Monday 14 October 2019 9:56 am

Sophos shares jump as it announces £3bn US private equity buyout

Cyber security group Sophos shares spiked this morning as it announced it is to be bought out by a US private equity firm, in a deal that values it at £3.1bn.

Thoma Bravo said this morning it would take Sophos private, as it dives deeper into the booming cyber security sector.

Read more: Sophos share price jumps as it grows revenue

The deal values Sophos at about 37 per cent above its previous market value. Shares jumped 36.6 per cent this morning on the news the London-listed firm would be coming off the markets.

The Oxford-based company makes antivirus, encryption and cloud security products, boasting more than 400,000 customers in over 150 countries.

However, the last year-and-a-half have not been easy for shareholders. Directors warned of slowing growth both in November last year and January this year, causing shares to tumble on both occasions.

The deal, which ends a four-year stint on public markets for Sophos, includes its net debt.

Thoma Bravo is active in the software buyout market, having already made more than 200 acquisitions representing worth over $50bn overall. However, this is its first outside the US.

Read more: City of London police chief urges banks to report cyber attacks

It manages a series of funds worth more than $35bn (£27.8bn).

“Thoma Bravo has deep sector expertise in cyber security software as well as a long and successful record of partnering with and investing in its portfolio companies to support long-term growth and success,” said Sophos chairman Peter Gyenes.

Happy ending to a ‘rocky road’

Nicholas Hyett, analyst at Hargreaves Lansdown said: “It’s been a rocky road for Sophos investors … against that background we suspect most investors will be reasonably happy with the offer, and with Sophos’ former private equity owner Apax already committed to backing the deal we see little chance of it failing to win shareholder support.

“One thing worth bearing in mind is that the offer is denominated in dollars, and given the volatility we’ve seen in sterling recently that means the final pounds and pence value of the deal could end up being significantly different to that reported today.

“If sterling weakens then that’s good news for UK investors, but should a Brexit deal be agreed, a rally in sterling could leave investors out of pocket.

“For those unwilling to stomach the volatility and who want to lock in the current price, it might make sense to sell the shares now rather than hold on until the deal completes – even if that does rule out the possibility of a bump in price from any rival bid.”

Read more: Concerns over Sophos as shares tank in early trading after ‘subdued performance’ warning

AJ Bell analyst Russ Mould added: “Another day, another takeover of a UK company by a foreign business as a US private equity firm makes a bid for FTSE 250 software firm Sophos.

“The downside of Sophos receiving a takeover bid is that the London market loses yet another tech stock.

“There are now slim pickings for UK investors wanting to invest in mid to large technology companies, meaning they have to look further afield for opportunities and be comfortable owning overseas-listed shares or, as an alternative, leave it to a fund manager to find suitable stocks.”