Apigee Is A Good Strategic Fit For Google, Says Pacific Crest

Pacific Crest says Apigee Corp APIC is a good strategic fit for Google given the search giant's emphasis on building up its enterprise cloud offerings.

Google will buy Apigee, an API provider, for $17.40 per share in cash, for a total value of approximately $625 million. The companies expect the deal to close by the end of 2016.

Despite shares are trading above Google's offer price, the brokerage views a competitive bid as "unlikely" given that the company has been shopping itself for a few months.

"While we believed the long-term opportunity for Apigee was significant enough to warrant a higher premium, shares have been up significantly over the past few months in anticipation of a buyout," analyst Ben McFadden wrote in a note.

As such, McFadden downgraded Apigee to Sector Weight following Google acquisition.

Meanwhile, Apigee reported mixed fourth quarter results with subscription revenue of $11.6 million topping Pacific Crest estimate of $11.5 million, but product revenue came in light. That said, the company's customer base is growing faster than its revenue.

"We believe large deals continue to be focused on on-premise environments, which has driven a higher product revenue number. However, over time, the company could see subscription reaccelerate as more customers begin to shift to public cloud environments," McFadden highlighted.

At time of writing, shares of Apigee were trading almost flat at $17.44.