Twilio to Acquire SendGrid in $2B Transaction

Cloud software firm Twilio Inc. announced its plans to acquire email marketing group SendGrid through an all-stock transaction worth about $2 billion.

The two companies said Twilio will offer 0.485 shares for each Class A common share of SendGrid stock, valuing it at $36.92 a share or a premium of around 19 percent to SendGrid’s Monday closing price of $30.93.

The deal, which is expected to close in the first half of 2019, would combine two firms that share the same vision and business model to offer a platform of choice for developers, reaching more than 100,000 customers and fetching over $700 million in annual revenue.    

Shares of SendGrid were up 2.7 percent to $31.79, while Twilio fell 12.1 percent to $66.89 on Tuesday.

The acquisition marks as the biggest purchase to date by the San Francisco-based company which helps its customers like rental platform Airbnb Inc. and ride-hailing app Lyft Inc. send messages to its users.

While it is expensive at 10 times SendGrid’s 2019 revenue, analyst Pat Walravens believes it is a good arrangement for Twilio that should work out well over the long term.

SendGrid Chief Executive Sameer Dholakia stated that several of Twilio’s products generate higher revenue per user than do SendGrid’s.

The Colorado-based email group, which will operate as a wholly owned subsidiary of Twilio under Dholakia, could lift its revenue by selling the software maker’s services to SendGrid customers. Twilio and SendGrid have some joint customers.

A huge part of the calculus for both sides was the cross-sell opportunity, Dholakia said.   

Developing Email Capability

Twilio’s current focus is on omnichannel communication, with email being a key part of that. While the cloud technology company offers a number of services around voice, video, and chat, its focus on the email area has been different.

With the agreement, Twilio now has the foundation to immediately build up its capabilities in that region and expand its services there.

Analysts have noted that the US software maker would have a hard time developing its own email capabilities, as there are separate laws that are regulating email, therefore placing it outside of Twilio’s expertise.

It would have taken them some time if they decided to do it organically, according to senior analyst Stephen Bersey.

Twilio Chief Executive Jeff Lawson stated that they started the company by building voice, then SMS, video, web and mobile chat, channels like Facebook Messenger and WhatsApp. Along the way, email has been something that customers have asked them about.

Email is a vital communications channel for companies around the world, and so it was to include this capability in the platform, Lawson added.

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