Intel spins out Intel Security with TPG to form new McAfee valued at $4.2B

Intel announced today that it has plans to spin off its security unit into a new company that will be owned in-part by private equity firm TPG. Intel will retain a 49 percent ownership stake of the entity with TPG taking the majority stake. In exchange, Intel will be receiving $3.1 billion in cash.

Intel’s security unit originated from its acquisition of McAfee. The $7.68 billion transaction closed in 2011 and in the years following, analysts have been keen to pressure Intel to sell the company back off. Intel wanted to create an integrated full stack security juggernaut but instead was caught in open water with shrinking PC sales and low margins.

Despite a market that isn’t ideal for Intel’s strategic interests, Intel Security Group has still grown revenue by 11 percent in the first half of the year. The group works with two-thirds of the world’s 2,000 largest companies, according to the statement from the company.

When the dust settles, the security entity spun out from Intel will be renamed McAfee. In a fun twist, the ever-interesting bedtime story character John McAfee sued Intel earlier this week over the rights to use his name in new ventures. Intel obtained the rights to the McAfee name back when it acquired the company.

TPG is putting $1.1 billion into the company to help smooth over the transition and accelerate growth. The new company was valued at $4.2 billion by combining a $2.2 billion equity value with $2 billion of net debt. For the time being, the debt will continue to be financed by Intel.

Private equity has been all over tech this year and security is no exception. Just this summer, Vista Equity Partners nabbed Ping Identity kicking off a fast paced season for those of us energized by PE deals.

As with most deals, TPG expects to benefit from the increased efficiencies of a company uniquely focused on security. The firm also led security investments in Tanium and Zscaler for $120 and $100 million respectively.

Chris Young, senior vice president and general manager of Intel Security Group will be taking over as CEO of the new company when the deal closes in Q2 2017.