Thales to Acquire Gemalto for $5.6 Billion

Thales and Gemalto announce that they have reached an agreement on a recommended all-cash offer for all issued and outstanding ordinary shares of Gemalto, for a price of €51 per share cum dividend, or approximately $5.6 billion, according to reports.
 
“The acquisition of Gemalto marks a key milestone in the implementation of Thales’s strategy,” Patrice Caine, Thales’s chairman and CEO, said. “Together with Gemalto’s management, we have big ambitions based on a shared vision of the digital transformation of our industries and customers. We have a tremendous respect for Gemalto’s technological achievements, and our two Groups share the same culture and DNA. I would like to personally thank Gemalto’s management and Board of Directors for their unanimous support and I welcome warmly Gemalto’s 15,000 employees to our Group.  By combining our talents, Thales and Gemalto are creating a global leader in digital security.”
 
“I am convinced that the combination with Thales is the best and the most promising option for Gemalto and the most positive outcome for our Company, employees, clients, shareholders and other stakeholders,” Philippe Vallée, Gemalto’s CEO, added: “We share the same values and Gemalto will be able to pursue its strategy, accelerate its development and deliver its digital security vision, as part of Thales.” 

Over the past three years, Thales has significantly increased its focus on digital technologies, investing more than €1 billion in connectivity, cybersecurity, data analytics and artificial intelligence, in particular with the acquisition of Sysgo, Vormetric and Guavus. The integration of Gemalto strongly accelerates this strategy, reinforcing Thales’s digital offering, across its five vertical markets (aeronautics, space, ground transportation, defence and security).
 
Altogether, this new business unit will represent approximately 20% of pro forma Group revenues and rank among the top three players worldwide, with €3.5 billion revenues in the fast growing digital security market.
 
Combined with Gemalto’s leading digital security portfolio, Thales will be ideally positioned to offer an end-to-end solution, to secure the full critical digital decision chains, from data creation in sensors to real-time decision making.
 
By acquiring a leader in trusted identities and data security, Thales adds more than €3 billion of revenue to its digital business sales and acquires a set of technologies and competencies that have applications in all of Thales’s five vertical markets.
 
The combination creates a portfolio including security software, expertise in biometrics and multifactor authentication and the issuance of secure digital and physical credentials. These technologies, which combine diverse and constantly evolving use cases, are expected to yield significant commercial opportunities and revenue synergies in the years ahead.
 
Thales will combine its digital businesses into Gemalto, which will continue to operate under its own brand as one of the seven Thales global business units. Both the Thales and Gemalto management teams share a common industrial vision and endorse the growth project of this newly created digital security global business. Philippe Vallée will lead the combined digital security business. The combined Group will have more than 28,000 engineers, 3,000 researchers, and invests more than €1billion in self-funded R&D.
 
Employees who are included in the current Gemalto efficiency program are immediately offered access to Thales’s internal job boards and to the Thales internal mobility mechanism under the same conditions as Thales’s employees. Furthermore, Thales has committed to preserve employment in Gemalto’s French activities until at least the end of 2019. Thales recruited 6,000 people worldwide in 2017, and will actively pursue its human capital investments in the future.
 
Thales offers €51 in cash per Gemalto share cum dividend. The offer price represents a premium of:
·57% over the closing price as of Dec. 8., 2017.
·56% over the 1-month volume weighted average price.
·48% of the 3-month volume weighted average price.
·Implied EV/2018E EBIT2 of 17x.
 
Consistent with its fiduciary duties, Gemalto’s Board of Directors, with the support of its financial and legal advisors, has carefully reviewed and unanimously concluded that the offer is in the best interests of the company, the sustainable success of its business and clients, employees, shareholders and other stakeholders.
 
The Gemalto Board has decided to unanimously support the transaction and recommend that Gemalto’s shareholders accept the offer and vote in favor of the resolutions relating to the offer at the upcoming Extraordinary General Meeting.
 
The transaction is expected to close shortly after Thales has secured all customary regulatory approvals and clearances.