CHICAGO - Thoughtworks (NASDAQ: TWKS), a global technology consultancy firm, announced today that it has agreed to a buyout by an affiliate of Apax Partners LLP. The transaction is set to purchase all outstanding shares of Thoughtworks at $4.40 per share in cash. This deal represents a 48% premium over the 30-day volume-weighted average price of the company's stock as of August 2, 2024.
The definitive merger agreement values Thoughtworks at approximately $1.75 billion. A special committee of independent directors from the Thoughtworks board, along with independent legal and financial advisors, recommended the board approve the transaction. The board unanimously approved the merger, which is expected to close in the fourth quarter of 2024.
Mike Sutcliff, CEO of Thoughtworks, expressed confidence that the deal delivers immediate and fair value to the company's minority stockholders. He emphasized the importance of Apax's support for long-term investments and advancing the company's strategic partnership vision with its clients.
Salim Nathoo, Partner at Apax and Non-Executive Director of Thoughtworks, highlighted the company's 30-year impact on the world through technology and looks forward to its continued growth. Rohan Haldea, also a Partner at Apax and Non-Executive Director of Thoughtworks, cited the importance of the company's unique culture and mission in the decision to return to private ownership.
The transaction is subject to customary closing conditions and has already been approved by an affiliate of the Apax funds, which is the majority stockholder of Thoughtworks. No further stockholder approval is required. Once the merger is complete, Thoughtworks will no longer be listed on NASDAQ and will operate as a privately held company.
Goldman Sachs (NYSE:GS) & Co. LLC is serving as the financial advisor to Apax, while Lazard (NYSE:LAZ) is advising the special committee of Thoughtworks. Legal counsel for the parties includes Kirkland & Ellis LLP, Richards, Layton & Finger, P.A., Kramer Levin Naftalis & Frankel LLP, Potter Anderson & Corroon LLP, and Paul Hastings LLP.
This announcement is based on a press release statement and contains forward-looking statements regarding the proposed acquisition and its expected timing and effects. The completion of the transaction is subject to various factors, including regulatory approvals and other customary closing conditions.
In other recent news, Thoughtworks has reported first-quarter revenues of $249 million, exceeding expectations. However, the company fell short of its adjusted EBITDA margin guidance due to the timing of its supply rebalancing program.
Thoughtworks has also seen a strong demand for AI and data services, contracting with 49 new clients and forecasting quarter-over-quarter growth in Q2. In a recent development, CEO Guo Xiao has stepped down, with Mike Sutcliff taking his place.
In addition to these, Thoughtworks was initiated with a Sell rating from Goldman Sachs due to predicted sustained difficulties in the company's fundamentals. Goldman Sachs cited cyclical challenges in the high-end consulting market and competitive disadvantages related to delivery costs as primary concerns.
The firm anticipates that the share price will not improve until there is a shift in the cyclical market forces or Thoughtworks can achieve a more competitive cost structure.
Further, Thoughtworks recently acquired AI company Watchful to boost its AI capabilities. Despite expecting a dip in Q2 revenues, the company sees prospects for future growth and margin expansion. These recent developments underscore Thoughtworks' ongoing efforts to navigate market challenges and enhance its service offerings.
InvestingPro Insights
As Thoughtworks (NASDAQ: TWKS) prepares for its transition to private ownership under the Apax Partners deal, current and potential investors are closely watching the company's financial health and market performance. According to InvestingPro data, Thoughtworks has a market capitalization of approximately $1.09 billion, which is notably lower than the buyout valuation of $1.75 billion, indicating a significant premium offered to shareholders.
The company's recent performance metrics shed light on its valuation and growth prospects. Thoughtworks has experienced a revenue decline of 16.69% over the last twelve months as of Q1 2024, aligning with the InvestingPro Tip that analysts anticipate a sales decline in the current year. Despite this, the company's liquid assets surpass its short-term obligations, suggesting a stable liquidity position.
Moreover, Thoughtworks has not been profitable over the last twelve months, which is reflected in its negative P/E ratio of -10.23. However, investors have seen a silver lining with a strong return over the last month of 32.42% and over the last three months of 50.67%, which could be indicative of market optimism or strategic movements in anticipation of the buyout.
For those interested in diving deeper into the financials and future projections of Thoughtworks, InvestingPro provides additional insights. There are a total of 9 InvestingPro Tips available, including predictions on profitability and dividend policies. For instance, while the company does not currently pay a dividend, analysts predict that Thoughtworks will be profitable this year. These tips, along with detailed financial metrics, can be found on the InvestingPro platform by visiting https://www.investing.com/pro/TWKS.
Investors and stakeholders can leverage these insights to better understand the implications of the buyout and Thoughtworks' potential trajectory post-acquisition.
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