Thoma Bravo's renegotiated deal has U.S. investors wondering who's next

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07/06/2022 16:39

By Krystal Hu
    June 7 (Reuters) - Investors who speculate on whether
mergers and acquisitions will be completed as agreed are betting
against the shares of some companies that have inked leveraged
buyouts in the wake of private equity firm Thoma Bravo
renegotiating a deal.
    The buyout firm convinced software firm Anaplan Inc  PLAN.N 
to agree to a reduction to the $10.7 billion purchase price by
about $300 million, the companies said on Monday.  urn:newsml:reuters.com:*:nL4N2XT26K
    Thoma Bravo argued that Anaplan breached a condition for
their deal to be completed, and while the latter disagreed, it
negotiated a 3.4% cut to the deal price to avoid lengthy
litigation over the dispute, the companies said. 
    The renegotiation of that deal has coincided with the Nasdaq
Composite Index  .IXIC  dropping more than 24% since the start
of the year, amid concerns about soaring inflation and a looming
economic slowdown. This has fueled speculation among investors
that some private equity firms may be getting buyer's remorse
and are also looking to renegotiate their deals lower.
    "This opens up a little bit of a Pandora's box because we
don't know if it's just kind of a one-off thing, or is it the
beginning of buyers that signed deals at the beginning of the
year all of a sudden looking for recuts," said Chris Pultz,
portfolio manager of merger arbitrage at Kellner Capital.
    Shares of SailPoint Technologies Holdings Inc  SAIL.N 
dropped 3% on Monday on investor fears that Thoma Bravo will
seek to renegotiate its $6.9 billion deal to buy the identity
security company.
    Sources close to Thoma Bravo said Anaplan'a price cut was
case-specific and the buyout firm had no current plans to push
for a renegotiation of the SailPoint deal or other agreed
transactions. 
    SailPoint did not immediately respond to requests for
comment. Thoma Bravo declined to comment.
    Shares of software company Citrix Systems Inc  CTXS.O  fell
2% on Monday on concerns that its $16.5 billion sale to Vista
Equity Partners and Elliott Investment Management LP will be
renegotiated.
    Shares of auto parts maker Tenneco Inc  TEN.N  dropped 4% on
Monday on doubts over the company's $7.1 billion sale to Apollo
Global Management Inc  APO.N . 
    Citrix and Tenneco did not immediately respond to requests
for comment.
    To be sure, investors are still assigning odds higher than
50% that these leveraged buyouts will be completed, based on how
the shares of the target companies are trading. But investors
say the new uncertainty surrounding these deals underscores how
the stock market volatility is pushing them to reassess whether
they have priced in the worst-case scenario.  
    "You could argue that the probability of these deals closing
hasn't really changed. But the standalone downside has changed.
And that has contributed to spreads widening," portfolio manager
Roy Behren, co-president at Westchester Capital Management,
said.
  

 (Reporting by Krystal Hu in New York
Additional reporting by Chibuike Oguh in New York
Editing by Matthew Lewis)
 ((Krystal.Hu@thomsonreuters.com;))