Shares of Zendesk (NYSE:ZEN) are up 30% today after the company confirmed it will be acquired for $77.50 a share in cash, or $10.2 billion. That represents a 34% premium to where ZEN stock finished trading yesterday.
Media reports say San Francisco-based Zendesk has agreed to be acquired by a group of buyout firms led by Hellman & Friedman and Permira. ZEN stock was as up as much as 50% in premarket trading today before the acquisition and its terms were confirmed by Zendesk.
Before today, ZEN stock was down 44% on the year and trading at $57.95 per share.
What Happened With ZEN Stock
Zendesk had been actively seeking a buyer in recent months, and said earlier in June it would remain an independent software company after failing to find a potential acquirer. ZEN stock’s current price gives the company a market value of $9.2 billion, according to market data. The $10.2 billion in cash that Hellman & Friedman and Permira are paying for the software-as-a-service company represents a sizable premium for Zendesk.
According to Bloomberg, “In February, Zendesk received an unsolicited takeover offer from buyout firms that valued the company at $127 to $132 a share. Those firms included Hellman & Friedman, Advent International and Permira.” That unexpected offer arrived weeks before Zendesk stopped trying to buy Momentive Global (NASDAQ:MNTV), SurveyMonkey’s parent company. The company said it couldn’t secure shareholder support for that purchase.
Zendesk’s original Momentive deal from last fall featured an all-stock transaction worth $4 billion. But several activist shareholders balked at the combination, including Janus Henderson Group (NYSE:JHG) and Jana Partners. ZEN stock has fallen sharply since the Momentive acquisition was scuttled this past spring.
Why It Matters
That Hellman & Friedman and Permira have come back and offered to buy Zendesk for a big premium to its current share price is good news for the company and its shareholders. It’s also a big reversal from only a few weeks ago when Zendesk said it could not find any companies willing to purchase it.
On June 9, Zendesk’s management team said they would no longer seek a sale after conducting an internal review. The company said it had reached out to 26 potential partners and financial institutions, but was rejected by all of them.
Zendesk said at the time that no bids for it were submitted because of “adverse market conditions.” But now, Hellman & Friedman and Permira have come back with another offer to buy Zendesk at a 34% premium to its closing stock price yesterday, which is the company’s desired outcome.
What’s Next for ZEN Stock
The takeover of Zendesk by Hellman & Friedman and Permira is good news for shareholders of ZEN stock. It also concludes a difficult period in which the company struggled to grow it business and then to sell it. While the takeover is still subject to regulatory approval, investors can assume it will go through with the support of Zendesk’s board of directors and shareholders.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.