Can Avast retain its massive gains?

• Avast PLC (LON: AVST) share price soared nearly 18% on Thursday (15 July 2021)
• The cybersecurity software firm confirmed a day earlier that it is in ‘advanced’ merger talks with Norton AntiVirus developer, NortonLifeLock
• The FTSE 100 company could receive a valuation of over US$8 billion
• Berenberg analysts believe Avast should not settle for anything less than US$10 billion
• Meanwhile, NortonLifeLock (NASDAQ: NLOK) share price fell over 4% in early trading on Wall Street
• Interested to trade Avast or NortonLifeLock shares at just a fraction of the cost? Open an account with us today to get started.

AVST share price: what’s the latest?

Avast shares burgeoned over 17%, a day after it confirmed recent media speculation on a potential merger with US-listed NortonLifeLock Inc, the owner of Norton AntiVirus.

The cybersecurity software company’s board said on Wednesday (14 July 2021) that it is in ‘advanced discussions’ regarding the ‘possibility of an offer being made for the entire issued and to be issued share capital of Avast’ by Norton.

This may be implemented as a cash and share offer, in accordance with the requirements of the City Code on Takeovers and Mergers, the company added.

‘There can be no certainty as to whether any transaction will take place or the terms on which any possible merger may be agreed,’ it further stated.

According to people familiar with the matter, the FTSE 100 company is also looking at a possible valuation of over US$8 billion, the Wall Street Journal had reported.

Why is Norton keen on buying Avast?

Analysts at Berenberg, however, posited that Avast ‘should not settle for less than US$10 billion’.

‘We are in an age where even real, critical infrastructure is being targeted by cybercriminals, propelling valuations in the cybersecurity industry. Moreover, with private equity and large enterprises attempting to outbid each other, deal premiums have gone up,’ the analysts said in a note.

They believe that Norton is ‘probably after Avast for the company’s large 435 million user base’, adding that Norton could ‘start upselling and cross-selling’ its products on the monetised segments of Avast’s platform.

Although Avast offers a basic antivirus package that is available for free download on its website, more advanced features and products are charged at a premium.

For now, the Avast stock has a consensus rating of ‘buy’ and price target of £528.33, based on the latest data published by MarketBeat. The price target equates to a 12.3% upside potential from the counter’s last traded price of £593.60.

NortonLifeLock shares fall in early trading

Meanwhile, NASDAQ-listed NortonLifeLock fell 4.5% in early trading on Thursday. The company, which has a market capitalisation of US$14.9 billion, was known as Symantec Corp. up until 2019, when its enterprise business was sold to Broadcom Inc.

Nevertheless, the stock’s price target was bumped up to US$32 from US$31 by Barclays following Avast’s announcement.

With all that said, Norton is required by no later than 17:00 GMT+1 on 11 August 2021, to either announce a firm intention to make an offer for Avast in accordance, or announce that it does not intend to make an offer for Avast. This is in accordance with Rule 2.6(a) of the City Code.

This deadline can be extended with the consent of the Panel on Takeovers and Mergers.

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