LogMeIn Merging with Citrix’s GoTo Business – A Deal Valued at $1.8 Billion

LogMeIn and Citrix Systems announced that the companies have entered into a definitive merger agreement for LogMeIn to combine with Citrix’s GoTo business in a deal valued at approximately $1.8 billion.  The deal will enable Citrix to focus on its other products, including XenDesktop and XenApps.

Back in November, Citrix announced that it would spin off its GoTo family of products as a separate company.  By combining the spinoff with a merger, the transfer will be tax free for Citrix in a move known as a "Reverse Morris Trust."

The transaction has been unanimously approved by the boards of directors of both companies.  According to officials with both companies, the deal, expected to close in the first quarter of 2017, will create a software-as-a-service (SaaS) business with a diverse product portfolio and greater resources to drive innovation. 

The combined company is expected to have annual revenues in excess of $1 billion with more than two million customers in virtually every country around the globe. Upon completion of the transaction, the combined company is expected to achieve run rate cost synergies for the benefit of both Citrix and LogMeIn shareholders of $65 million within the first year post-close, and run rate cost synergies of more than $100 million in year two.

The combination brings together proven innovators with a shared belief in simplifying the way people connect to customers, colleagues and the world around them. The GoTo family of products delivers collaborative communication solutions for small and medium sized businesses and has strong global brand recognition through leading products including GoToAssist, GoToMeeting, GoToMyPC, GoToTraining, GoToWebinar, Grasshopper and OpenVoice.  

LogMeIn has rapidly attracted millions of users and thousands of leading businesses to its popular and disruptive products, including join.me, LastPass, LogMeIn Rescue and BoldChat, among others.

Bill Wagner, President and CEO of LogMeIn, who will lead the combined company as President and CEO, commented, "We are extremely excited about this transformative merger and the profound benefits it will bring to our customers, our people and our shareholders.  Both companies have passionate employees who are committed to developing easy-to-use software that simplifies the way we connect with people, devices, apps and products.  The additional scale of the combined company will allow us to accelerate innovation in order to deliver better outcomes for our customers and also creates a compelling financial model that will reward our shareholders."

Kirill Tatarinov, President and Chief Executive Officer of Citrix, said, "We believe this combination is a winning outcome for all parties. Both LogMeIn and GoTo have a shared goal of developing innovative solutions to exceed customer expectations by simplifying business and personal communications. Given that we have already been working towards a spinoff of GoTo, we expect this to be a smooth transition for the business. From Citrix’s perspective, this transaction will allow us to further enhance our strategic focus, operational efficiency and accelerate execution of our strategy to provide the world’s best integrated technology services for secure delivery of apps and data."

• A Leading SaaS Company With A Diverse Product Portfolio – Assets from both companies fill gaps in the respective product lines, resulting in better experiences and outcomes for our customers.  In addition, the scale and stability of the combined company enables accelerated growth of the businesses in emerging verticals, which include cloud-based telephony and identity, as well as IoT.
   
• A Shared Focus On Innovation That Is Enhanced by Scale – The merger brings together the combined resources of each company to address the challenges customers face in the wake of compelling secular trends, including workforce mobility, rapid adoption of cloud-based applications and the proliferation of connected products.
   
• Talented Team Positioned To Capture Exciting Growth Opportunities – Through a commitment to retaining the best talent from both companies, the new company will have a seasoned management team with a track record of driving growth, innovation, and shareholder value.  The combined company’s Board will be comprised of experienced directors from both LogMeIn and Citrix who share a commitment to customer satisfaction and shareholder value creation.
   
• Powerful Financial Profile That Drives Long-Term Shareholder Value – Shareholders are expected to benefit from the significant free cash flow generated as a result of synergy capture, and the scale of the combined company would enable us to take advantage of operational efficiencies over the longer term to continuously improve the company’s financial profile.

Financial Benefits of the Transaction

LogMeIn expects the combined company to have a strong financial profile, including:

• Pro Forma revenue of more than $1 billion
• Pro Forma Adjusted EBITDA margins of approximately 35%, after realizing year one run rate cost synergies of $65 million
• Pro Forma Free cash flow of more than $250 million (after year one run rate cost synergies)
• Anticipated Pro Forma 35%+ Free Cash Flow Accretion over Standalone LogMeIn (after year one run rate cost synergies)