What Could Be in the Works for a Salesforce Acquisition of Slack

Apps & Software

Published: November 30, 2020 10:56 am

Slack Technologies Inc. (NYSE: WORK) hit an all-time high on Monday on the expectation of an announcement that Salesforce.com Inc. (NYSE: CRM) will acquire it. Although rumors arose last week about such an acquisition, many were calling for this deal to get the green light on Tuesday.

CNBC previously reported that this deal is expected to be half cash and half stock. Even further, the deal will price at a premium to Slack’s then-current price. Note that Slack had a market cap of roughly $17 billion prior to the run-up in the stock price.

In terms of what to expect, we can apply premiums based on the 50-day and 200-day moving averages that are $28.80 and $28.93, respectively. Implying premiums of 40%, 50% and 60% to these averages would yield prices of $40.32, $43.20 and $46.08, respectively.

This deal would represent Salesforce’s largest acquisition to date. One of Salesforce’s more recent large acquisitions was Tableau in 2019 for a price target of $15.3 billion. The company previously acquired MuleSoft in 2018 for $6.5 billion.

Truist Securities has made a case for Salesforce not buying Slack. Truist reiterated a Buy rating on the positive dynamics of the existing business in Salesforce. The firm went on to say that it hopes that Salesforce does not acquire Slack and investors should be excited by the wide array of organic growth opportunities and other strategic acquisition opportunities.

Look for Salesforce to report its most recent quarterly results on Tuesday afternoon. Consensus estimates are calling for $0.75 per share in earnings and $5.25 billion in revenue for its fiscal third quarter.

Slack stock traded up about 5% at $42.60 on Monday, in a 52-week range of $15.10 to $43.67. The consensus price target is $31.10.

Salesforce stock was down about 3% at $240.00. It has a 52-week trading range of $115.29 to $284.50, and analysts have a consensus price target of $281.03.