Thales To Create A World-Class Global Cybersecurity Leader, Acquiring Us-Based Cyber Champion Imperva From Thoma Bravo -...

(business wire )-- Thales (Euronext Paris: HO) announces today that it has reached an agreement with Thoma Bravo, a major software investment firm, for the acquisition of 100% of Imperva, a leading US-based data and application cybersecurity company, for an enterprise value of $3.6 billion1.

• With this acquisition, Thales is taking its cybersecurity business to the next level. Imperva will enable growth in data security and Thales' entry into the attractive application security market. Thales total cybersecurity business will generate more than € 2.4 billion revenues2.
• The transaction price is based on a $3.6 billion enterprise value1.
• Significant value creation for Thales shareholders:
  • $110 million of run rate cost and revenue synergies
  • Financial profile of DIS segment enhanced
  • Significant medium-term adjusted EPS accretion
  • Transaction adjusted ROCE3 above WACC in Year 5 post-closing
• Imperva's integration into Thales will significantly expand Thales' addressable market in an already fast-growing sector.
• The new financial targets set for Thales' Digital Identity and Security (DIS) activity are:
  • 2024-2027 organic sales growth: +6 to +7%,
  • 2027 EBIT3 margin to reach 16.5%.
• The acquisition is in line with Thales' disciplined capital deployment framework, with no impact on the Group existing dividend policy or ongoing share buyback programme.
• Closing of the transaction is expected by the beginning of 2024, upon completion of customary anti-trust and regulatory approvals.

Patrice Caine, Chairman and Chief Executive Officer, Thales, declared:“The acquisition of Imperva marks a major milestone in Thales' cybersecurity strategy. With this acquisition, we are seizing a unique opportunity to accelerate our cybersecurity capabilities and are taking an important step towards our ambition to build a world-class global cybersecurity integrated player, providing a comprehensive portfolio of products and services. We have tremendous respect for Imperva's innovative application and data security offerings. Imperva and Thales share the same vision and the same DNA. We are thrilled to enter the next phase of our growth together. We look forward to welcoming Imperva to Thales to further enhance our cybersecurity solutions, and help customers address their most important digital security challenges.”

Pam Murphy, Chief Executive Officer, Imperva, declared: “Today's announcement represents an exciting new chapter for Imperva, one that will further our mission to help organizations protect data and all paths to it, bring better protection and strategic value to our customers and partners, and create more opportunities for our team members. We admire Thales' vision and culture, and believe that, together, we can deliver greater product innovation and efficiency through disruptive solutions, while helping to simplify the greatest security challenges facing organizations today: protecting digital identities, applications, APIs, and data in any environment, and any industry.”

Seth Boro, Managing Partner at Thoma Bravo, declared:“Imperva is a leading force in cybersecurity with an impressive track record of providing cutting edge security solutions and protecting customers through all stages of their digital transformation, from the application level down to the data level. Over the course of our more than four years of partnership, Imperva further differentiated itself in the competitive cybersecurity market through accelerated growth and innovation and with its unique approach to end-to-end application and data security. During this time, the company successfully executed three acquisitions which strengthened its product offerings and capabilities to better protect clients' critical data and applications. We are proud of what we built through our partnership with Pam Murphy and the Imperva team, and look forward to watching the company's continued success as part of Thales' innovative and diverse security portfolio.”

Acquisition of a significant player in application and data security

With over half a billion dollars in revenue on a TTM (trailing twelve months) in 2022, basis and over 1,400 employees, Imperva is a cybersecurity leader that protects critical applications, APIs and data anywhere at scale. With an integrated approach combining edge, application security and data security, Imperva protects companies through all stages of their digital journey.

Headquartered in San Mateo, California, the company has a global footprint in the Americas, Asia Pacific and Europe-Middle East and Africa, and monitors threats across 180 countries. Imperva is a highly recognized, multi-awarded player in both of its core business segments. Its comprehensive portfolio combines unique expertise and products in the fast-growing application and data security markets:

- Application security : Imperva offers an industry-leading Web Application Firewall (WAF), which prevents attacks by analysing web traffic to applications. Imperva's Application Security portfolio includes industry-leading API Security, Advanced Bot Protection and DDoS.

- Data security advanced offering : Imperva's Data Security platform helps enhance the visibility of a company's data, in order to prevent breach and avoid compliance issues. It provides Data Discovery and Classification on both structured and unstructured data, Data Security Governance, Data Access Monitoring, risk analysis powered by AI, real time risk monitoring and intrusion detection on databases, on premise and in the cloud.

Imperva has a highly recurring revenue business model and a large and diversified customer base. It serves approximately 35% of Fortune 100 companies and some of the largest groups in financial services, telecommunications, energy, healthcare, retail and e-commerce.

Imperva is 9-time awarded in the Gartner Magic Quadrant for Web Application Firewalls and API Protection (WAAP) and a Gartner Peer Insights Customers' choice in 2023.

Imperva also demonstrates an attractive financial profile, with double-digit sales growth and ~20% EBIT margin forecasted by 2027, in line with Thales global cybersecurity product business.

Highly complementary combination

With this acquisition, Thales will add circa $500 million of revenue and significantly expand its data and application security offering. The combination of Thales and Imperva's operations will create a world-class global cybersecurity portfolio structured around 3 product areas :

1.1 Identity (Thales),

1.2 Data security (Thales and Imperva)4

1.3 Application security (Imperva).

Thales and Imperva will combine their respective strengths. Increased capabilities are notably expected in the fields of protecting data at rest and data in use, complementing Thales' know-how in data in motion.

Imperva and Thales will also benefit from their strong complementarity and cultural fit in terms of clients and addressable markets. The combination is expected to yield significant commercial opportunities within the existing client base as well as revenue synergies in the years ahead.

Thales estimates that the combination will generate c.$110 million of pre-tax run-rate synergies, including $50 million of cost synergies and $60 million linked to revenue synergies.

Thales' step-change in cybersecurity

Cybersecurity represents a priority market for Thales. It is both a critical enabler for its other activities and a long-term fast-growing and technology-driven market where Thales can bring unique know-how.

As a global leader in cybersecurity, Thales is involved at every level of the cyber value chain: Identity, Protect, Detect, Respond, Recover.

Thales' offer is focused on three families of cybersecurity products and services:

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Appendices

Note on methodology

“Organic change” measures the movement in monetary indicators excluding the effects of changes in exchange rates and scope of consolidation. It is obtained by calculating the difference between the indicator for the previous year discounted at the exchange rates applicable for the current year for entities whose reporting currency is not the euro, less the contribution of entities divested during the current year, and the value of the indicator for the current year, less the contribution of entities acquired during the current year.

Definitions of non-GAAP financial indicators

In order to facilitate the monitoring and benchmarking of its financial and operating performance, the Group presents three key non-GAAP indicators, which exclude non-operating and/or non-recurring items. They are determined as follows:

• EBIT , an adjusted operating indicator, corresponds to income from operations plus the share in the net income of equity-accounted companies, before the impact of entries recorded as part of business combinations (amortization of assets valued when determining the purchase price allocation, other expenses directly related to acquisitions).
• EBITDA, corresponds to EBIT, plus depreciations and amortizations excluding PPA.
• Adjusted net income corresponds to net income, excluding the following items and net of the corresponding tax effects:
  • Amortization of assets valued when determining the purchase price allocation (business combinations);
  • Expenses recognized in income from operations or in finance costs that are directly related to business combinations;
  • Gains and losses on disposals of assets, changes in scope and other;
  • Impairment of non-current assets;
  • Changes in the fair value of derivative foreign exchange instruments (recognized under“Other financial income and expenses” in the consolidated financial statements);
  • Actuarial gains (losses) on long-term benefits (recognized under“Finance costs on pensions and other long-term employee benefits” in the consolidated financial statements).
• Free operating cash flow corresponds to the net cash flow from operating activities before contributions to reduce the pension deficit in the United Kingdom, and after deducting net operating investments.

Defining EBIT and adjusted net income involves defining other aggregates in the adjusted income statement : adjusted cost of sales, adjusted gross margin (corresponding to the difference between sales and the adjusted cost of sales), adjusted indirect costs, other adjusted financial income and expenses, adjusted financial income on pensions and long-term employee benefits, adjusted income tax, and adjusted net income, Group share, per share (adjusted EPS).

Net cash (debt) corresponds to the difference between the sum of the“cash and cash equivalents” and“current financial assets” items and short- and long-term borrowings, after deduction of interest rate hedging derivatives. From January 1, 2019, it incorporates the lease liability recorded in the balance sheet pursuant to IFRS 16. Its calculation appears in Note 6.2 to the consolidated financial statements.

Transaction adjusted ROCE corresponds, for a given acquisition, to the ratio between:

• At the numerator: EBITDA of the acquisition, plus impact of phased synergies, including implementation costs; less capital expenditures: less change in net working capital: less income taxes incurred on EBIT including phased synergies and implementation costs;
• At the denominator, the net enterprise value of the acquired asset.

Please note that only the consolidated financial statements as at December 31, 2022 are audited by the statutory auditors, including EBIT, the calculation of which is outlined in Note 2“Segment Information”, net cash (debt), the definition and calculation of which appear in Note 6.2“Net cash (debt)”, and free operating cash flow, the definition and calculation of which are specified in Note 7“Changes in net cash”. Adjusted financial information other than that provided in the notes to the consolidated financial statements is subject to the verification procedures applicable to all information included in this press release.

1 $3.7 billion gross enterprise value minus $0.1 billion tax benefits

2 In 2024, pro forma of the proposed acquisitions of Imperva and Tesserent

3 Non-GAAP financial indicators, see definitions in appendix.

4 Thales and Imperva provide different and complementary products and capabilities.

5 Assuming 1€ = 1.1US$

6 Net debt / EBITDA leverage, pro forma of the proposed acquisitions of Tesserent, Cobham Aerospace Communications and Imperva.

7 Excluding Transport business, which is being divested

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