Avast stockholders will receive cash and shares that value the deal at $8.1 billion to $8.6 billion, the companies said Tuesday in a statement. Once the merger is completed, NortonLifeLock Chief Executive Officer Vincent Pilette will remain CEO and the company will have dual headquarters in Tempe, Arizona, and Prague. Avast CEO Ondrej Vlcek will become president and join the board, the companies said.
About 1,000 jobs, or as much as 25%, at the combined firm are at risk due to overlaps in responsibility, Pilette said on a call with reporters Wednesday.
“Combined, we have roughly a little bit less than 5,000 employees and we’ll run the company moving forward at about 4,000,” he said, adding that cuts would affect both companies and be implemented across all geographies.
High-profile ransomware attacks on large companies and infrastructure providers have increased demand for software to guard against hackers. That, coupled with more people working remotely, will continue to boost growth of cloud-based security providers, Bloomberg Intelligence analyst Mandeep Singh has said.
The deal will dramatically expand user numbers for NortonLifeLock, which was known as Symantec Corp. before it sold its enterprise-security business to Broadcom Inc. in 2019 for $10.7 billion. Prague-based Avast has 435 million “freemium” subscribers. It attracts customers to a free, baseline product and tries to turn them into paying users with more advanced software.
“With this combination, we can strengthen our Cyber Safety platform and make it available to more than 500 million users,” Pilette said in the statement.
Both CEOs agreed that the surge in expansive and damaging cyberattacks during the pandemic created new demand for digital security tools, and an opportunity for the companies to vie for a larger slice of cybersecurity revenue.
“The bad guys have been really, really busy taking advantage of the situation created by Covid-19,” said Vlcek. “The massive increase in attacks has been against everyone — enterprises, small businesses and consumers. Now is the time to join forces and accelerate the transformation of the entire cybersecurity space.”
Avast shareholders have two choices in the deal — $2.37 in cash and 0.19 in NortonLifeLock shares for each Avast share or $7.61 in cash and 0.03 NortonLifeLock shares for each Avast share. The stock exchange is based on NortonLifeLock’s closing price of $27.20 on July 13, the day before the companies disclosed they were in talks.
Avast’s shares had declined 6.2% this year before the deal talks were first reported last month. The company said at the beginning of the year that plans to transition its customer base to one-year subscriptions would hurt billings growth in the first half, while its adjusted earnings margin would be held back by higher costs to move to the cloud.
Avast reported revenue of $471.3 million for the first half on Wednesday. That compared with the average $462.3 million estimate of analysts surveyed by Bloomberg.
NortonLifeLock shares declined about 1% in extended trading after closing at $24.15 in New York. The stock has gained 16% this year.