After successfully raising $1.35 billion for its fifth closed-end fund”Capital Tower/River VEarlier this week, private equity software investment firm Turn/River Capital immediately wasted no time in putting the new funds to work on the $570 million acquisition. from cybersecurity automation software provider Tufin Software (NYSE: TUFN) or “Tufin” on Tuesday:

Under the terms of the agreement, Tufin shareholders will receive $13.00 per share in cash, a premium of approximately 44% over Tufin’s closing share price on April 5, 2022, the last day trading prior to the announcement of the transaction, and a premium of approximately 54% to Tufin’s one-month volume-weighted average closing price through April 5, 2022. Following the transaction, Tufin will go private and partner with Turn/River to further accelerate its mission to help enterprise customers use enterprise-driven automation to address tomorrow’s security threats.

(…)

The agreement includes a 30-day “go-shop” period expiring May 5, 2022, which allows the board and its advisors to actively solicit, initiate, encourage or facilitate alternative acquisition proposals from third parties. The Board shall have the right to terminate the Merger Agreement to enter into a Superior Proposal subject to the terms and conditions of the Merger Agreement. There can be no assurance that this “go-shop” will result in a superior proposal, and Tufin does not intend to disclose developments regarding the solicitation process unless and until it determines that such disclosure is appropriate or otherwise required.

The transaction is expected to close in the second quarter of 2022, subject to customary closing conditions, including Tufin shareholder approval and receipt of regulatory approvals. Upon closing of the transaction, the Company’s common shares will no longer be listed on any public market. The company will continue to be headquartered in Tel Aviv, Israel.

Ruvi Kitov, President, CEO and Co-Founder of Tufin and Reuven Harrison, CTO and Co-Founder of Tufin, have entered into voting agreements pursuant to which they have agreed, among other things, to vote their common shares of the company in favor of the transaction.

To be perfectly honest, Tufin hasn’t been very successful despite its focus on the hot cybersecurity market.

The company went public at $14 per share three years ago. At the end of 2019, some shareholders managed to dispose of their holdings at $17 per share in a secondary offering, but soon after Tufin began to experience sales difficulties partly due to the epidemic. of COVID-19, as many customers delayed shopping as their focus shifted to health. and safety of their employees as well as the execution of business continuity plans.

In early 2021, Tufin surprised market players by moving to a subscription model which is expected to take around three years.

Over the past year, the company has improved execution and made good progress in the transition to subscription. Despite some revenue headwinds due to the business model transition, Tufin managed to grow sales by 10% year over year. Annual recurring revenue (“ARR”) increased 19% and cloud reservations increased 40%.

At the end of the fourth quarter, the company had cash, cash equivalents and marketable securities of approximately $90 million, sufficient for another six years at the current rate of cash usage.

Personally, I’d be surprised to see the company offer a higher deal during the 30-day “go-shop” period, given Tufin’s less-than-stellar growth, operating cash burn, and lack of scale in a competitive market environment.

With the Turn/River Capital offer well above the highest closing price for the stock seen over the past year, I strongly expect a majority of shareholders to approve the acquisition and that the transaction is completed before the end of this quarter.

Conclusion :

In its three years as a public company, Tufin hasn’t exactly covered itself in glory, but at least some of the underperformance can be attributed to the impact of the pandemic.

My personal Tufin track record is even worse as I recommended the stock above $15 in Feb 2021 and didn’t have the guts to move to an outright “buy” rating in May, the things seemingly stabilizing and stocks trading near all-time lows. I left my position about 12 months ago with a significant loss.

While I don’t expect the 30-day “go-shop” period to result in a higher bid, investors should hold onto their shares in case I’m proven wrong again on the issue. ‘business.

Expect Tufin to host a special meeting of shareholders in the coming weeks. Assuming shareholder approval, the transaction is expected to close shortly thereafter.