Why was the Slack-Salesforce deal not signed?
It has been over six months since salesforce.com announced its intention to acquire Soft (NYSE: WORK). Investors are probably wondering what’s going on, especially as Slack shares have been on hold since the announcement. On a fool live episode recorded May 26Fool contributor Toby Bordelon explains where the deal stands today and what investors should do if they still own Slack shares.
Toby Bordelon: Let’s talk about Slack. It’ll be a little different the way I’m going to talk about Slack because they have this acquisition by Salesforce that’s going on. Quite frankly, if you’re a shareholder, I don’t think you care about their income. I really don’t think you care about the details of what’s going on in the business as long as it stays on track because it overshadows everything.
What’s up with this? Let’s take a quick look at this like the deal. There are two things to highlight here, things that I have seen so far. As recently as last week, Australian regulators formally approved the deal. It was something that had to happen. This box is therefore checked. The big win though, the big endorsement you need is the Department of Justice in the United States. Where is it? Well, in February the problem was called the second request. This is not a very good sign, but it is also not unusual for these big antitrust deals. What that basically means, basically, is that they want more time to think about it, and they want a little more information to dig into certain details a little more closely.
When I was practicing as a lawyer, I worked on a few second requests. They are expensive. They are time consuming and expensive. Think literally of the hundreds of lawyers around the country going through documents to figure out what you owe the government. It may take a long time. Now the thing here, Slack, these two companies are saying, yeah, we’re still planning to get this deal done at the end of July. But we’re at the end of May and I haven’t seen a big update on this, where the status is. I wouldn’t be shocked if this closure slips a bit, and I think no one should be concerned if that happens. It’s just because these reviews can just take a long time.
Theoretically, the government has a time limit, and once it has to do an analysis, but the reality is that if you are one of those companies and you have a choice between granting an extension to the government and him just deny your deal or have to fight in court, you’re gonna let it take all the time maybe. It’s just the way these things work. We’ll see.
I expect that as the end of July deadline approaches, we will get a bit more information. If we don’t get approval the company will say something that will take a little longer, but we plan to close now in the third quarter or something like that. We’ll have to see. But don’t worry too much as it seems to hang around as it’s pretty standard.
The big point that I want every shareholder to remember, if you still own your stock, this is a cash and stock transaction. What does it mean? I mean if you don’t do anything and the deal goes through, you become a shareholder of Salesforce. Ask yourself if you want this to happen and don’t let it be the default. Don’t just do nothing and magically show shares on your account, then figure out what you want to do with them. Make the decision before. Think about it, do you want to own Salesforce? It’s a good business. There’s nothing wrong with that, but it’s a very different business from Slack. I think you have to make that positive decision before the deal is done so as not to be surprised, and then you have to figure out what you want to do.
Brian Withers: Thanks for the update, Toby. I had assumed it was just a simple rubber stamp approval. Since the DOJ approved Google and Fitbit, I think Slack and Salesforce would pass, but they can certainly take longer if they want.
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