The Bethesda-based cloud services company Virtustream is set to be acquired by IT giant EMC in a deal worth $1.2 billion, the companies said Tuesday.
The all-cash deal is expected to close during the next few months and marks one of the largest acquisitions in the Washington region this year.
Virtustream, whose customers include Coca-Cola, Heinz and Kawasaki, provides management software for businesses that use cloud computing. The company also owns and operates data centers, including one in Northern Virginia.
EMC has a long history of partnering with Virtustream, so the companies are already familiar with each other’s work, Howard Elias, EMC’s president and chief operating officer, said in an interview.
The deal allows EMC to offer a complete range of cloud infrastructure and services, which more clients are demanding, Elias said.
After the deal, Virtustream will become part of EMC’s new managed cloud services business.
The privately owned company had been mulling a public offering for a year, Virtustream’s chief executive, Rodney Rogers, told investors in a conference call Tuesday. The company received several offers before settling on EMC, he said.
At $1.2 billion, the price tag for Virtustream is higher than is typically expected for a services company, said Lydia Leong, vice president in the technology and service provider group at Gartner, in an e-mail.
But, she said, the price “makes sense given Virtustream’s mix of business and distinctive intellectual property.”
Sixty percent of Virtustream’s revenue comes from providing cloud infrastructure work, and the rest is from selling software, Rogers wrote in a company blog post. The company has a proprietary cloud management software known as XStream.
Rogers will stay on with the company and report to EMC chief executive Joe Tucci.
The company’s offices in the Washington area will also remain open after the deal is completed.
EMC has nine offices in the Washington area that are primarily focused on government work.