A Citrix Tale Of Spinoffs And Share Prices, Mergers And Market Moves

Citrix Systems, Inc. CTXS shares are down over 22 percent on Wednesday, as it announced the completion of the spinoff of its GoTo family of service offerings and its subsequent merger with LogMeIn Inc LOGM in a merger of online meeting organizers.

The Deal

The transaction, according to the company's release, would leave Citrix shareholders with 0.1718 shares of LogMeIn common stock for each share of Citrix they held as of January 20, 2017. The fractional shares will be compensated with cash.

The spinoff was announced in November 2015. At that time, Citrix said the company formed out of the spinoff will be made up of GoToAssist, GoToMeeting, GoToMyPC, GoToTraining, GoToWebinar, Grasshopper and OpenVoice.

Subsequently in July 2016, LogMeIn and Citrix Systems announced a merger agreement, providing for LogMeIn merging with Citrix' GoTo business in a Reverse Morris transaction. The deal was valued at $1.8 billion and would result in the merged entity owned equally by Citrix and LogMeIn shareholders. The combined company was expected to be a leading SaaS company, with innovative product portfolio, with combined annual revenue of more than $1 billion and serving over 2 million customers.

Analysts' Take

Barclays said in a note in October 2016 that deal is a game changer, as it thinks there are enough ways for the company to win apart from traditional synergies. Citing the higher overlap between both businesses, Barclays analyst Raimo Lenschow said he is confident of the company delivering more than the guided range of cost synergies, once the merger is complete.

MKM Partners, meanwhile, believes the spinoff would pave way for share buybacks for Citrix, helping to boost earnings per share by 4–8 percent, depending on the size/timing. The firm said in a note on January 9 that at current prices, there is a 4 percent arbitrage between Citrix and LogMeIn, down from 10 percent since its November 30 note on the transaction.

At Time Of Writing

• Citrix shares were plunging 22.69 percent to $70.50.
• LogMeIn shares were down 3.12 percent at $104.80.

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