FireEye surges as investment firm Blackstone takes $400 million investment, board seat

FireEye is also buying privately held Respond Software for capabilities in analyzing threats via data science.
Written by Tiernan Ray, Senior Contributing Writer

Shares of cloud-based security provider FireEye shot up almost 10% in late trading Thursday evening after the company announced that private equity firm Blackstone Group is making a $400 million investment in the company and taking a board seat.

FireEye announced in a separate press release that it will buy four-year-old security startup Respond Software of Mountain View, Calif., for $186 million in cash and stock.

New York-based Blackstone, one of the most powerful private equity firms in the world, with a market cap of $67 billion or so, is teaming up with venture capital firm ClearSky Power & Technology Partners, based in Juno Beach, Florida, to buy $400 million worth of convertible stock in FireEye. 

The duo will purchase "shares of a newly designated 4.5% Series A Convertible Preferred Stock of FireEye," said FireEye, "with a purchase price of $1,000 per share." 

The Series A Preferred will be convertible into shares of FireEye's common stock at a conversion price of $18.00 per share, the company said.

A senior managing director at Blackstone, Viral Patel, will take a seat on FireEye's board, the company said. 

Said Patel, "Blackstone and FireEye have a shared vision of the unique role FireEye can play in addressing the increasingly sophisticated cyber security challenges their customers face."

"We are excited to partner with the company's board and management to accelerate execution on their vision."

Also: FireEye Q3 results beat expectations, raises year view, shares jump 6%

Proceeds of the convertible offering will be put toward the purchase of Respond, the company said, as well as "increased investment to accelerate the growth of the company's cloud, platform and managed services portfolio," it said.

Respond makes software in the class known as "eXtended Detection and Response," or XDR. 

As FireEye describes it, the software "accelerates cyber investigation and response by automating the correlation of multi-sourced attack evidence using cloud-based data science models that ingest data from a comprehensive set of security technologies."

FireEye said the "will become a key part of the Mandiant Advantage platform, bringing vendor-agnostic XDR and investigation capabilities that integrates with any customer environment."

Tonight's announcement follows an upbeat earnings report by FireEye three weeks ago, in which the company beat Wall Street's quarterly revenue and profit expectations, and raised its year forecast above expectations as well.

FireEye management is hosting a conference call with analysts this evening at 5 pm to discuss the deal, and you can catch it on the company's investor relations Web site.

Shares of Mandiant are up almost 10% in late trading at $15.65.

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