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Commvault to Buy SDS Vendor Hedvig for $225M to Jumpstart Growth

As competition from the likes of Cohesity heats up, Commvault's sales growth has slowed, and its shares are down 27 percent this year.

Nico Grant and Liana Baker (Bloomberg) -- Commvault Systems Inc. plans to buy startup Hedvig Inc. in a bid to bolster the software maker’s capabilities in the competitive data-storage market.

Commvault Chief Executive Officer Sanjay Mirchandani told Bloomberg in an interview that his company will buy Hedvig for $225 million in cash and stock. The purchase price covers the cost of retaining Hedvig employees.

Commvault expects the deal to be slightly dilutive to its adjusted earnings per share in fiscal 2020, and accretive to its earnings in fiscal 2021, the company said in a statement Tuesday.

Commvault, founded in 1988 and based in Tinton Falls, New Jersey, is trying to keep up in a data-storage market filled with cloud-based entrants including Cohesity Inc., a SoftBank-backed startup valued at more than $1 billion. Commvault’s sales growth slowed during its fiscal year ending March 31. Its shares have fallen 27% this year.

Mirchandani took the helm of the company in February and has been focused on sparking growth by figuring out its customers’ storage needs as they increasingly adopt cloud computing.

Doing an acquisition marks a new direction for Commvault, which came into the crosshairs of activist investor Elliott Management last year. The company appointed two new directors in connection with a settlement agreement with Elliott last year and the hedge fund has since sold out of the stock, according to a regulatory filing.

Mirchandani called the deal, which is expected to close in the third quarter, “extremely strategic.”

“We believe this gives us an incredibly innovative storage and data management product.” he said.

Hedvig Backers

Santa Clara, California-based Hedvig was founded in 2012 and raised at least $52 million as a private company, backed by investors including Hewlett Packard Enterprise Co., Redpoint Ventures and Vertex Ventures.

Hedvig co-founder and Chief Executive Officer Avinash Lakshman said being part of Commvault was a natural evolution.

“Being able to collaborate with someone who already has well-established customer relationships and can also create so much value was a no-brainer,” Lakshman said in an interview.

The $225 million deal value includes the purchase price for ongoing employee retention.

Boutique investment bank Qatalyst Partners represented Commvault on the deal.

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