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Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail [email protected] with your contact information.

Archives > Transaction Case Study 21

Verint to acquire Witness Systems

Dear Colleague,

On February 12, 2007, Verint Systems Inc. (VRNT.PK), and Witness Systems, Inc. (NASDAQ: WITS), announced that they have entered into a definitive agreement under which Verint will acquire Witness for $27.50 per share in cash, which is equal to about $950 million on a fully-diluted basis. WITS price per share rose 20.3% from $22.27 to $26.79 at the close of business the day of the announcement. Verint’s share price remained steady, closing the day at $32.28.

Verint is paying 3.8x revenue and 20.2x EBITDA based on the trailing 12 months of Witness Systems’ reported figures of $208.27 million in revenue and $39.26 million in EBITDA. The Enterprise Value is $791.34 million after deducting WIT's cash on hand of $158.66 million. It appears that the transaction will be dilutive to VRNT in 2007.

Verint Systems Inc., headquartered in Melville, New York, with revenues of $294 million (ttm), is a provider of analytic software-based solutions for security and business intelligence through the collection, retention and analysis of voice, fax, video, email, Internet and data transmissions from multiple communications networks.

The Witness Systems software and services help businesses capture customer intelligence and optimize their workforce performance including the underlying back-office processes that enhance the customer experience and build customer loyalty.

Verint and Witness together can create a foundation for growth that addresses the important needs of customer-centric enterprises, including product development and delivery, service and support. Additionally, the Verint/Witness combination will provide a global footprint, with offices around the globe, expansion of both direct, indirect and OEM sales channels, and create cross-sell opportunities across a global customer base.

The transaction is being financed through a $650 million debt financing commitment provided by Lehman Brothers Inc., Deutsche Bank and Credit Suisse and a $293 million preferred stock investment by Comverse Technology, Inc (CMVT.PK). CMVT is a 57 percent shareholder of Verint. Unvested options will be assumed by Verint and be exercisable for Verint stock.

Said Nick Discombe, CEO of Witness Systems, “We are uniting a unique group of people and solutions through a converged vision and common purpose -- to help our joint customer base and partners enhance their operational effectiveness and create sustainable competitive advantage.” Discombe continued, “This combination makes us an attractive strategic partner that delivers real solutions and strong ROI to both the SMB (small to medium size business) and enterprise markets.”

“We are confident in our ability to effectively integrate the companies based on the strength of both management teams, our shared vision and our deep expertise in delivering value-added solutions for the enterprise market,” concluded Dan Bodner. “This growth-driven combination advances our strategy to enhance customer and shareholder value.”

The transaction is targeted to close in the second quarter of 2007, pending approval by regulators and by stockholders of Witness Systems, as well as satisfaction of other customary closing conditions.

We hope that you find this feature from Sokoloff & Co. interesting, informative and useful.  We welcome your comments and suggestions.

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