Austin-based company, Forcepoint, which is owned by U.S. defense contractor Raytheon and private equity firm, Vista Equity Partners is set to go through some growing pains.
In 2015, Forcepoint sprung from a $2.3 billion deal between Raytheon and Vista Equity Partners, which held cybersecurity company Websense as a portfolio asset. Under the deal, Raytheon acquired an 81 percent stake in a new entity, Forcepoint, while Vista retained a 19 percent share. However, the private equity firm no longer wants a stake in the cybersecurity company, as it’s positioned Raytheon to buy out their 19% share.
“Earlier this month, Vista Equity Partners, our joint venture partner in Forcepoint, exercised their put option to require Raytheon to purchase their interest in Forcepoint,” said Raytheon CFO Toby O’Brien. “As a result, the parties are currently engaged in the formal process under the joint venture agreement to determine the fair value of their interest.”
Eventually, Raytheon will be left owning 100% of the company, leaving them to find ways to monetize Forcepoint to create shareholder value. “There’s a lot of optionality relative to how we do monetize that, said Raytheon chief executive Tom Kennedy. “But it all remains in play in terms of monetizing the asset.”
Earlier this year, investment advisor, Cestrian Capital suggested that Forcepoint was unimportant to Raytheon's overall business. “The numbers suggest that Raytheon ought to sell Forcepoint in the near term,” Cestrian said, adding: “We believe there would be plenty of buyers, mainly private equity.”
This comes as Forcepoint announced an expansion of the company's global cloud infrastructure. Raytheon also recently reported surprisingly good third-quarter profits, thanks to higher demand for space programs, weapons, and missile warning systems. Meanwhile, Forcepoint saw sales decline by 3% from the prior year as well as a 22% drop in quarterly profit.
While it's unclear exactly how the company will monetize Forcepoint, more details are set to arrive following the completion of the deal.