SolarWinds announced that its board of directors has authorized the company’s management team to explore a potential spin-off of its MSP business into a newly created and separately traded public company.
If completed, the standalone entity would provide broad and scalable IT service management solutions designed to enable managed service providers, or MSPs, to deliver outsourced IT services for their small and medium size business end-customers and more efficiently manage their own businesses. SolarWinds would retain its Core IT Management business focused primarily on corporate IT organizations. SolarWinds believes that, if completed, the potential spin-off would enable shareholders to more clearly evaluate the performance and future potential of each entity on a standalone basis, while allowing each to pursue its own distinct business strategy and capital allocation policy.
If SolarWinds proceeds with the spin-off, it would be structured as a tax-free, pro-rata distribution to all SolarWinds shareholders as of a record date to be determined by the board of directors of SolarWinds. If completed, upon effectiveness of the transaction, SolarWinds shareholders would own shares of both companies.
“We are exploring a potential spin-off transaction because we believe that, if completed, a spin-off may enhance the successful operation of both the MSP and the Core IT Management businesses and increase their respective values,” said Kevin Thompson, President and CEO, SolarWinds. “By splitting the two businesses into separate companies, it may be that the business and related investment, spending and capital allocation policies of each company could be managed consistently with each business’ objectives. Establishing specific and independent goals may enable both the Core IT Management and MSP businesses to manage investments and objectives that are more closely tailored to each business’ market needs and customer requirements. Should we move forward with the spin-off, we would expect that the Core IT Management business would be focused on maintaining our best-in-class profit margins, while the MSP business would be focused on long-term growth with strong, differentiated profitability metrics for a SaaS business.”
Completion of any spin-off would be subject to various conditions, including final approval of SolarWinds’ board of directors, and there can be no assurance that the potential spin-off transaction will be completed in the manner described above, or at all. If SolarWinds proceeds with the spin-off, it does not expect to complete the transaction earlier than the end of the first quarter of 2021.
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