In a significant move to expand its offerings in the realm of software as a service (SaaS), Progress Software has reached an agreement to acquire the document collaboration service ShareFile from Cloud Software Group for a substantial $875 million. This acquisition is poised to bolster Progress's revenue streams by adding more than $240 million annually, along with a robust customer base of 86,000 users. The acquisition will be financed through a mix of cash reserves and Progress's existing credit facilities, showcasing confidence in the ongoing growth trajectory of the company.
Progress anticipates that the deal will finalize within its current fiscal year, which concludes on November 30, subject to the necessary regulatory approvals. In recent trading, shares of Progress Software experienced a decline of 2.2%, reflecting market reactions to the news. However, the acquisition aligns effectively with Progress's ambitious growth strategy, which aims to double its company size every five years. According to Progress’s Chief Executive, Yogesh Gupta, integrating ShareFile into the company's digital experience portfolio is expected to significantly enhance both client and team collaboration.
He emphasized that businesses today face increasing pressure to optimize their operations for efficiency while ensuring secure document sharing. Gupta's vision reflects an understanding of modern business needs, where collaboration tools play a critical role in operational success. On the other end, Cloud Software Group’s Chief Executive, Thomas Krause, underscored the strategic advantage of ShareFile being part of Progress’s extensive product offering.
Krause noted that the collaboration would provide greater positioning for ShareFile within Progress's diverse user community, thereby enhancing its market reach and effectiveness. Looking forward, Progress has set optimistic projections for its fiscal third-quarter results, forecasting revenue between $174 million to $178 million and adjusted earnings per share (EPS) in the range of $1.11 to $1.15.
Analysts from Capital IQ have suggested a consensus revenue estimate of approximately $175.9 million and normalized EPS of $1.14, indicating strong confidence among market watchers. In a further development, Progress disclosed plans to suspend its quarterly dividend following the completion of the ShareFile acquisition.
This strategic decision aims to redirect capital towards debt reduction, thus enhancing liquidity for future mergers and acquisitions. Additionally, the company is poised to allocate funds for stock buybacks, further solidifying its financial standing and shareholder value. With a current stock price of $56.29, marking a decrease of $1.36 or 2.36%, Progress Software appears to be strategically navigating the complexities of the tech industry while positioning itself for long-term success in the competitive landscape..