Cloudera Agrees $5.2 Billion Merger Deal with Hortonworks

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Cloudera

Cloudera and Hortonworks stocks rocketed in pre-market trading on Thursday after the companies agreed to merge in a $5.2 billion transaction. Cloudera shares jumped $4.42, or 25.88% to $21.50 on the news, while Hortonworks soared $5.07, or 23.17% to $26.95.

The merger between the two big-data rivals will create a single data processing giant under the Cloudera banner, expected to generate annual revenues of more than $700 million. Under the terms of the agreement, Cloudera stockholders will own about 60% of the blended company, while Hortonworks stockholders will own the remaining 40%.

Hortonworks stockholders will receive 1.305 shares of Cloudera for each share of Hortonworks stock owned based on the 10-day average exchange ratio of the companies’ prices through Monday. The combined company has a fully-diluted equity value of $5.2 billion based on Tuesday’s market close.

Cloudera CEO Tom Reilly will be the CEO of the blended company, whose board of directors will consist of five members from Cloudera and four members from Hortonworks. Scott Davidson, the current Chief Operating Officer at Hortonworks, will serve as COO.

The two firms are yet to report a profit and the deal is likely to allow the combined business to become profitable and minimize duplicate staffing costs. However, their revenues have been growing with Cloudera generating $411 million from its 1,300 clients, while Hortonwork locked $309 million in revenues from its 1,400 customers last year.

Reilly made the following comments in a prepared statement, “Our businesses are highly complementary and strategic. By bringing together Hortonworks’ investments in end-to-end data management with Cloudera’s investments in data warehousing and machine learning, we will deliver the industry’s first enterprise data cloud from the Edge to AI. This vision will enable our companies to advance our shared commitment to customer success in their pursuit of digital transformation.”

Hortonworks CEO Rob Bearden also commented saying, “This compelling merger will create value for our respective stockholders and allow customers, partners, employees and the open source community to benefit from the enhanced offerings, larger scale and improved cost competitiveness inherent in this combination. Together, we are well positioned to continue growing and competing in the streaming and IoT, data management, data warehousing, machine learning/AI and hybrid cloud markets. Importantly, we will be able to offer a broader set of offerings that will enable our customers to capitalize on the value of their data.”

The companies expect to close the transaction during the first quarter of 2019. It is still subject to Cloudera and Hortonworks stockholder approval and other customary closing conditions.

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