San Francisco’s Vista Equity Agrees to Pay $1B for Active Network

9/30/13Follow @bvbigelow

San Francisco-based Vista Equity Partners, which is managing more than $7 billion in software-related investments, has been doing a lot of shopping in San Diego this year.

After paying approximately $1 billion in May to acquire San Diego-based Websense, a public Web security company, and $800 million in August to buy San Diego-based Qualcomm’s Omnitracs business, the private equity firm is paying just over $1 billion to buy San Diego’s Active Network (NYSE: ACTV) in an all-cash deal, according to a statement today.

The Active Network provides Software as a Service (SaaS) that people use to register for a variety of events—from marathons and sports leagues to campsite reservations, hunting and fishing licenses, to such activities as corporate meetings and church retreats. Under terms of the deal, Active Network shareholders stand to receive $14.50 per share in cash, a 27 percent premium to Friday’s closing share price of $11.40.

In the statement announcing the buyout, the Active Network says Vista Equity’s offer represents a premium of approximately 111 percent to the company’s year-to-date average closing stock price. On the other hand, the Active Network went public a little more than two years ago at $15 a share, so the buyout offer of $14.50 a share isn’t a great endorsement as a long-term investment.

It’s worth noting, though, that Vista Equity’s other San Diego acquisitions are companies that provide recurring revenue through well-established technology services. The Active Network buyout also provides an opportunity for Vista Equity to operate another big SaaS enterprise as a private company, and to restructure the business. “There’s an opportunity to clean it up away from the public eye,” RBC Capital Markets analyst Andre Sequin told Bloomberg Businessweek. “I wouldn’t be surprised to see Active as a public company again in about five years.”

Exactly what needs restructuring is less obvious, however. The Active Network ended its second quarter with $108 million in available cash, and roughly $4 million in debt as capital lease obligations.

By another metric, the $1.05 billion price tag is about 2.5 times the company’s total annual revenue of almost $419 million in 2012. Extrapolating revenues for the first six months of this year, which came in at $238.4 million, (about 10 percent higher than the same period in 2012), the buyout multiple would be less than 2.3 times the company’s 2013 revenue—even more attractive from the buyer’s point of view.

Profitability, however, has been elusive, and the Active Network has come under increasing pressure for its flagging performance. Matthew Landa resigned as CEO and Dave Alberga resigned as both executive chairman and chairman of the company’s board. Jon Belmonte, a former Active Network COO and chief media officer returned to serve as the company’s interim CEO.

In the company’s statement, Belmonte says, “We believe the partnership with Vista will position us to execute on our strategy and further enhance our industry leadership. For our customers, we will continue to focus on delivering the strongest product offerings through our advanced technology platform,”

The company says any shares not tendered in the offer will be acquired in a second-step merger at the same cash price as paid in the tender offer. The transaction is expected to close before the end of the year, although it is subject to regulatory review and other closing conditions.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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