More on the Procera Deal
The transaction equates to $11.50 per share, which represents a premium of about 21% over Procera's closing price Tuesday of $9.51. The company's stock rallied approximately 20% to $11.43 by midday Wednesday, giving Procera a market capitalization of about $197.4 million. The Deal exclusively reported in late January that the Fremont, Calif.-based communications equipment maker had tapped Stifel, Nicolaus & Co. to shop itself after activist shareholders called for the company to review its alternatives. The deal marks a victory for Chicago-based hedge fund Castle Union. "This is a great outcome for Procera shareholders," said Toan Tran, managing partner at Castle Union, in a telephone interview Wednesday. "Procera just should not be a public company." He went on to explain that Procera is much more suited to being in the hands of a private equity sponsor than as a public company. "From their perspective, there is an opportunity to invest in the Procera product road map, which I think is promising," Tran said of Francisco Partners. Going private means the company would have the freedom to invest with a more long-term perspective and get away from a quarter-to-quarter scrutiny, he added. It is unlikely that Procera will receive another bid, Tran said, as he thought the company ran an extensive process. "We would have expected a strategic buyer so this agreement suggests other larger telecommunications equipment vendors were not ready to integrate Procera's products into their larger routing platforms," wrote Alex Kurtz, an analyst with Sterne Agee Group, in a Wednesday note, adding that the agreement is a "good first step" for Procera given challenges with the spending volatility with the company's Tier 1 customers.