https://prospect.org/power/griftrix-citrix-systems-debt-deal-private-equity/
7 replies (most recent on top)
This is a sweet deal for Vista. They are going to make money on Wrike twice in a row! First they bought for $700M and sold for $2B+ to Citrix. Then they bought it along with the rest of Citrix. Now they will sell it separately for potentially $4B again and carve out the rest of Citrix to pocket (split with Elliott) another $4-5B in profit.
Remember that Elliott and Vista have very little actual skin in the game. They borrowed $15B of the $16B deal and that interest is now hoisted on the companies. at roughly 5%, the debt is going to approach $1B per year, which was pretty much the net cash flow of Citrix. To make sure this works, they will cut Opex to generate more than $1B per year of cash flow. Then when they sell Wrike, they can pay off some of the debt while pocketing most of the profit.
So, the banks lost because they essentially pre-paid some of the interest (through discounted bond selling) that Citrix would have paid. Those bank losses eventually will come from somewhere, at a minimum, bank shareholders, who are not happy now.
But Vista and Elliott will still sing their way to their bank.
Yes, you can all thank the ELT and Calderoni for this value destruction.
This is a circus... Citrix bought wrike at high price just to be bought again at bargain price by the same people...... brilliant management in deed with Calderoni leading this valuable tam of leaders..... glad his gone and their inoperant minions
How in the world does this deal work for Vista? Somebody there has made a very bad miscalculation.
Happy Days had "the fonz" (Fonzie - Arthur Herbert Fonzarelli) and Citrix/Tibco had "the ponz" (Ponzi-schemer - Vista-Elliott robber barons)
Love it! <3 It's symptomatic to how Citrix operated in the last two years.
"Elliott’s private equity arm and Vista were proposing to merge Citrix, Tibco, Blue Prism, and Wrike, in a deal that would value Citrix at $13 billion, a roughly 30 percent premium to its stock price. The merged entity would eventually borrow $15.5 billion to consummate the deal, while raising an additional $2.5 billion in “preferred” equity shares from four private equity firms: Apollo, Blackstone, Carlyle, and Oaktree Capital Management. Elliott and Vista’s contribution to the transaction, meanwhile, seemed to be generally limited to the firms’ pre-existing shares in Citrix and Tibco.
The four software companies together had a combined EBITDA (earnings before interest, taxes, depreciation, and amortization) of roughly $1 billion in 2021, giving the deal a debt-to-EBITDA ratio of at least 15. The average 2021 vintage software LBO had a ratio around seven, which itself is very high. Some $741 million had to be earmarked to pay the fees associated with the brilliant underwriters who signed off on this transaction, plus another $375 million in dividends to the preferred equity holders. Even if Citrix could have borrowed all $15.5 billion at the going 2021 rate of 5.55 percent—and it doesn’t work that way—the first interest payment would have sent the company into default."
"Because the bankruptcy process currently stands as the only legal venue that exists for curing the disease of toxic Ponzification, policymakers must commit themselves to reforming the process to better protect the millions of victims of these schemes. The Securities and Exchange Commission, too, could cut off the private equity racket’s liquidity hose if Congress would repeal the little-known 1996 statute that gave the biggest psychopaths of the Greed Is Good era access to the pension funds and university endowments that turned a seedy niche underbelly of finance into a multitrillion-dollar hegemony."