McAfee Divests Enterprise Business To Symphony Technology For $4B

McAfee Corp (NASDAQ: MCFE) inked an agreement to divest its Enterprise business to a consortium led by Symphony Technology Group (STG) in an all-cash transaction for $4 billion.

What Happened: The Enterprise business is a partner for 86% of the global Fortune 100 firms with $1.3 billion in net revenue in FY20.

McAfee is set to become a pure-play consumer cybersecurity company. It expects to issue an estimated $4.50 special dividend per share upon the divestment.

Why it Matters: McAfee intends to reduce debt by $1 billion. Additionally, it will pay $175 million in customary transaction expenses and other one-time charges. The $2.75 billion of remaining proceeds will be distributed by its subsidiary Foundation Technology Worldwide on a pro-rata basis to all holders, including McAfee Corp. 

McAfee Corp. will use its pro-rata portion to pay $300 million in required corporate taxes and related payments concerning the transaction and use all remaining proceeds to pay a one-time special dividend of $4.50 per share. 

It represents a one-time special dividend rate of 21% of the stock's closing sale price on Friday before McAfee entered into the transaction. McAfee also intends to pay $300 million in additional one-time separation costs and stranded cost optimization, a portion of which will be expenses paid by proceeds from the transaction.

The company will continue to conduct and operate the Enterprise business till the transaction closure, while McAfee, STG, and the Enterprise business' leadership team will partner for a successful transition.

McAfee will retain its name, remain focused on delivering leading solutions for consumer protection, and be a personal security leader upon transaction closure. The Enterprise business will be re-branded in the coming months.

Goldman Sachs and Morgan Stanley Co. LLC are the financial advisors, with Ropes & Gray LLP as legal advisors, to McAfee.

McAfee's long-term debt amounted to $3.9 billion as of December 26, 2020.

Price action: MCFE shares are up 10.9% at $23.50 in the pre-market session on the last check Monday.