Blog Coverage Gartner Acquired CEB in a Cash and Stock Transaction

LONDON, UK / ACCESSWIRE / January 6, 2017 / Active Wall St. blog coverage looks at the headline from information-technology research and advisory firm Gartner Inc. (NYSE: IT) and CEB Inc. (NYSE: CEB), a provider of business research and analysis, as both companies announced on January 05, 2017 that the acquisition of all of the outstanding shares of CEB in a cash and stock deal valued at approximately $2.6 billion. With this deal, Gartner’s offering expands into a wider range of industries. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Transaction Details

As per the transaction details, CEB’s shareholders will receive $54.00 in cash and 0.2284 shares of Gartner common stock for each share of CEB’s common stock they own, which implies a 70% cash and 30% stock consideration for the offer. The total $77.25 per share consideration represents a premium of approximately 31% compared to the volume weighted average closing stock price of CEB over the past 30 days, approximately 41% compared to the volume weighted average closing stock price of CEB over the past 60 days, and approximately 25% compared to CEB’s closing stock price on January 4, 2017, the last trading day before the deal was announced.

Post completion of the transaction, Gartner’s shareholders will own approximately 91% of the combined Company and CEB’s shareholders will own approximately 9%. In order to fund the transaction, Gartner will issue approximately 8 million shares of its common stock. Gartner intends to fund the cash portion of the transaction consideration through a combination of cash on hand and fully committed debt financing to be provided by JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA. Upon completion of the transaction, Gartner is expected to have net debt of approximately $3 billion.

The transaction has a total enterprise value of approximately $3.3 billion, including Gartner’s assumption of approximately $0.7 billion in CEB net debt. Gartner stated that the transaction will be immediately accretive to its adjusted EPS and is expected to be double-digit percentage accretive in 2018. Furthermore, Gartner expects to realize annualized cost synergies of approximately $25 million – $50 million starting in 2018. Over the longer-term, Gartner expects to deliver double-digit revenue, earnings, and free cash flow growth while maintaining a strong balance sheet and liquidity profile. Gartner announced that it plans to quickly de-lever to approximately 3 times gross leverage within 24 to 36 months after closing.

The transaction has been unanimously approved by the Boards of Directors of both companies. The transaction, which is expected to be completed in H1 2017, is subject to the approval of CEB’s shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. Under terms of the definitive agreement, CEB has a go-shop right to solicit third party alternative acquisition proposals for the next 35 days.

Why Gartner Acquired CEB?

Gartner stated that the addition of CEB will enhance its ability to deliver value to its clients and help them make the right decisions. CEB’s best practice and talent management insights across a range of business functions, including Human Resources (HR), Sales, Finance and Legal, combined with Gartner’s analyst-driven, syndicated research and advisory services in Information Technology (IT), Marketing, and Supply Chain, will provide a comprehensive and differentiated suite of advisory services aligned to the mission-critical priorities of virtually all functional business leaders across every industry and size of enterprise worldwide.

The combination will benefit from a complementary, expanded and growing base of recurring, subscription-based revenue streams offering high visibility and high renewal rates. In addition, both companies are expected to continue generating strong cash flow conversion given the negative working capital dynamics associated with upfront invoicing.

On a pro-forma basis, the combined Company’s reported results for the last 12 months ended September 30, 2016 include approximately $3.3 billion in revenue, $693 million in EBITDA and $463 million in free cash flow. The combined entity will employ more than 13,000 associates serving clients in more than 100 countries across the globe.

“We are excited about joining forces with CEB, a world-class company we have long admired. Our highly complementary business models will create the leading global research and advisory company for all major functions in the enterprise,” said Gene Hall, Chief Executive Officer of Gartner.

“We expect this acquisition to create value for our shareholders in both the near and long-term, including immediate accretion on an adjusted EPS basis,” added Mr. Hall.

Stock Performance

On Thursday, January 05, 2017, post the announcement of the deal, Gartner’s share price finished yesterday’s trading session at $90.56, slumping 11.03%. A total volume of 5.62 million shares exchanged hands, which was higher than the 3 months average volume of 348.42 thousand shares. The stock has advanced 2.58%, and 2.43% in the last three months, and past twelve months, respectively. The stock is trading at a PE ratio of 39.36 and currently has a market cap of $7.50 billion.

On the other hand, at the closing bell, shareholders of CEB welcomed the news, sending the Company’s shares soaring 20.92% to end the trading session at $74.85. A total volume of 4.41 million shares were traded at the end of the day, which was higher than the 3-month average volume of 253.66 thousand shares. In the last month and previous three months, shares of the Company have advanced 30.86% and 39.58%, respectively. Moreover, the stock surged 23.51% since the start of the year. The Company’s shares are trading at a PE ratio of 64.69 and have a dividend yield of 2.20%.

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