Zendesk Board Determines That Recapitalization Proposal From Light Street Capital Management Is Not A Superior Proposal

Author: Benzinga Newsdesk | September 01, 2022 11:13am

The Unsolicited, Non-Binding Light Street Proposal Would Result in Uncertain Value and Increase Operational, Financial and Governance Risks

Transaction with Investor Group Led by Hellman & Friedman and Permira is Superior to the Light Street Proposal, Providing All Zendesk Stockholders Immediate, Attractive and Certain Value

Zendesk, Inc. (NYSE:ZEN) ("Zendesk" or the "Company") today announced that its Board of Directors has completed a thorough financial and strategic evaluation of the unsolicited, non-binding recapitalization proposal from Light Street Capital Management ("Light Street"), in consultation with its independent financial and legal advisors, and determined that it is neither a Superior Proposal nor reasonably likely to lead to a Superior Proposal under the Company's merger agreement with the consortium led by Hellman & Friedman and Permira (the "Consortium").

The Zendesk Board determined the Light Street recapitalization proposal, which contemplates Light Street "arranging" $2 billion of preferred equity and the Company borrowing $2 billion of incremental new debt from unspecified sources, undertaking a $5 billion tender offer for approximately 50% of Zendesk's common shares and transferring voting and Board control to the preferred holders, who would also enjoy downside protection, would result in uncertain value and increase standalone operational, financial and governance risks. Moreover, even if the recapitalization could be accomplished, the Board determined that it would not be superior to the proposed all-cash acquisition of 100% of the outstanding common shares of Zendesk by the Consortium, which followed a robust and thorough process, and the Board believes offers immediate, attractive and certain value to all Zendesk stockholders.

An investor presentation outlining the Board's observations regarding Light Street's alternative proposal and the Consortium transaction can be found at https://investor.zendesk.com/files/doc_presentations/2022/09/Zendesk-Investor-Presentation-(9_1_2022).pdf. The Board's key findings1 in connection with its determination include:

Light Street's Proposal Is Vague and Presents Significant Risk

• Light Street's recapitalization proposal is not supported by committed financing.
• The proposal assumes significant operating margin improvements with no impact to growth, but provides no credible strategy or plans to achieve them.
  • The proposal calls for a new CEO and new Board directors but has not identified candidates for these roles, instead providing Light Street with control over the process to identify them and presuming little to no related business disruption.

Posted In: ZEN