Verint Systems Inc. has agreed to acquire its holding company, New York software company Comverse Technology Inc., for $805 million in stock. The deal, announced Monday, will free Verint from Comverse's majority control.
Comverse Technology owns 41% of Verint's common stock and all of its preferred convertible stock, which through the deal could be converted into a 53.7% stake of Verint's common stock.
Comverse Technology, which makes voicemail and cellphone billing software, will spin off its telecommunications business, Comverse Inc., before the transaction with Verint. Comverse expects to complete the spinoff by the end of October, and the two sides expect to complete the merger by April 30.
Comverse Technology announced its spinoff plans for Comverse Inc. in January.
Under financial terms of the merger, Verint will issue 27.5 million shares of common stock on a converted basis, an amount equal to shares held by its parent. In addition, Verint will issue a further $25 million in new common shares, or about 880,592 shares, valued at Verint's Aug. 10 closing stock price of $28.39.
In the end, Comverse shareholders will receive about 0.13 Verint shares for each Comverse share they own. Both boards have already approved the transaction.
"We look forward to becoming a non-controlled and independent public company," said Verint CEO Dan Bodner in a statement. "Clarifying our ownership structure is a significant positive for Verint as we continue to focus on increasing shareholder value."
The transaction includes a $10 million termination fee, payable to either side if the merger has to be called off.
"We are delighted to reach an agreement that is in the best interests of the shareholders of both [Comverse] and Verint," said Comverse chairman and CEO Charles Burdick in a statement. "This agreement, along with the planned spinoff of [Comverse Inc.], will result in a tax efficient distribution to our shareholders and direct ownership in two independent, well-capitalized publicly traded companies."
Last year, Comverse made an attempt to find buyers for Verint but decided to keep the Melville, N.Y., software maker after the subsidiary completed a $2 million share buyback program.
Shares of Verint traded 1.6% lower, to $27.92, on Monday afternoon, with its market capitalization near $1.1 billion. Comverse's stock traded 4 cents higher, to $5.74, on Monday afternoon, giving it a market cap of $1.25 billion.
Verint received legal representation from Jones Day partners Randi Lesnick and Nick Rodriguez.
Verint's special committee was counseled by Loeb & Loeb LLP's David Schaefer and received financial advice from Cary Kochman and Jonathan Kaye at Citigroup Global Markets Inc..
Laurence Grafstein, Nick Melton and Justin Singh of Rothschild and Goldman, Sachs & Co.'s Michael Ronen and Jason Rowe advised Comverse. Milbank, Tweed, Hadley & McCloy LLP's David Zeltner represented Comverse.
Neither Comverse nor Verint returned calls on Monday.