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Case Studies

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 84

SOKOLOFF & COMPANY CASE STUDY
Siris Capital Buys Xura, Inc. (Nasdaq: MESG)

DATE ANNOUNCED: May 23, 2016
BUYER: Siris Capital  
SELLER: Xura, Inc. (Nasdaq: MESG)    
PURCHASE PRICE: $643 million
FORM OF PURCHASE PRICE: $25 per share in cash

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year

2014

2015

Extrapolated from Most Recent Quarterly Data*

Revenue

$652.5M

$477.4M

$327M

EBITDA

$47.8M

$9.2M

$56M

Cash

 

 

$166M

Debt

 

 

$153M

Purchase Price

 

 

$643M

Enterprise Value

 

 

$541.2M

Multiple of Revenue

 

 

1.97

Multiple of EBITDA

 

 

11.48

Q3 2016 Adjusted EBITDA

 

 

$110M

Forward Multiple of EBITDA

 

 

5.85

*Xura, formerly known as Comverse, divested over half of its business to Amdocs (“DOX”) in July 2015.  The following month Comverse completed its acquisition of Acision. The only numbers available which properly reflect the combination of Comverse and Acision, minus the unit sold to Amdocs, is for the quarter ending January 31, 2016.  Twelve month figures have been annualized from this data.  The company published an Adjusted EBITDA number for the quarter and that was likewise annualized in the above. 

Xura also published a guidance suggesting that Adjusted EBITDA will be at a run rate of $100-$120 million for Q3 2016, annualized.  For comparison purposes we included the average of $110 million in the chart.

TRANSACTION DRIVERS

Philippe Tartavull, President and CEO of Xura, said, “Over the past year, the company has experienced unprecedented change, with the divestment of the Comverse BSS business and the combination of Comverse and Acision to form Xura. Siris’ acquisition of Xura is a strong endorsement of our transformation strategy and provides immediate value to our stockholders.  Working in a private setting will allow greater flexibility to accelerate our strategy to bring best-in-class messaging, voicemail, security, and monetization solutions to our customers.”

Hubert de Pesquidoux, Siris Capital Executive Partner, said:  “We see great potential and talent within the organization, and we are excited to partner with Xura to build a business with digital innovation and customers at its core.

SOKOLOFF COMMENTARY:

In early January 2014, Comverse shares were trading at a high of nearly $40.  The stock then began a long decline to about $18 in the summer of 2015, trailing well below the NASDAQ Index.  Following completion of the Amdocs and Acision deals, investors pushed the stock up above $26 toward the end of 2015.  Investor sentiment turned negative again in December when the company reported a 12% decline in revenues.  At the same time Adjusted EBITDA improved significantly but the market did not give much credit to this fact.

This is a classic example of the problems with public markets’ emphasis on quarter by quarter results.  Xura is undergoing a well thought out transformation and is bound to have some near term stumbles along the path.  Under private ownership the company will be free to make long term choices without concern from public shareholders.  The strategy is a good one and Xura may very well be a great bet for a patient investor going forward.

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