Imperva Takeover To Have Minimal Premium: BTIG

Joel Fishbein of BTIG believes Imperva Inc IMPV could be acquired, but the takeover premium would be minimal as he downgraded the stock to Neutral given balanced risk/reward.

Shares of Imperva have gained about 23 percent since a recent report from Bloomberg said the security-software company is working with Qatalyst Partners to find a buyer. The report said the company has drawn interest from companies including Cisco Systems, Inc. CSCO and International Business Machines Corp. IBM.

"We still think a deal could happen, but believe any premium is limited given where the stock is currently trading," Fishbein wrote in a note.

Related Link: The Tailwinds Expected To Boost Cybersecurity In 2017

"We see only two clear strategic acquirers in Cisco and IBM; the lack of a third (or a viable "stalking horse"), in conjunction with what looks like a tough path forward for Imperva as a standalone company, should prevent bidders from driving up the price," Fishbein continued.

Further, Fishbein's business checks are mixed, as the turnover continues to be an issue in light of the sale process. Notably, Imperva has recently slashed its FY revenue guidance by $50 million/26 percent.
Absent a deal or the process drags on, the stock could fall materially and hence the analyst moving to the sidelines.

"Without a deal, we believe the stock could fall 25% and trade at 3.5x EV/FY17 Revenues (consistent with other security stocks in our coverage with low-DD revenue growth)," Fishbein added.