Takeover Speculation for Verisign

Verisign’s share price has risen 14 per cent in two days fuelling rumours it could be in line for a takeover according to several news reports.Adding to the speculation is the cancellation of plans to appear at two upcoming conferences.Verisign, currently valued at $5.7 billion is a provider of internet infrastructure services as well as being the TLD manager for around 110 million .COM and .NET domain names, has been without a CEO since late August following the resignation of Mark McLaughlin.”CEO vacancy plus unexplained spiking of investor meetings equals speculation the company may be for sale, though a person familiar with the matter said he wasn’t aware of any active sale discussions,” reported the Wall Street Journal.”The company has not responded to requests for comment, which suggests to us a significant corporate action may be pending,” CLSA analyst Ed Maguire said in a research note today. “In our view, VeriSign is an attractive (albeit expensive) target for private equity given the highly recurring cash flows and untapped earnings leverage in the model.”On the other hand, ThinkEquity analyst Daniel Cummins wrote in a research note that he believes the conference cancellations “owe more to the situation with the CEO search than other potential factors, including potential M&A developments.”Cummins also noted that VeriSign’s business “remains in very good shape” and that the most important task for the board of directors is finding a replacement CEO. However, he noted the possibility of an acquisition.”We believe the consensus view for at least a year has been that Verisign, following numerous divestitures, could attract interest from private equity investors. We think that makes sense,” Cummins wrote.Adding fuel to the rumours is that in recent years VeriSign “has been on an aggressive selling spree to pare down the company to a few core businesses, reversing a dot-com-era binge. Since 2007, the company has sold more than a dozen units for more than a total of $2 billion, including last year’s sale to Symantec Corp. of a division that makes security ‘certificates’ to websites.”

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