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Symantec Promises $5.5 Billion to Investors after Veritas Sale

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Symantec gets $1 billion less than proposed in after-tax cash payments from Veritas sale

In the prior part of the series, we discussed Symantec’s (SYMC) recently announced fiscal 3Q16 results as well as Silver Lake’s $500 million investment in the company. On January 29, 2016, Symantec completed the sale of Veritas to The Carlyle Group for $7.4 billion, which was less than the earlier agreed-upon $8 billion. Symantec will get $6.6 billion in cash and a $400 million equity interest in Veritas.

Earlier, after paying taxes of ~20% on the $8 billion, Symantec was expected to receive approximately $6.3 billion in net cash from the Veritas sale. However, Symantec received $5.3 billion in after-tax cash payments from the Veritas sale.

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Apart from Symantec, technology players like HP (HPQ) and eBay (EBAY) have been forced to give into rising investor pressure and announce splits. EMC (EMC), which was considering a buyout by its own subsidiary, VMWare (VMW), is also in the process of becoming part of Dell, in the biggest technology acquisition to date.

Symantec added $2 billion to its capital return program and announced special dividend

After the Veritas sale, Symantec increased its capital return program from the earlier announced $4 billion to $5.5 billion, which is to be completed by March 2017. Symantec’s capital return program includes share buybacks and dividends. Symantec stated that share buybacks and dividend payout would be funded through after-tax proceeds from the Veritas sale, Silver Lake’s investment, and additional debt and cash.

Symantec announced share buybacks of $2.3 billion and a special dividend of $4 per share, which will equal $2.7 billion. Symantec has already executed $500 million in share repurchases as of January 2016 of this capital return program. However, compared to fiscal 4Q16, Symantec will reduce its annual dividend to 30 cents per share due to the special dividend and lower expected domestic cash flow after the Veritas sale.

Investors who wish to gain exposure to Symantec can consider investing in the Technology Select Sector SPDR Fund (XLK). XLK has an exposure of 35% to application software. It invests ~0.34% of its holdings in Symantec.

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