The $12.50-a-share offer for Nimble was 45 percent more than Monday’s closing price. Hewlett Packard Enterprise said Tuesday it also will assume, or pay out, about $200 million of Nimble’s unvested equity awards at the closing of the deal.
Chief Executive Officer Meg Whitman — looking for ways to return to sales growth — is spending more on acquisitions after a multiyear effort to slim down her company. She had already announced three purchases this year, and the deal for Nimble will extend Hewlett Packard’s reach into flash-storage data, which uses memory chips that are much faster than traditional hard disk-based storage.
“The acquisition is a continuation of HPE’s strategy to acquire smaller hardware businesses,” analysts at UBS Securities LLC said Tuesday in a research note. “Nimble’s flash product could revitalize HPE’s storage business.”
The market for flash storage was estimated to be about $15 billion in 2016 and will grow to $20 billion by 2020, according to projections from International Data Corp.
Hewlett Packard Enterprise, which posted a 10 percent drop in revenue in the quarter ended Jan. 31., is seeking faster-growing businesses to help offset weak demand for older products and competition from cloud-based providers of storage and computing power. Sales in the key Enterprise Group — which includes servers and storage gear — dropped 12 percent.
Meanwhile, San Jose, California-based Nimble reported that revenue increased 26 percent to $102 million in the quarter ended Oct. 31. Its offerings are complementary to Hewlett Packard Enterprise and the deal will “enable HPE to deliver a full range of superior flash storage solutions for customers across every segment,” according to a statement announcing the agreement.
The transaction is expected to add to earnings in the first full fiscal year following its completion, anticipated in April.
Whitman — who split her company from its personal computer and printer businesses in late 2015 — is trying to make Hewlett Packard Enterprise more flexible. This year, the Palo Alto, California-based company should conclude two multibillion-dollar deals unveiled in 2016. In September, the company announced it would spin off and merge some software assets in a deal with U.K.-based Micro Focus International Plc. Last May, HPE said it would combine its technology-services division with Computer Sciences Corp. in a spinoff scheduled to become official April 1.
Nimble was founded in 2007, went public in December 2013 and has about 1,300 employees, according to the statement.
Nimble’s two co-founders and its chief executive, all natives of India, claim more than 14 percent of the company, making them big beneficiaries of the purchase, according to data of recent holdings compiled by Bloomberg.
Varun Mehta, a Nimble co-founder, is set to make more than $87 million from the sale based on his position as the largest stockholder with about 7 million shares, or 8 percent of the company, according to data compiled by Bloomberg. Most of the shares are held by a variety of family trusts, of which he is a co-trustee, according to Nimble regulatory filings. Mehta, now the chief strategy officer, was the first CEO of the company, a position he held until 2011. He also was vice president of engineering at a startup, PeakStream Inc., sold in 2007 to Google for undisclosed terms.
Umesh Maheshwari, chief technology office and another co-founder, will make more than $60 million from the acquisition. He is the fourth-largest shareholder with about 5.5 percent of the company, according to data compiled by Bloomberg. His shares also are mostly held by a handful of family trusts, according to company regulatory filings.
Suresh Vasudevan, who became CEO in 2011 and is board chairman, holds more than 1 percent of the company. He stands to make almost $15 million based on those shares, according to data compiled by Bloomberg. The UBS analysts called Vasudevan “a seasoned industry veteran” who will strengthen Hewlett Packard’s effort in the flash storage market.