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Riverbed Agrees to $3.6B Buyout Amid Activist Pressure

Riverbed Technology Inc. on Monday agreed to go private in a $3.6 billion sale to private equity firm Thoma Bravo LLC, the second big-ticket buyout in as many days driven mainly by pressure from an activist investor.

Under the deal's terms, Thoma Bravo will pay $21 per share in cash, roughly a 12 percent premium over Friday's close. Teachers’ Private Capital, the private investor department of Ontario Teachers’ Pension Plan, is also in on the deal.

The agreement comes about three months after California-based Riverbed, a software company, said its board would explore the company's strategic options amid a redoubled sale push by activist hedge fund Elliott Management Corp.

Riverbed landed in Elliott's crosshairs about a year ago, dogged by criticism of its top brass and their growth plan. Elliott itself lobbed a sweetened $21-per-share bid early this year, rejected by Riverbed in February. The latest offer price essentially matches the spurned proposal, but it has a much greater upside, Riverbed Chairman and CEO Jerry Kennelly said in a statement.

“Having undertaken a thorough strategic review, during which we assessed a wide variety of options to maximize value, the board unanimously concluded that partnering with Thoma Bravo was the best choice for Riverbed,” he said, noting Thoma Bravo's longstanding tradition of investing in the tech space.

For three decades, the private equity house has honed its reputation as one of the premier private investors in software and other technology outfits. Since adding tech to its investment mix, Thoma Bravo has mounted almost 20 take-private deals for publicly held software companies. Overall, it has acquired more than 50 companies in the sector, worth a combined $7.5 billion.

The Riverbed buy will mark the largest bet in Thoma Bravo's history.

“With the benefit of Thoma Bravo’s knowledge and insights, combined with the added flexibility we will have as a private company, Riverbed will be able to focus on reaching the next level of growth,” Kennelly said.

Riverbed's board unanimously approved the transaction, which still needs approval from Riverbed stockholders and regulators. Elliott, the company's most prominent shareholder, said it would back the deal.

“As Riverbed's largest shareholder, we're delighted with this outcome that gives shareholders immediate, premium value,” said Jesse Cohn, head of U.S. equity activism at the fund. “Elliott offered to buy Riverbed nearly one year ago and we commend Jerry and the rest of Riverbed's board for taking this bold step.”

The Riverbed play is one of Elliott's biggest to date in an especially active run in the tech sector.

Riverbed is represented by a Wilson Sonsini Goodrich & Rosati team led by Michael Ringler and David Segre and including Thomas Earnest, Derek Liu, Michael Ray, Andrew Hirsch, Christine Li, Eileen Marshall, Myra Sutanto Shen, Madeleine Boshart, Brandon Gantus, Suzanne Bell, TJ Graham, David Berger and Amy Simmerman. Qatalyst Partner and Goldman Sachs & Co. are serving as the company's financial advisers.

Thoma Bravo is represented by Kirkland & Ellis LLP attorneys Gerald Nowak, Corey Fox and Bradley Reed.