Elliott makes first public buyout with Gigamon in $1.6 bln deal

SAN FRANCISCO (Reuters) - Elliott Management Corp, best known as an activist investor, announced its first agreement to buy a public company on Thursday, a $1.6 billion acquisition of network software firm Gigamon Inc GIMO.N.

The deal for Gigamon was struck by Elliott’s private equity arm, Evergreen Coast Capital Partners, about six months after the hedge fund bought a 15.3 percent stake in the company and pushed it to explore a sale.

Elliott said it would pay $38.50 per share for Gigamon, a 7 percent premium to Thursday’s closing price. The deal is expected to close in early 2018.

Shares rose 4.43 percent in after-hours trading to $37.75.

While activists have made offers for companies in the past and investors such as Carl Icahn have acquired companies before, New York-based Elliott, with assets of more than $33 billion, is one of the few hedge funds with a dedicated team chasing buyouts. Elliott launched Evergreen in Menlo Park, California in 2015 and owns assets such as Dell’s software unit that it bought along with private equity firm Francisco Partners for more than $2 billion.

Elliott’s private equity push, spearheaded by partner Jesse Cohn, could capture a lot of value for the firm if it successfully exits its acquisitions in the future, but it also involves bigger risks.

Owning the majority of a company that fails to live up to its potential can hurt a fund’s bottom line and its reputation far more than a minority stake that underperforms. It also creates potential confusion for CEOs and corporate boards wondering which path Elliott will take when it shows up as a shareholder.

Santa Clara, California-based Gigamon makes software used in large data centers to boost the flow of traffic and prevent bottlenecks.

Isaac Kim, Evergreen’s managing director, said in a statement that his team, including operating executives it has hired, will help the company develop products and explore acquisitions to boost growth.

The company had held on and off talks for several months with Gigamon. Talks had broken off in early October, Reuters previously reported, over price disagreements. They heated up in mid-October after Gigamon’s third-quarter results came in, according to a source familiar with the matter.

Gigamon reported on Thursday that its revenue in the third quarter declined 5.1 percent to $79.2 million.

Gigamon was advised by Goldman Sachs GS.N while Elliott's Evergreen was advised by Jefferies, Bank of America and Macquarie.

(In first, third and 11th paragraphs, corrects day to Thursday from Wednesday)

Reporting by Liana B. Baker in San Francisco; Editing by Cynthia Osterman