Late on Thursday, private equity firm EQT AB announced plans to take SUSE, a German-based multinational open-source software company, private. This deal will be funded by a special dividend issued by the Frankfurt-listed SUSE.
A seasoned player in open-source software
Founded in 1992, SUSE was the first company to market Linux for enterprise customers. It is the primary developer of SUSE Linux Enterprise and the main sponsor of the community-supported openSUSE Linux distribution project. The openSUSE “Tumbleweed” variant serves as an upstream distribution for both the “Leap” variant and SUSE Linux Enterprise distribution. Notably, openSUSE Leap effectively operates as a non-commercial version of SUSE’s enterprise product.
Generous offer to shareholders
EQT, which owns around 79% of SUSE, is set to offer shareholders 16 euros per share. This offering presents a premium of nearly 67% to the company’s closing price on Thursday, placing the company’s valuation at 2.72 billion euros ($2.96 billion). This offer, however, is a notable markdown from SUSE’s 30-euro IPO price in May 2021.
Shares in SUSE soar
In response to this news, shares in SUSE surged almost 60% in early Frankfurt trading on Friday, signaling the market’s positive reception of EQT’s move.
Navigating recent challenges
Our decision has matured over the past few months,
EQT partner Johannes Reichel in his comment to Reuters
Marcel, EQT’s holding company, stated on Thursday that its decision came after a year marked by execution challenges, operational issues, and significant changes. Low liquidity of SUSE’s stock compounded these issues, negatively affecting the company’s operating performance and market valuation.
A new leadership at the helm
Recently, SUSE underwent a management revamp, culminating in the appointment of Dirk-Peter van Leeuwen as chief executive in May.
Funding the buyout
EQT will finance the shareholder buyout through an interim dividend issued by SUSE. This financing strategy will be supported by SUSE’s available cash and up to 500 million euros in loans.
A flexible timeline for EQT’s exit
Reichel conveyed that EQT is not under time pressure to exit SUSE. “I don’t think we will sell in the next 12 months – but we probably won’t stay invested for another four years either,” he stated.
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