Fast-growing LogMeIn Inc. announced a $1.8 billion merger with a division of Citrix Systems Inc. that will triple its size overnight, creating a Boston software firm with nearly 3,000 employees and more than $1 billion in annual revenue.
The deal to merge with Citrix’s GoTo business, unveiled late Tuesday, will significantly advance chief executive Bill Wagner’s ambition to make LogMeIn a leading software company in Boston.
“We saw this as a once-in-a-lifetime opportunity for us to significantly increase the scale of our business,” Wagner said in an interview. “This puts LogMeIn as one of the preeminent tech employers in the Boston area.”
LogMeIn sells software and services that, among other things, help businesses manage the many ways employees and clients connect with their systems and with each other. It reported revenues of $272 million in 2015, and that’s expected to grow around 22 percent this year. The GoTo collaboration products include the well-known GoToMeeting software that allows customers to conduct virtual live meetings from different locations.
The combined company will remain based in Boston after the deal closes, likely in early 2017. The Citrix operation, based in Santa Barbara, Calif., has nearly 2,000 employees. Even before the deal, LogMeIn had doubled its headquarters with a second office across from its base on Summer Street in the South Boston Waterfront area. Of its 1,100-person workforce, 600 are based in Boston.
The deal’s origins can be traced to November, when Citrix said it would spin off its GoTo operations into a separate, publicly traded firm. Instead, Wagner and LogMeIn chairman Michael Simon got Citrix to agree to combine the two businesses under terms that will be tax-free for Citrix shareholders.
Once the deal closes, LogMeIn shareholders will own 49.9 percent of the outstanding shares, and Citrix shareholders will own 50.1 percent. Citrix shareholders will get 27.6 million LogMeIn shares, valued at $1.8 billion based on LogMeIn’s $65.31 closing price Monday.
“We’re one third the size of them, but our shareholders get 50 percent of the combined company,” Wagner said. “That’s pretty spectacular.”
Investors in LogMeIn seemed to agree: Shares were up as nearly 20 percent in after-hours trading Tuesday.
If LogMeIn shareholders and regulatory officials approve the deal, LogMeIn’s board will be reconstituted. The new board will consist of five current LogMeIn members, down from eight, and four directors from Citrix. Simon will continue as chairman, and both Wagner and LogMeIn chief financial officer Ed Herdiech will keep their titles.
The deal is expected to result in as much as $100 million in annual expense savings within two years. Wagner said savings will come from employee reductions, efficiencies from combining back-end systems and overlapping real estate, likely in cities such as Sydney and Dublin where both companies have offices that can be consolidated.
Wagner said it’s too soon to know what kind of positions will be eliminated as a result of the merger. Some positions in Boston could be affected, but he doesn’t expect significant cuts here.
Overall, he said, the merger should lead to net job growth in Boston.
The merger will also beef up LogMeIn’s presence on the West Coast. Wagner said GoTo employees seemed to have a startup culture similar to LogMeIn’s, despite their parent company’s size.
“They’ve been running more like a standalone company for years,” Wagner said. “Culturally, I think it’s going to be a good match.”
Steve Ashley, a software analyst at Robert W. Baird & Co., said the Citrix deal was at least in part due to the activism of New York hedge fund firm Elliott Management Corp., which successfully pushed for a leadership switch at Citrix last year. That, in turn, led to a number of changes within the company, which reported $3.3 billion in revenue in 2015.
“Citrix has gone through massive reorganizations that are unfolding nicely for shareholders,” Ashley said in an interview. “Clearly [Elliott] is the one that changed the leadership and got them to sit and rethink the business.”
This article has been updated to correct the estimate for LogMeIn’s revenue growth.Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.