Gen Digital's GoDaddy Approach: The Debt Math, the $1.9bn Share Drop and Why a Deal Is Unlikely
Gen Digital fell 12.1% to $23.07 after the Financial Times reported an early approach for GoDaddy, which rose 4.6%. The two have almost identical revenue, and Gen already carries $7.6 billion of net debt. A deal at a normal premium would need either leverage near 7 times EBITDA or a share issue close to a merger of equals, and the desk expects no signed agreement by March 31, 2027.
Gen Digital and GoDaddy each took in about $5.1 billion of revenue over the past year. Gen, the owner of Norton, Avast and LifeLock, has an equity market value of about $13.8 billion after Thursday's fall. GoDaddy's is about $12.8 billion. A buyer and target of the same size, with the buyer already more indebted, is the first thing to know about the approach the Financial Times reported on Thursday. Gen made the first contact in recent weeks, talks are at an early stage, no terms have been disclosed and neither company has confirmed anything.
Investors voted quickly. Investor's Business Daily reported GoDaddy up 4.6% and Gen down 12.1% at $23.07. On about 599 million Gen shares, that fall removed roughly $1.9 billion of market value, more than three times the roughly $560 million GoDaddy gained. Gen's shareholders are telling management they doubt it can pay a price GoDaddy's holders would accept, and the desk agrees with them. The balance sheets make a cash deal close to impossible and a stock deal a merger in all but name.
Gen's debt comes first. It paid about $1 billion in cash for MoneyLion, the consumer finance app, in April 2025, funded partly with a $750 million incremental term loan. That followed the 2022 Avast merger, which left the company with a large debt load. Fitch, which rates Gen BB+, expected leverage to rise to 3.9 times after MoneyLion and to stay above its 3.5 times downgrade threshold through fiscal 2026. Gen's own target is net leverage below 3 times by the end of fiscal 2027, which ends next March. Today it has about $8.2 billion of debt, $0.5 billion of cash and trailing EBITDA of $2.41 billion on StockAnalysis figures, or net debt of about 3.2 times. Some 70% of that debt floats, so every rise in rates goes straight to interest cost.
Now price the target. Strip out Thursday's jump and GoDaddy's undisturbed equity value is about $12.2 billion. A 30% premium, ordinary for a public software takeover, takes that to about $15.9 billion. Add GoDaddy's own net debt of $2.64 billion and the enterprise value is about $18.5 billion, only a little less than Gen's own $21.5 billion.
If Gen borrowed the full equity cheque, pro forma net debt would be about $26.2 billion (Gen's $7.6 billion, GoDaddy's $2.6 billion and $15.9 billion of new money) against combined trailing EBITDA of about $3.8 billion. That is 6.9 times, before any synergies, for a company rated in the double-B range. The cost of that money has risen. The 10-year Treasury yield was about 5.1% on Thursday, near its highest since 2007, and the ICE BofA high-yield option-adjusted spread was about 2.7 percentage points in September. New high-yield debt at the index average would cost about 7.8%. On $15.9 billion that is about $1.24 billion a year of interest, equal to 73% of GoDaddy's trailing free cash flow of $1.70 billion. Rating agencies would not let that stand, and Gen's lenders would price the risk before the agencies moved.
The alternative is shares. To keep combined leverage at 4 times, Gen could add only about $4.9 billion of debt and would have to pay the other $11 billion in stock. At $23.07 that means issuing about 477 million shares against the 599 million in issue today. GoDaddy's holders would own about 44% of the combined company. Every dollar Gen's stock falls makes that share bigger, and it fell $3.18 on Thursday.
The industrial case has some logic. GoDaddy manages about 81 million domains, about a fifth of registered names worldwide, and has more than 20 million small-business and creator customers. Gen sells security and identity protection mainly to consumers. Bundling Norton-style protection, website security and identity monitoring into a GoDaddy subscription is an easy slide to draw. It is harder to build. GoDaddy's own recent pitch to investors is Airo, its AI site builder and business assistant, whose annualised bookings run rate rose from $10 million to $50 million in the second quarter. That is still under 1% of revenue. On the second-quarter call GoDaddy narrowed full-year revenue guidance to $5.215 billion to $5.255 billion, about 6% growth, and the shares fell about 14% across the regular and after-hours sessions. Gen would be buying a company in the middle of replacing its legacy website products with an AI platform, while Gen digests MoneyLion.
The strongest argument for a deal comes from GoDaddy's cash. It generated $443 million of free cash flow in the second quarter and spent more than 95% of it on buybacks, $852 million in the year to July 29, cutting its diluted share count by 7%. Its EV is about 11 times EBITDA and its equity about 7.5 times free cash flow. On those numbers GoDaddy pays down acquisition debt quickly, and a buyer who believes the market is wrong about Airo gets a cash machine at a discount after a fall of more than 15% this year. The argument is fair on GoDaddy's price. It fails on the buyer. A private equity firm with fresh equity could do this deal; Gen cannot, because it has to lever an already levered balance sheet at the highest long rates in almost two decades. GoDaddy has private-equity history of its own: KKR and Silver Lake took it private in 2011 and listed it in 2015, and Starboard Value built a 6.5% stake worth about $800 million in late 2021 and pushed for board changes and a possible sale.
The winners so far are GoDaddy holders, who get a free option on a bid after a bruising quarter, and any rival bidder that now knows the board has been approached. Gen's shareholders have lost about $1.9 billion. Gen's lenders face the prospect of more debt ranking alongside theirs. Web rivals such as Wix face a GoDaddy that, if bought, would bundle security into its base plans.
The desk expects no signed agreement between Gen and GoDaddy by March 31, 2027. If one comes, the desk expects at least half the consideration to be paid in Gen stock. The checkpoints are near. Gen reports its fiscal second quarter in late October or early November, and management will be asked whether it is still committed to getting below 3 times leverage by March. GoDaddy reports third-quarter results in early November, where its revenue guide of $1.315 billion to $1.335 billion will show whether the business is steady enough to sell. A statement from either company, a financing commitment letter or a rating-agency watch on Gen would move the call. A Gen share price back above $26 would say investors believe a cheaper structure exists.