Cloud software company Twilio buys SendGrid for $ 2 billion

(Reuters) – Twilio Inc., a company specializing in cloud computing technologies, announced Monday that it would buy SendGrid Inc.'s messaging technology company as part of a transaction involving shares worth approximately $ 2 billion (£ 1.5 billion), combining two companies managing communications between applications and their users.

While Twilio's technology is helping customers like Airbnb Inc. and Lyft Inc send text and other types of messages to its users, SendGrid is focused on email.

"We started Twilio by building voice, then SMS, video, web and mobile chat, channels like Facebook Messenger, WhatsApp. Along the way, customers have asked us questions about email, "said Jeff Lawson, managing director of Twilio, during a conference call explaining the acquisition.

SendGrid CEO Sameer Dholakia told Reuters in an interview that many of Twilio's products generate higher revenue per user than SendGrid. The messaging company, which will operate as a stand-alone unit within Twilio under Dholakia, could increase its revenue by selling Twilio services to SendGrid customers. Both have few common clients.

"A huge part of the calculation for both parties was a cross selling opportunity," said Dholakia.

Twilio will offer 0.485 shares for each SendGrid Class A common share. The transaction amounts to approximately $ 36.92 per share, a premium of 19.4% on SendGrid's closing price on Monday.

SendGrid shares rose 14.5% to $ 35.40, while those of Twilio fell 4.5% to $ 73.

"Although it's expensive 10 times [SendGrid’s] In 2019, I think it's a good contract for Twilio that should work well in the long run, "Pat Walravens, an analyst at JMP Securities, told Reuters that Salesforce.com Inc. had recently acquired MuleSoft Inc. at a equivalent price. 12 times the future revenue of MuleSoft.

Analysts also noted that it would have been difficult and expensive for Twilio to develop its own messaging capabilities.

"There are separate laws governing email. So it's outside of their workings and, in my opinion, it would have taken them some time if they decided to do it organically, "Stephen Bersey, a senior analyst at MUFG Securities, told Reuters.

Meanwhile, Twilio Lawson told investors during the teleconference that two partners of Bessemer Venture Partners, Byron Deeter, who serves on the board of directors of both companies, and Jeff Epstein, a board member of Twilio, are withdrawn from the negotiations. Bessemer invested in both companies prior to their IPO and holds approximately 13.7% of SendGrid's shares.

"This decision was made between the two companies, without any Bessemer involvement," said Lawson.

Goldman Sachs is the financial advisor for Twilio, while Morgan Stanley is SendGrid's financial advisor.

The companies expect the transaction to close in the first half of 2019, subject to the approval of the shareholders of both companies.