Open Text to Buy Vignette for $310M

On May 6, 2009, enterprise content management vendor Open Text announced it would acquire Web content management company Vignette. Open Text is a leading provider of enterprise content management and communication services. Vignette provides Web content management and portal software.

Transaction Detail:

  • Cash plus stock deal valued at $310M at May 5, 2009.
  • Net of Vignette’s cash/near cash of around $140M; this represents a price/trailing 12-month revenue ratio of just under 1.1.
  • Per share, Vignette stockholders will receive $8 in cash and Open Text stock worth $4.70 at the time of the announcement and $4.48 today, so valuing each Vignette share at around $12.50-12.70.
  • The price is near to the 12 months’ Vignette stock high of $13.08 (August 2008) and compares to the low of $5.70 (March 2009) and a price of $9.02 on May 5.

Recent Trading Performance:

  • Open Text is a very successful, cash-generative, company:
    • At March 31, 2009, it had $237M in cash and operations generated $73M cash in the March quarter alone.
    • Fiscal 2008 (June) revenues were $725M, up 22% on 2007 and net income was $53M, almost 150% up on the previous year.
    • In the quarter to March 31, 2009, revenues of $192M were up 8% on 2008, and net income was $22M (2008 $7M). Net income for the 9 months to March 31 was $37M (2007 $26M).
  • Vignette has moved from significant profit in 2007 to a loss in 2008, as a consequence of reduced revenues:
    • At March 31 the company had cash/near cash of $143M.
    • Vignette revenues for the year ended December 31, 2008, were down by 12%, to $170M, totally as a result of lower license income. A net loss of $6M was incurred, compared to a profit of $22M in 2007.
    • In the quarter to March 31, 2009, revenues of $34M were down $11M on 2008; license revenues fell $3M and service revenues were $8M lower. The net loss for the quarter was $1.8M (2008 $0.8M).

David Ferris and Mike Stackpoole

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