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Instructure In Filing Says Received Interest From Strategic Party At $54-$57

Instructure, Inc., a Delaware corporation (the “Company”), filed its revised definitive proxy statement on January7, 2020 (the “Proxy Statement”), relating to the Agreement and Plan of Merger,

Benzinga · 02/05/2020 15:57

Instructure, Inc., a Delaware corporation (the “Company”), filed its revised definitive proxy statement on January7, 2020 (the “Proxy Statement”), relating to the Agreement and Plan of Merger, dated as of December4, 2019, by and among the Company, PIV Purchaser, LLC (“Parent”), and PIV Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of Parent, as a result of which Merger Sub will merge with and into the Company, with the Company surviving the merger and becoming a wholly owned subsidiary of Parent (the “Merger”). The Company desires to supplement the Proxy Statement. These Definitive Additional Materials should be read in conjunction with the Proxy Statement and any supplements thereto, which we urge you to read in its entirety.
Explanatory Note
Following the announcement of the proposed acquisition of the Company by Parent (the “Proposed Transaction”) and as of the filing of these Definitive Additional Materials, five lawsuits have been filed by purported stockholders of the Company challenging the Proposed Transaction. The first and second lawsuit, brought as putative class actions, are captioned Post v. Instructure, Inc., et al., No. 1:20-cv-00034 (D. Del. filed Jan. 13, 2020) and Zhang v. Instructure, Inc., et al., No. 1:20-cv-00042 (D. Del. filed Jan. 13, 2020). The third, fourth, and fifth lawsuits, brought by the plaintiffs individually, are captioned Bushansky v. Instructure, Inc., et al., No. 3:20-cv-00113 (S.D. Cal. filed Jan. 16, 2020); Domenico v. Instructure, Inc. et al., No. 2:20-cv-00814 (D.N.J. filed Jan. 24, 2020); and Rubin v. Instructure, Inc., et al., No. 3:20-cv-00193 (S.D. Cal. filed Jan. 30, 2020). The complaints name as defendants the Company and each member of the Company’s board of directors.
While the Company believes that the disclosures set forth in the Proxy Statement comply fully with all applicable law and denies the allegations in the pending actions described above, in order to moot plaintiffs’ disclosure claims, avoid nuisance and possible expense and business delays, and provide additional information to its stockholders, the Company has determined voluntarily to supplement certain disclosures in the Proxy Statement related to plaintiffs’ claims with the supplemental disclosures set forth below (the “Supplemental Disclosures”). Nothing in the Supplemental Disclosures shall be deemed an admission of the legal merit, necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, the Company specifically denies all allegations in the complaints described above that any additional disclosure was or is required or material.
All page references used herein refer to pages in the Proxy Statement before any additions or deletions resulting from the Supplemental Disclosures, and capitalized terms used below, unless otherwise defined, have the meanings set forth in the Proxy Statement. Underlined text shows text being added to a referenced disclosure in the Proxy Statement. Except as specifically noted herein, the information set forth in the Proxy Statement remains unchanged.
Supplemental Disclosures to Proxy Statement
The following disclosure is an additional paragraph that is inserted after the first full paragraph on page 30 of the Proxy Statement:
“On August2, 2019, J.P. Morgan and Instructure entered into an amended and restated engagement letter, which the Board of Directors had previously reviewed and approved on July17, 2019. The amended and restated engagement letter was substantially the same as the prior engagement letter, except that it contemplated the potential additional engagement of J.P. Morgan for potential activist defense and provided for an increase in the transaction fee payable to J.P. Morgan in connection with the Transaction if the Company actually engaged J.P. Morgan for activist defense. No such additional engagement materialized.”
The first full paragraph on page 33 of the Proxy Statement is hereby amended and restated in its entirety as follows:
“Over the next several days, at the direction of the Board of Directors, J.P. Morgan made outbound inquiries to the eleven parties who were viewed as “tier 1” parties, including Sponsor A, Sponsor B, Sponsor C, Sponsor D, Sponsor E, Thoma Bravo, a financial sponsor that had indicated an interest in a possible strategic transaction with Instructure in 2018 (“Sponsor F”), a strategic party who had an existing commercial relationship with Instructure (“Industry Participant G”), a strategic party that had been engaged in on-going discussions with Instructure since July 2019 regarding commercial arrangements, including a possible partnership arrangement (“Industry Participant H”), and two new strategic parties (“Industry Participant I”) and (“Industry Participant J”). At the direction of the Transaction Committee, J.P. Morgan requested that the seven financial sponsors that had been involved in the process to date provide an indication of interest prior to the previously scheduled November1, 2019 meeting of the Board of Directors, including an indicative price for a strategic transaction. In its communications with the strategic parties, the Transaction Committee directed J.P. Morgan to request such parties provide feedback regarding their level of interest as promptly as possible, given their internal processes, without setting any specific time restraints, and further indicated to such strategic parties that if there was bona fide interest, then such party would be provided with an appropriate amount of time to submit a proposal. Starting on October24, 2019, Instructure senior management provided each of the “tier 1” parties who had executed a confidentiality agreement with more detail confidential information about Instructure’s business and financial performance, and then subsequently provided such materials to Industry Participant H on October26, 2019.”
The second full paragraph on page 34 of the Proxy Statement is hereby amended and restated in its entirety as follows:
“On October31, 2019, Industry Participant H entered into a confidentiality agreement with Instructure. Later that day, (i)Sponsor B and Sponsor D informed representatives of Instructure that they had determined not to submit a written proposal, (ii)Thoma Bravo submitted a written proposal to acquire Instructure for $50.00 per share, (iii)Sponsor E submitted a written proposal to acquire Instructure in the range of $48.00 to $51.50 per share, (iv)Sponsor C submitted a written proposal to acquire Instructure in the range of $49.00 to $51.00 per share, (v)Sponsor A submitted a written proposal to acquire Instructure in the range of $45.00 to $47.00 per share, and (vi)representatives of an investment bank engaged by Industry Participant H verbally communicated to representatives of J.P. Morgan that Industry Participant H may be interested in a potential transaction in the range of $54.00 to $57.00 per share (subject to further internal approvals of Industry Participant H), but thereafter Industry Participant H never submitted a formal proposal. On the same day, the Transaction Committee met to review and assess the written proposals received to date with Mr.Kaminer and representatives of J.P. Morgan and Cooley. Representatives of J.P. Morgan discussed the terms of the proposal with the Transaction Committee. The Transaction Committee further discussed the potential timeline for soliciting final bids and executing definitive documentation, taking into account that each of Thoma Bravo, Sponsor A, Sponsor C and Sponsor E had indicated in their respective indication of interest letters that such party was prepared to promptly enter into definitive documentation with respect to the strategic transaction. The Transaction Committee instructed J.P. Morgan to discuss a timeline with each of the parties culminating in final bids and signed acquisition agreements towards the end of November.”
The fifth paragraph on page 39 of the Proxy Statement is hereby amended and restated in its entirety as follows:
“Later in the day, at the direction of the Board, Mr.Goldsmith and Mr.Kaminer had a call with representatives of Thoma Bravo and representatives of each of Cooley and Kirkland& Ellis, to discuss Instructure’s financial plan. Later in the day on December2, 2019, pursuant to J.P. Morgan’s instructions to provide a revised proposal by such date, Sponsor C submitted a written proposal to acquire Instructure at a price per share of $47.00 (“Sponsor C $47.00 Proposal”) and Thoma Bravo submitted a written proposal to acquire Instructure at a price per share of $47.50 (“Thoma Bravo $47.50 Proposal”). Sponsor C’s proposal required, as a condition to the merger, the execution of go-forward employment arrangements with certain officers, including Mr.Goldsmith and Mr.Kaminer, prior to the signing of the merger agreement and reiterated its requirement such executives agree to not terminate their executive employment agreements for good reason. Thoma Bravo’s proposal noted that Thoma Bravo expected that Instructure’s existing management would continue to operate the post-close entity in a normal course manner consistent with past practice, but did not include any requirement that any executive enter into any employment agreement. On behalf of Thoma Bravo, Kirkland& Ellis delivered a revised draft of the merger agreement addressing, among other matters, restrictions on the interim operations of Instructure, the duration of the “go-shop” period, whether directors, officers and certain other stockholders would need to sign a voting agreement, certain aspects of the scope of the “go-shop” and “no shop” terms, including whether existing bidders would be subject to those restrictions, and the amount of termination fees and cap on damages that would be payable in connection with the termination of the acquisition agreement in certain circumstances.”