Cloudera shares pop after unveiling all-stock $5B merger with competitor Hortonworks

Shares of the cloud software company Cloudera (NYSE:CLDR) are still soaring in Thursday’s pre-market session a day after unveiling an all-stock merger with a chief competitor, Hortonworks (NASDAQ:HDP).

Together, the companies will have a combined equity value of $5.2 billion based on the closing prices of their stocks on Tuesday.

The tie-up will establish the merged company’s dominance as a provider of Hadoop, a type of open-source software for storing data that was first introduced by Yahoo.

After the merger, the company will also establish a firmer foothold to compete in the areas of content streaming, the internet of things, data management, data warehousing, artificial intelligence and hybrid cloud computing, according to a statement from Hortonworks CEO Rob Bearden.

Under the deal’s terms, Cloudera stockholders will own about 60% of equity in the merged company while Hortonworks shareholders will control the remainder. Each Hortonworks share can be exchanged for 1.305 shares of Cloudera.

Read: Shares in Cloudera soar after posting smaller-than-expected loss for the fiscal 2Q on subscription revenue

The deal has been well-received by investors who sent Cloudera shares up 21% to $20.70 before Thursday’s opening bell and Hortonworks shares up 20.7% to $26.41.

Post the merger, the two companies expect to kick off about $720 million in combined yearly revenue and see more than $125 million in yearly cost savings.

In a statement, Tom Reilly, CEO of Cloudera called the two companies’ businesses “highly complementary and strategic”.

“By bringing together Hortonworks’ investments in end-to-end data management with Cloudera’s investments in data warehousing and machine learning, we will deliver the industry’s first enterprise data cloud from the Edge to artificial intelligence,” Reilly added.

Tom Reilly, Cloudera’s CEO will take the helm of the combined company as CEO while Jim Frankola, Cloudera’s finance chief, will assume the same job post the merger. Hortonworks’ chief operating officer Scott Davidson and Hortonworks’ chief product officer Arun Murthy will also keep their current roles at the new company. Hortonworks’ CEO Rob Bearden, meanwhile, will join the board.

The transaction, which is still subject to the approval of Cloudera and Hortonworks’ shareholders as well as US antitrust clearance, is set to close in the first quarter of next year.

Morgan Stanley is advising Cloudera while Qatalyst Partners is advising Hortonworks.

Story by ProactiveInvestors