Wells Fargo Downgrades ArcSight On HP Acquisition (ARST, HPQ)

Wells Fargo Securities is downgrading shares of ArcSight ARST to Market Perform after the company agreed to be acquired by Hewlett-Packard HPQ for $43.50 per share. In the research note, Wells Fargo writes, "HP announced that it has signed a definitive agreement to acquire ArcSight for $43.50 per share or $1.5B in cash. This represents a 24% premium over ArcSight's closing price as of Friday and a 54% premium above ArcSight's price on August 25, before the Wall Street Journal article regarding M&A speculation. We believe ArcSight's 6.41x NTM revenue multiple is in line with the range for high-growth companies. We are downgrading our rating on ARST shares to Market Perform from Outperform. While we believe many companies looked at ArcSight, we believe that HP was the only serious bidder at this valuation. This would indicate to us that a continued bidding war is unlikely and we expect the deal to close before the end of the calendar year." Shares of ArcSight are down 11 cents to $43.80 in early Tuesday trade, indicating that traders are still speculating on another bidder emerging for the company.