Today, Squarespace, Inc. (NYSE:SQSP), a leading provider of website creation and hosting services, announced that it has entered into a definitive agreement to sell its subsidiary Tock LLC to American Express (NYSE:AXP) Travel Related Services Company, Inc. The cash transaction is valued at $400 million, subject to customary adjustments.
Tock LLC, a wholly-owned subsidiary of Squarespace, operates within the hospitality management space, offering reservation, table management, and other related services. The acquisition by American Express, a company with a significant footprint in the travel and services industry, is expected to close subject to the terms and conditions outlined in the Securities Purchase Agreement.
The transaction was disclosed in a regulatory filing with the Securities and Exchange Commission on June 21, 2024. According to the filing, the Purchase Agreement stipulates that the acquirer, American Express, will obtain all issued and outstanding limited liability company interests of Tock LLC.
The announcement does not detail the strategic rationale behind the sale for Squarespace or the future plans of American Express for Tock LLC. However, the deal underscores American Express's continued investment in expanding its suite of services, particularly in areas that complement its core offerings in travel and card services.
Squarespace's decision to divest Tock LLC comes as the company, known for its services in prepackaged software, continues to refine its business portfolio. The deal is significant for Squarespace, representing a substantial cash infusion from the divestiture of one of its business units.
In other recent news, Squarespace has experienced several noteworthy changes. The company's stock was downgraded from Buy to Neutral by B.Riley following an all-cash acquisition proposal from Permira, a private equity group. This transaction values Squarespace at $6.9 billion, with the offered price per share closely aligning with B.Riley's fair value estimate for the company. This development has led to a limited potential for stock price growth according to the firm's assessment.
On the other hand, Squarespace's strategic moves, such as its acquisition of Google (NASDAQ:GOOGL) Domains, have resulted in a significant boost in subscriber additions, driving subscription growth for the fourth consecutive quarter. This has led to the company's first quarter financial results for 2024 surpassing expectations, with revenue and unlevered free cash flow exceeding the high end of guidance.
Analyst notes reflect mixed sentiments, with Squarespace being downgraded by JMP Securities from Market Outperform to Market Perform following the acquisition announcement. However, Mizuho upgraded Squarespace from Neutral to Buy, citing key growth drivers that are currently undervalued by the market. Piper Sandler also increased Squarespace's stock price target due to the company's strong growth trajectory. These are recent developments that investors should keep an eye on.
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