Octa acquires co-identity management company Auth0 in $ 6.5 billion total shares

Publicly traded identity management company Okta acquires one of its leading challengers, the Seattle-based startup Auth0, in a total transaction worth $ 6.5 billion, the companies announced on Wednesday.

The deal offers Auth0 a fixed number of Octa shares at a price of $ 276.21 each. Shares of Octa closed at $ 241 a share on Wednesday, giving a market capitalization of $ 31 billion. But equities declined more than 11% after hours, as Octa also reported quarterly revenue of $ 234.7 million, up 40% year-over-year, on non-GAAP net income of $ 8 million Wednesday.

In an interview, Todd McKinnon, CEO of Octa, said the move was part of the venture to be one of the “five or six primary clouds” where customers will name their customers as market leaders, referring to Microsoft , Salesforce and Zoom as other candidates. such status.

“For us, identity must rise to be one of the primary clouds, and if that is not the case, it will just as well be thrown into other clouds, and Okta will not reach its potential,” McKinnon said. said.

McKinnon claims McKinnon, with a view to the developer community, that Okta is primarily a business tool for businesses to track and manage their employees’ identities and credentials when using work programs.

In other words, while Okta is selling from the bottom up, to chief information officers or technical leaders, Auth0 has built its business from the bottom up.

At Auth0, co-founder and CEO Eugenio Pace said the two companies ‘agree on a vision’ for the identity cloud of the future, or what Pace calls an ‘identity operating system’. In a general refrain for high-growth technology companies joining larger competitors, Pace noted that Okta was on scale at least a few years before Auth0; to join forces, he insisted, Auth0’s roadmap would move forward by five to ten years.

‘What’s exciting to me is that these companies are compatible, that identity is not a department, part of another group or a necessary evil. That’s all we do. “Together we have the opportunity to move the needle in terms of what we can offer our customers,” said Pace.

Auth0 joins a business that reported revenue of $ 835 million in the past financial year and forecasts revenue of $ 1.08 billion to $ 1.09 billion for fiscal 2022. Meanwhile, Auth0 is expected to reach a rate of return (A 12-month forecast based on the McKinnon said the rate of the past month was more than $ 200 million by the end of the year.

Forbes heard rumors for the first time a few weeks ago that Auth0 was for sale, and two sources said Okta emerged as the favorite buyer. But the deal did not close quickly as Auth0 considered other options, including prospective other buyers or to continue on the path to IPO. One Auth0 investor who asked to remain anonymous said they hoped the company would rather follow a public offering, given its potential and the recent favorable stock market valuations in the clouds.

Auth0 was founded in 2013 and raised more than $ 330 million from venture capital investors, which the company recently valued at about $ 1.9 billion in July 2020. Prominent investors included Bessemer Venture Partners, Trinity Ventures, Meritech Capital, Sapphire Ventures and Salesforce Ventures. The company appeared at number 19 on the Cloud 100 list of the world’s leading private cloud companies in September.

Concerns against antitrust have also slowed the process, a source said Forbes before announcing the transaction. The acquisition, although agreed by both boards, is subject to regulatory approval, but is expected to end in the first half of the year, the companies said.

Asked what he would say to employees and supporters who might have hoped Auth0 would test the public markets as an independent company, Pace said the outcome was ‘fantastic’ for all stakeholders. “I certainly do not see it as an exit for Auth0,” he added. “We just scratch the surface of what we do.”

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