Verint to split into two companies

Dan Bodner Photo: Eyal Izhar
Dan Bodner Photo: Eyal Izhar

Israeli tech company Verint will separate its civilian and military businesses. Verint will also receive investment of $400 million through Apax Partners.

Verint Systems Inc. (Nasdaq: VRNT) has announced that it will split into two companies, one of which will consist of its customer engagement business, while the other will consist of its cyber intelligence business. Verint expects to complete the separation shortly after the end of its next fiscal year ending January 31, 2021.

The move comes a few months after Verint rejected demands from minority shareholders to consider a split. Verint, headed since 1994 by Dan Bodner, provides systems and services for business and military intelligence. Among other things, these involve analytics solutions, cyber, and video monitoring, with the business divided into two sectors: civilian, which it calls customer engagement; and military, which it calls cyber intelligence.

In the past, Verint was often compared with fellow Israeli company NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE), but in recent years the similarity between the two companies has diminished, after Nice's current CEO Barak Eilam introduced a strategy that took Nice out of the military field, leaving it to focus on its civilian business. This has worked well for Nice: in recent years its results have steadily improved, giving its shareholders considerable added value. Nice did something similar to what Verint is doing now: a spin-off, through the sale of its military and security activity. Nice has a current market cap of $9 billion, three times that of Verint, when five years ago their market caps were similar.

This was one of the complaints of Verint shareholder Neuberger Berman, which pointed out that Verint was lagging behind Nice in investor returns. For its part, Verint argued that its strategy was working well and generating value. The dispute with the investment fund eventually ended in compromise.

"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," Bodner said. "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."

Verint will implement the separation through a pro-rata distribution of common stock of a new entity that will hold the cyber intelligence business. Completion of the transaction is subject to regulatory approvals.

In addition, Verint announced that funds advised by Apax Partners have agreed to invest up to $400 million in Verint. The investment will be made in the form of convertible preferred stock in two tranches of $200 million each. The first tranche is targeted to close in Verint's first quarter ending April 30, 2020. The second tranche is conditional on fulfilment of the separation plan, and is expected to close shortly after that takes place.

Verint today also announced a a new share repurchase program for up to $300 million of common stock over the period ending on February 1, 2021. 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 a revolving credit facility.

Verint also released quarterly results yesterday. Revenue grew 7.5% in comparison with the corresponding quarter to $331 million, which compares with a consensus analysts' estimate of $333 million. Non-GAAP net profit was $63 million, 12% higher than in the corresponding quarter. On a GAAP basis, net profit was $11.7 million, compared with $19 million in the corresponding quarter.

Published by Globes, Israel business news - en.globes.co.il - on December 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Dan Bodner Photo: Eyal Izhar
Dan Bodner Photo: Eyal Izhar
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