On January 31, a deeply unsexy but supremely important Wall Street deal was quietly announced. Vista Equity Partners, the mighty private-equity firm founded by the controversial Robert Smith, and an affiliate of Elliott Management, the activist hedge fund known for muscling once upon a time into Twitter and AT&T, joined together to buy Citrix, a publicly traded software specialist, and have plans to merge it with Tibco, an existing Vista portfolio company. The two firms agreed to pay $104 per share in cash for Citrix, a 30 percent premium to where the company’s stock price was trading prior to the announcement. The total value of the deal is around $17.3 billion.
In the heady days of pre-post-ZIRP Wall Street, the deal was a star-studded affair, at least as far as the financing goes. Vista, after all, is an industry leader, especially when it comes to technology deals, and Smith, despite some not insignificant complications around his tax avoidance history, is the second richest Black person in the country, behind Oprah. Elliott, for all its aggressiveness, is a wealth creation machine that first bought into Citrix in 2015, to great success, among other great successes. As part of the deal, a consortium of A-list Wall Street banks—led by Bank of America, Credit Suisse and Goldman Sachs—committed to provide $16 billion of financing for the buyout of Citrix. These banks have a supporting cast of another 30 or so big banks from around the globe, including Morgan Stanley, Deutsche Bank, and the Royal Bank of Canada. (Only JPMorgan Chase is sitting this one out, which is a lucky turn of events for Jamie Dimon et al., as we shall see.)
The deal, which came together just as the broader markets peaked, was secured on particularly advantageous terms for Vista and Elliott. “The obligation” of affiliates of Vista and Elliott to “consummate the [m]erger is not subject to any financing condition,” according to the proxy statement for the deal filed with the Securities and Exchange Commission. That put the consortium of banks on the hook for the financing, with only the barest of escape hatches. The financing had four parts: a $7.05 billion senior secured loan; a $1 billion senior secured revolving loan facility; a $4 billion senior secured bridge loan; and, an unsecured bridge financing in the amount of $3.95 billion. What could possibly go wrong?