UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) August 14, 2007
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Citrix Systems, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-27084 75-2275152
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(Commission File Number) (IRS Employer Identification No.)
851 West Cypress Creek Road, Ft. Lauderdale, Florida 33309
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(Address of Principal Executive Offices) (Zip Code)
(954) 267-3000
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, If Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|X| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1--Registrant's Business and Operations
Item 1.01. Entry into a Material Definitive Agreement.
On August 14, 2007, Citrix Systems, Inc., a Delaware corporation
("Citrix"), PVA Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Citrix ("Merger Sub"), and PVA Acquisition LLC, a Delaware
limited liability company and a wholly owned subsidiary of Citrix ("LLC"),
entered into an Agreement and Plan of Merger and Reorganization (the "Merger
Agreement") with XenSource, Inc., a privately held Delaware corporation
headquartered in Palo Alto, California ("XenSource"), and John G. Connors, as
stockholder representative.
Pursuant to the Merger Agreement, Citrix proposes to acquire all of the
issued and outstanding capital stock of XenSource by means of a merger of
XenSource and Merger Sub, with XenSource continuing as the surviving corporation
(the "Merger"). Promptly following the Merger, XenSource will merge with and
into the LLC, with the LLC to be the final surviving entity. Under the terms of
the Merger Agreement, the total consideration pursuant to the Merger is
approximately $500 million payable in a combination of cash and Citrix common
stock, which includes the assumption of approximately $107 million in unvested
stock options upon the closing of the Merger. For purposes of the Merger
Agreement, the stock consideration is based on a per share value for Citrix's
common stock of $36.18.
This transaction has been approved by the board of directors of both
Citrix and XenSource. The parties to the Merger Agreement currently anticipate
completing this transaction in the fourth quarter of 2007, subject to various
closing conditions, including regulatory review and approval under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, approval by the
stockholders of XenSource, Citrix becoming current in its periodic reporting
obligations and other customary conditions.
The Sevin Rosen funds, a venture capital firm, is a stockholder in
XenSource. Steve Dow, a director of Citrix, is a general partner of the Sevin
Rosen funds and does not directly hold any interest in XenSource. Although the
Sevin Rosen funds are represented on the Board of Directors of XenSource, Mr.
Dow is not a director of XenSource. The Merger will provide a return to all
general partners of the firm, including Mr. Dow. Subject to certain assumptions,
Citrix currently estimates that the potential allocation to Mr. Dow through the
general partner entities of the Sevin Rosen funds related to the Merger is
approximately $1.9 million. Mr. Dow has been on the Citrix Board of Directors
since 1989 and currently owns 262,352 shares of Citrix common stock. Mr. Dow did
not attend the meeting at which the Citrix Board approved the transaction and
recused himself from the vote to approve the transaction. Consistent with
Citrix's policies and the charter of the Nominating and Corporate Governance
Committee of Citrix's Board of Directors, the Merger was reviewed and approved
by the Nominating and Corporate Governance Committee. There are no material
relationships among Citrix and XenSource or any of their respective affiliates
or any of the parties to the Merger Agreement and related agreements, other than
in respect of such agreements themselves and as disclosed in this Current Report
on Form 8-K.
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The foregoing description of the transaction does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Merger Agreement.
Section 3--Securities and Trading Markets
Item 3.02. Unregistered Sales of Equity Securities.
In accordance with the terms of the Merger Agreement and assuming no
exercises of XenSource stock options prior to the consummation of the
transaction, Citrix will issue to the shareholders of XenSource approximately
5.6 million shares of Citrix common stock on the date of the consummation of the
transaction. If certain conditions set forth in the Merger Agreement are
satisfied, however, the number of shares to be issued could be increased to
approximately 7.9 million shares. These shares are expected to be issued in
reliance upon the exemption from registration provided by Section 3(a)(10) of
the Securities Act of 1933, as amended, for the issuance and exchange of
securities approved, after a public hearing upon the fairness of the terms and
conditions of the exchange, by a state commission authorized by law to grant
such approval. Citrix intends to apply for such a public fairness hearing before
the Commissioner of the California Department of Corporations, in accordance
with Section 25142 of the California Corporate Securities Law of 1968, as
amended.
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Section 7--Regulation FD
Item 7.01. Regulation FD Disclosure.
On August 15, 2007, Citrix issued a press release announcing the
execution of the Merger Agreement. A copy of the press release is attached
hereto and furnished herewith as Exhibit 99.1.
Section 9--Financial Statements and Exhibits
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
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99.1 Press release, dated August 15, 2007, of Citrix
Systems, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CITRIX SYSTEMS, INC.
August 15, 2007
By: /s/David J. Henshall
David J. Henshall
Senior Vice President and Chief Financial
Officer
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press release, dated August 15, 2007, of Citrix Systems, Inc.
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Exhibit 99.1
Citrix to Enter Server and Desktop Virtualization Markets
with Acquisition of XenSource
Combination of Citrix and XenSource Accelerates the Mainstreaming of
Virtualization and Strengthens End-to-End Application Delivery Strategy
FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Aug. 15, 2007--Citrix
Systems, Inc. (NASDAQ: CTXS), the global leader in application
delivery infrastructure, today announced a definitive agreement to
acquire XenSource, Inc. of Palo Alto, Calif., a privately held leader
in enterprise-grade virtual infrastructure solutions, for
approximately $500 million in a combination of cash and stock, which
includes the assumption of approximately $107 million in unvested
stock options. This acquisition moves Citrix into adjacent server and
desktop virtualization markets, expected by Citrix to grow to nearly
$5 billion over the next four years.1 The combination of Citrix and
XenSource brings together significant customer, technical, channel and
go-to-market synergies. This will allow Citrix to extend its
leadership in the broader Application Delivery Infrastructure market
by adding key enabling technologies that make the end-to-end computing
environment far more flexible, dynamic and responsive to business
change. The acquisition will also strengthen each company's strong
partnership with Microsoft and commitment to the Windows platform.
The acquisition is expected to close in the fourth quarter of 2007
subject to the satisfaction of closing conditions.
Leveraging the Power of Xen
XenSource is the leading provider of enterprise-class virtual
infrastructure solutions built on the open source Xen(R) hypervisor.
Originally created by the founders of XenSource at University of
Cambridge, the Xen virtualization "engine" is now developed
collaboratively by an active open source community of senior engineers
at many of the industry's most innovative infrastructure companies,
including leading hardware vendors like Intel, IBM, HP and AMD. This
open collaborative approach significantly accelerates the innovation
of the Xen engine, leading to continual state-of-the-art improvements
in performance, scalability and cross-platform support. The
next-generation Xen architecture is widely acknowledged for its
industry-leading performance, efficiency, security and native support
for the latest hardware-assisted virtualization features from Intel,
AMD and leading device vendors.
Today's acquisition announcement comes on the heels of a
substantial new release of XenEnterprise(TM), the company's flagship
commercial product line powered by the Xen engine. XenEnterprise v4
marks a significant milestone in XenSource's transition from a
next-generation technology company into a leading provider of
comprehensive enterprise-class virtual infrastructure solutions. With
powerful new management, availability and ease-of-use features,
XenEnterprise v4 raises the bar as the most open, scalable, high
performance virtualization platform on the market. In a recent
head-to-head product comparison published this week in CRN, the
industry's leading publication for channel resellers and integrators,
reviewers praised XenEnterprise v4 as an "easy-to-use, feature rich
offering that is quickly catching up to its main rival". Channel
partner and customer enthusiasm over the XenEnterprise product line
has lead to a rapid increase in customer demand. Version 4 will
further accelerate an installed base that has more than doubled in the
last 90 days to over 650 customers.
"The combination of Citrix and XenSource brings together both
presentation and server virtualization to deliver more choice and
flexibility to the market, particularly Citrix's strong installed
base," said John Humphreys, program vice president of Enterprise
Virtualization for IDC. "By adding mobility, monitoring and storage
integration in the recently introduced XenEnterprise v4, XenSource has
narrowed the capability gap and delivered a viable virtualization
solution for server consolidation."
Upon close of the acquisition, the XenSource team and products
will form the core of the new Virtualization & Management Division of
Citrix dedicated to building and growing these important new
businesses. Peter Levine, XenSource, CEO, will lead the new division,
reporting directly to Mark Templeton, Citrix President and CEO. Under
Peter's leadership, Citrix is also committed to maintaining and
growing its support for the Xen open source community, led by
XenSource co-founder and Xen project leader, Ian Pratt. Between now
and the close of the acquisition, XenSource will work with the key
contributors to the Xen project to develop procedures for independent
oversight of the project, ensuring that it continues to operate with
full transparency, fairness and vendor neutrality - principles that
are critical to the continued role of Xen as a freely available open
source industry standard for virtualization.
"Today is a great day for the virtualization market because
customers will now have a strong alternative that is open, proven and
backed by one of the most successful end-to-end software
infrastructure leaders in the entire industry," said Peter Levine, CEO
of XenSource. "This move is not about competing for the five percent
of the market that is already being served. It's about steering into
the 90 percent white space that is wide open, both at the server and
in new emerging opportunities at the desktop."
"This announcement represents a key milestone for the Xen
project," said Ian Pratt, leader of the Xen project and co-founder of
XenSource. "Citrix is committed to our community and the principles of
transparency and neutrality that allow us to work together on the
reference standard for virtualization, promoting the rapid, ubiquitous
adoption of virtualization."
Strong Alignment with Microsoft
The acquisition will also strengthen each company's strong
partnership with Microsoft and commitment to the Windows platform. As
an independent company, XenSource has built a strategic relationship
with Microsoft designed to ensure broad interoperability between
XenSource products and the upcoming Microsoft Windows hypervisor, code
named "Viridian". This relationship complements and broadens the
successful partnership between Citrix and Microsoft in the Windows
application delivery, application networking and branch office
infrastructure markets.
"Although the market is still in the earliest phase,
virtualization already offers significant opportunities for cost
savings and innovation," said Bob Muglia, Senior Vice President,
Microsoft Server & Tools Business. "Citrix and XenSource have long
been strong partners for Microsoft and it is exciting to see them team
up to help move the market forward."
Extending Application Delivery Infrastructure from the Datacenter
to the Desktop
Virtualization has become one of the most talked-about
technologies in recent years because it breaks the "hard-coded" link
between hardware and software, allowing individual computing
components to be dynamically combined and reassembled for maximum
efficiency and agility. Citrix has long been the leading provider of
virtualization technologies at the user tier of computing with
products that deliver mission-critical applications to end users with
the best performance, security and cost savings. This acquisition will
allow Citrix to extend its use of virtualization into the logic and
data tier of applications, improving overall customer value and
enhancing its position as a market leader in end-to-end application
delivery infrastructure.
In the datacenter, this means extending virtualization to the
servers that run the business logic of applications and the storage
systems that manage application data. Citrix customers and partners
are increasingly requesting non-proprietary, easy-to-use server
virtualization solutions that are optimized to work best on the
Microsoft Windows platform. Citrix currently intends to distribute the
XenEnterprise product line through more than 5,000 channel partners
with proven expertise in enterprise datacenter solutions built on the
Windows Server platform. The company also plans to leverage its strong
relationships with leading server and datacenter infrastructure
partners to create additional routes to market through OEM sales
channels.
In the storage market, Citrix will continue the XenSource strategy
of leveraging key industry partners to ensure that the
open-architecture XenEnterprise product line fully supports leading
storage management and infrastructure solutions and a robust ecosystem
of storage software vendors. The two companies share a strong belief
that customers should be able to manage their virtual environments
with the same proven storage management solutions they use for their
physical environments. This strategy is exemplified by the recently
announced partnership between Symantec and XenSource which ensures
that XenEnterprise works transparently with Symantec's Veritas Storage
Foundation and Veritas NetBackup solutions.
"Symantec and XenSource share a common belief that customers want
unified server and storage virtualization," said Rob Soderbery, senior
vice president, Data Center Management Group at Symantec.
"Incorporation of Symantec's Veritas Storage Foundation solution into
XenSource open-architecture virtualization technology delivers that
capability. We look forward to continuing our collaboration with
Citrix and XenSource to help customers simplify data center operations
and dramatically reduce costs."
At the desktop, the combination of Citrix and XenSource will help
make the emerging market for virtual desktop delivery a mainstream
reality. Industry experts estimate that up to 30 million office
workers will move to virtual desktops over the next five years,
creating a new $1 billion market for desktop virtualization.2 While
much of the underlying technology to realize this vision exists today,
the available solutions are still far too complex and expensive for
most customers to assemble, integrate and manage. By combining the
capabilities of XenEnterprise v4 with the newly-released Citrix
Desktop Server(TM), Citrix will be able to provide customers with a
comprehensive set of desktop delivery solutions that offer
unparalleled economics, ease-of-use and end user experience. Citrix
further intends to enhance this strategy by incorporating other
relevant application delivery infrastructure technologies such as
Citrix EdgeSight(TM) end user experience monitoring, Citrix Access
Gateway(TM) for secure application access, Citrix WANScaler(TM) for
accelerated delivery to branch office users, Citrix(R) GoToAssist(TM)
for remote desktop support and the OS-streaming and provisioning
capabilities from its recent Ardence acquisition.
"We are tremendously excited about the opportunity to add the
XenSource products, team and culture to the Citrix family," said Mark
Templeton, president and chief executive officer for Citrix.
"Incorporating XenSource's dynamic virtualization services into our
market-leading application delivery infrastructure will enable our
entire product line to be more flexible, agile and dynamic, qualities
that have never been more important than they are today. We believe
application delivery will be a defining issue for IT over the next
decade because applications are the language of business. Companies
that are fluent with application delivery will be the winners, while
those who do not will lag behind, struggling with the pace of change
in an increasingly dynamic world."
Terms of the Agreement
Under terms of the definitive agreement, Citrix will acquire
XenSource for approximately $500 million in a combination of cash and
stock, which includes the assumption of approximately $107 million in
unvested stock options.
The acquisition has been approved by the board of directors of
each company and is expected to close during the fourth quarter of
2007. The acquisition is subject to various closing conditions,
including regulatory review and approval under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, approval by the stockholders of
XenSource, Citrix becoming current in its periodic reporting
obligations and other customary conditions.
Assuming the transaction closes as expected, the acquisition is
expected to add approximately $1 million in revenue and $3 million in
cost of revenues and operating expenses to fiscal year 2007. The
acquisition is expected to add approximately $50 million in revenue
and $60 to $70 million in total cost of revenues and operating
expenses to fiscal year 2008. The transaction will also result in
approximately an $8 to $10 million non-cash expense charge for the
write-off of in-process research and development in the quarter in
which the acquisition closes.
These estimates of cost of revenues and operating expenses do not
take into account any stock-based compensation expense, amortization
expense, or other charges resulting from the closing of the
acquisition.
Conference Call Information
Citrix will host a conference call today at 9:00 a.m. ET to
discuss the financial aspects of this transaction. The call will
include a slide presentation, and participants are encouraged to
listen to and view the presentation via webcast at
http://www.citrix.com/investors.
The conference call may also be accessed by dialing: (888)
799-0519 or (706) 634-0155, using passcode: CITRIX. A replay of the
webcast can be viewed by visiting the Investor Relations section of
the Citrix corporate Web site at http://www.citrix.com/investors for
approximately 30 days. In addition, an audio replay of the conference
call will be available through August 17, 2007, by dialing (800)
642-1687 or (706) 645-9291 (passcode required: 13525141).
About Citrix
Citrix Systems, Inc. (NASDAQ:CTXS) is the global leader and the
most trusted name in application delivery infrastructure. More than
200,000 organizations worldwide rely on Citrix to deliver any
application to users anywhere with the best performance, highest
security and lowest cost. Citrix customers include 100% of the Fortune
100 companies and 98% of the Fortune Global 500, as well as hundreds
of thousands of small businesses and prosumers. Citrix has
approximately 6,200 channel and alliance partners in more than 100
countries. Annual revenue in 2006 was $1.1 billion.
For Citrix Investors
This release contains forward-looking statements which are made
pursuant to the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The forward-looking statements in this release do not
constitute guarantees of future performance. Investors are cautioned
that statements in this press release, which are not strictly
historical statements, including, without limitation, statements by
the company's CEO, the CEO of XenSource and an officer of Microsoft;
statements concerning the proposed acquisition; statements concerning
the terms and timing of the acquisition; statements concerning
revenue, cost of revenue and operating expenses; statements concerning
the datacenter, desktop and other virtualization markets; statements
concerning integration plans, customers, partners, products, product
distribution, the open source development community and technology;
statements concerning expectations as to demand for growth of the
products; statements concerning expectations as to market growth; and
statements concerning management's plans, objectives, strategies and
assessments of market factors, constitute forward-looking statements.
Such forward-looking statements are subject to a number of risks and
uncertainties that could cause actual results to differ materially
from those anticipated by the forward-looking statements, including,
without limitation, the possibility that the proposed acquisition will
not close, including due to failure to receive required regulatory
approvals and failure by Citrix to become current in its periodic
reporting obligations; that the closing may be delayed or that the
companies may be required to modify aspects of the acquisition to
close the acquisition; the satisfaction of closing conditions to the
acquisition; the reaction of customers of Citrix and XenSource to the
acquisition; Citrix's timing and ability to successfully integrate
XenSource's products, operations (including migration of XenSource to
Citrix's systems and controls) and employees; the introduction of new
products by competitors or the entry of new competitors into the
markets for Citrix's and XenSource's products; the failure by Citrix
to retain key employees of XenSource; failure to further develop and
successfully market XenSource's technology and products, including
failure to execute Citrix's sales and marketing plans and failure to
successfully partner with key distributors, resellers, OEM's and
strategic partners (such as Microsoft); failure to achieve anticipated
revenues; and costs related to the acquisition. More information about
potential factors that could affect Citrix's business and financial
results are detailed in Citrix's filings with the Securities and
Exchange Commission ("SEC"), which are available at the SEC's website
at http://www.sec.gov. Citrix assumes no obligation to update any
forward-looking information contained in this press release or with
respect to the announcements described herein.
Citrix(R), Citrix Desktop Server(TM), Citrix EdgeSight(TM), Citrix
WANScaler(TM) and Citrix GoToAssist(TM) are trademarks or registered
trademarks of Citrix Systems, Inc. and/or one or more of its
subsidiaries, and may be registered in the U.S. Patent and Trademark
Office and in other countries.
Xen(R) is a registered trademark of XenSource, Inc.
XenEnterprise(TM) is a trademark of XenSource, Inc.
All other trademarks and registered trademarks are property of
their respective owners.
1 Citrix estimate based on data and research from IDC and Credit
Suisse.
2 Worldwide Virtual Client Computing 2007 - 2011 Forecast: The
Virtualization Revolution: Rethinking Client Computing, IDC.
CONTACT: Citrix Systems, Inc.
Investor Relations:
Eduardo Fleites, 954-229-5758
eduardo.fleites@citrix.com
or
Media Relations:
Eric Armstrong, 954-267-2977
eric.armstrong@citrix.com
or
A&R Edelman
Eric Jones, 212-819-4862
ejones@ar-edelman.com
or
Mindshare PR for XenSource, Inc.
Heather Fitzsimmons, 650-947-7400
heather@mindsharepr.com