In a significant move within the technology consultancy sector, Thoughtworks has announced that it will be acquired by an affiliate of funds advised by its majority shareholder, Apax Partners, in a substantial deal valued at $1.75 billion. This strategic acquisition comes even as the company reported an unexpected loss in its second-quarter earnings, raising questions about its future trajectory. The acquisition offer stands at $4.40 per share.
This figure not only reflects a notable 30% premium over Thoughtworks' closing stock price on the preceding Friday but also suggests strong confidence from Apax in the company's recovery potential. Following the announcement, shares of Thoughtworks surged by 27% during afternoon trading, indicating a positive market reaction. As part of the deal, Apax intends to purchase all outstanding shares that it does not currently own.
By the end of the fiscal year 2023, Apax had secured a significant 61% stake in Thoughtworks, as reported in the company's Form 10-K filing earlier this year. Funding for this acquisition will be sourced from fully committed equity financing, emphasizing Apax's confidence in their strategic acquisition plans. Rohan Haldea, a non-executive director on the Thoughtworks board and a representative of Apax Partners, stated, "We believe that it is in the interest of all stakeholders for the company to return to private ownership to allow the organization to re-focus on growth." This sentiment underscores the rationale behind the move, suggesting that private ownership may provide the necessary foundation for Thoughtworks to rebound and develop new growth avenues. In a statement regarding the transaction, Chief Executive Mike Sutcliff remarked on the deal's provision of "immediate and fair value" to Thoughtworks' minority shareholders, reinforcing the transaction's perceived benefits. The anticipated completion of this deal is expected in the upcoming fourth quarter of the year, contingent upon fulfilling customary closing conditions.
Upon finalization, it is expected that Thoughtworks will be delisted from the Nasdaq exchange, marking a significant transition in its operational approach. Turning to its recent financial performance, Thoughtworks presented disappointing second-quarter results, reporting an adjusted loss of $0.03 per share, contrasting sharply with a profit of $0.03 recorded in the same quarter the previous year.
Analysts had anticipated at least a breakeven performance, indicating a greater decline than market expectations. Additionally, the organization witnessed a revenue decline of approximately 12%, landing at $251.7 million, slightly above the $251.4 million average forecasting by analysts surveyed by Capital IQ. In a bid to strengthen its financial position, Thoughtworks has set ambitious goals targeting $85 million to $95 million in additional savings.
This initiative is expected to aggregate total savings under its restructuring program to somewhere between $185 million and $210 million. The company has also signaled its intent to reduce its global workforce by 6% to 7%, with the restructuring program projected to be completed by the close of October.
This proactive approach aims to stabilize the company’s financial health post-acquisition, preparing it for a constructive transformation under Apax Partners' stewardship..