What: SolarWinds (NYSE: SWI), a leading provider of powerful and affordable IT operations management software to more than 150,000 customers worldwide, is soaring nearly 17% higher Wednesday after announcing it has entered into a definitive agreement to be acquired by private equity technology investment firms Silver Lake Partners and Thoma Bravo, LLC.
So what: SolarWinds shareholders, under the terms of the agreement, will receive $60.10 per share, which roughly makes the deal worth $4.5 billion in cash. "This transaction recognizes the strength of our unique business model and provides our shareholders with immediate and substantial cash value at a compelling premium," said Kevin B. Thompson, president and chief executive officer of SolarWinds, in a press release.
Indeed, it is a premium: While SolarWinds is trading "only" some 17% higher than the previous close as of this writing, the $60.10-per-share purchase price is a roughly 44% premium to the closing price of SolarWinds on Oct. 8,2015, which was one day prior to the company's announcement it was "exploring strategic alternatives," which often is code for a sale. Speculation sent the stock price higher before today's official announcement.
Now what: This seems like the best route for management of SolarWinds to best return value to shareholders after the company said it faced challenges in its licensing business in July and lowered annual revenue guidance. Despite a volatile stock price, this is giving shareholders that stuck with the company from its 2009 IPO a great exit price.