What happened
Shares of McAfee (MCFE +0.00%) were quiet most of Friday, going sideways on perfectly ordinary trading volume. The computer security veteran suddenly sprung to life at 3:15 p.m. EDT as Bloomberg reported that the company is in "advanced talks" to go private. McAfee closed Friday's trading 20% above Thursday's closing price, having backed down from a peak gain of 24.4%.
Image source: Getty Images.
So what
A deal could be announced in a matter of days, according to Bloomberg's anonymous insider sources. The final price tag should land above the $10 billion mark in a team-up by private equity firms Permira and Advent International. Both firms focus on international growth investments and they have a total of $125 billion under management.
Now what
McAfee returned to the stock market in October 2020, having spun out from microchip maker Intel (INTC +0.42%) in 2016 after six rocky years acting as Chipzilla's data security division. This business is no stranger to the borderline between private and public companies. If Bloomberg's report is correct, Permira and Advent are likely to tighten up McAfee's operations away from the harsh glare of public investors, preparing to take it public again at a higher price a couple of years down the road. That's standard operating procedure for splashy private equity buyouts.
Friday's action brought McAfee's market cap to $11 billion, which is 10% above the suggested buyout price. It remains to be seen whether the equity firms are willing to follow through on this idea under these circumstances, as investors might balk at a final offer below the market price at the time. Moreover, McAfee isn't exactly a paragon of financial health. Getting this buyout ready for a profitable relaunch on the public market would take more than a spit-shine.
Next Thursday's third-quarter report will shed some light on McAfee's future. If Advent and Permira are serious about the reported deal, I wouldn't be surprised to see the official announcement on the day of that report. Either way, I'm not itching to get my hands on McAfee shares right now. Whether the buyout is happening or not, I don't see much room for shareholder gains from this price level.
