Procera Networks Inc. (NASDAQ: PKT) may not be a household name to most technology investors. Still, it is being acquired by private equity firm Francisco Partners. With the deal valuing the company at $240 million, or about $11.50 per share, many investors may be wondering if a 20% premium is enough here. If you look back through time, even at a 52-week high, some long-term investors may not be very happy with the terms of this deal.

Procera announced that it will be acquired by private funds managed by Francisco Partners Management, in an all-cash transaction valued at approximately $240 million. Francisco Partners will acquire all outstanding shares of Procera’s common stock for $11.50 per share in cash, reflecting a premium of roughly 21% from Tuesday’s closing price.

Stifel is serving as financial advisor to Procera, and Paul Hastings is acting as the company’s legal advisor.

What both companies are hoping in this acquisition is that Procera will have the resources and financial expertise needed for it to attain the next level of growth and to strengthen its competitive market position.

Procera also announced preliminary financial results for the first quarter. The company expects that revenue will be in a range $19.5 million to $20.5 million and that it will incur a net loss. Thomson Reuters has consensus estimates of a net loss of $0.08 per share on $16.83 million in revenue.

Thomas Saponas, chairman of Procera’s board, commented on the acquisition:

After careful consideration and an extensive process to review strategic alternatives, the Board unanimously concluded that the sale of Procera to Francisco Partners is in the best interest of the Procera stockholders. This transaction delivers immediate and substantial cash value for our stockholders, while supporting the long-term success of Procera’s customers, partners and employees.

Note that Procera was a $20 stock as recently as 2012, and prior to the recession it was a $30 stock.

A look at the balance sheet shows that Procera has no long-term debt, but the company is losing money with its 2014 and 2013 annual revenues each around $75 million. Procera had a net loss in 2014 of roughly $24 million and a net loss of $16 million in 2013.

James Brear, president and CEO of Procera, talked about the value that shareholders are receiving:

I believe this transaction delivers compelling value to our stockholders, and we remain firmly committed to establishing Procera as the leader in improving the customer broadband experience for carriers and operators.

Most shareholders actually appear to be winning in this buyout. The longer-term holders who fall outside of that “most shareholders” category might feel very different about this being a good deal. Also, it was hard to not notice that over a half-dozen law firm announcements have been made from different class action law firms that they are investigating the merits and terms of this acquisition.

Sterne Agee analyst Alex Kutz said of this deal:

We would have expected a strategic buyer so this agreement suggests other larger telecommunications equipment vendors were not ready to integrate Procera’s products into their larger routing platforms. Ultimately, the spending volatility with their Tier 1 customers was proving to be increasingly difficult to gain quarter-to-quarter visibility. We see this tentative agreement as a good first step for the company given these challenges.

Shares of Procera were up 20% at $11.43 Wednesday afternoon. The stock has a consensus analyst price target of $10.00 and a 52-week trading range of $5.60 to $11.46.

ALSO READ: America’s Highest Paying Companies

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.