited to be partnering with Advent International and Crosspoint Capital, premier firms with security DNA and track records of success in strengthening companies and supporting them through transitionary times."

The sale agreement includes a 30-day period in which Forescout can look for better acquisition offers and cancel the current deal if it receives one. Otherwise, the deal is due to close in the second quarter, subject to approval by the shareholders.

Forescout also released its 2019 financials today. Revenue for the year totaled $337 million, 13.2% more than in 2018. On a GAAP basis, the company posted a net loss for the year of $119 million, which compares with a loss of $74.8 million in 2018. On a non-GAAP basis, the net loss for 2019 was $38.4 million, or $0.84 per share, which compares with a loss of $17.4 million in 2018.

Published by Globes, Israel business news - - on February 6, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

ForeScout Photo: Prospectus
ForeScout Photo: Prospectus
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