Analyst Note| Dan Romanoff, CPA |
No-moat Slack has agreed to be acquired by Salesforce for approximately $28 billion. Investors will receive $26.79 in cash and 0.0776 shares of Salesforce common stock for each share of Slack. Strategically, this would be a sound acquisition for Salesforce, as it would add serious direct exposure to collaboration and the remote work movement, large and rapidly growing markets that the company indirectly participates in, and would allow for yet another connection between Salesforce and its customers. The premium is obviously compelling for Slack shareholders, compared with our standalone $20 fair value estimate for the firm and the $30 price where the stock was trading before rumors of the deal arose. We are raising our fair value estimate for Slack to $46 from $20. This new fair value estimate is equivalent to $26.79 per share in cash plus the value we assign to the fraction of Salesforce shares received, based on our $253 fair value estimate for Salesforce. We think there is a near 100% probability of the deal being consummated.