TORONTO, Dec. 20, 2016 /CNW/ - Redknee Solutions
Inc. ("Redknee" or the "Company") (TSX: RKN)
announced today that it has entered into a subscription agreement
(the "ESW Agreement") with ESW Capital, LLC ("ESW
Capital") and Wave Systems Corp. (the "ESW Capital
Investor"), an affiliate of ESW Capital. Under the ESW
Agreement, Redknee will complete a private placement of 800,000
Series A Preferred Shares of the Company (the "Preferred
Shares") and a common share purchase warrant (the
"Warrant") to the ESW Capital Investor for gross proceeds of
US$83.2 million (the
"Transaction"). The Warrant will entitle the ESW Capital
investor to acquire a number of common shares ("Common
Shares") of the Company (each a "Warrant Share") equal
to US$60 million divided by the
exercise price per Warrant Share (the "Warrant Exercise
Price") for a period of ten years from the closing date. The
Warrant Exercise Price will be determined on the date of closing of
the Transaction (the "Closing Date") and equal to the lower
of: (i) the US dollar equivalent on the Closing Date of the volume
weighted average trading price of the Common Shares over the period
of 10 trading days on the Toronto Stock Exchange ("TSX")
ending in the second trading day prior to the Closing Date; and
(ii) US$1.43; provided that the
Warrant Exercise Price shall not be less than US$1.09. The Warrant will provide for a cashless
exercise feature and will contain customary anti-dilution
provisions, including anti-dilution provisions for issuances of
Common Shares below the Warrant Exercise Price.
As previously announced by the Company on December 9, 2016, the Company entered into an
agreement (the "Constellation Agreement") with Constellation
Software Inc. ("Constellation") and a subsidiary thereof
(the "Constellation Investor") for gross proceeds of
US$80 million. The Constellation
Agreement provided that, in the event that Redknee received a
competing proposal that was considered to be superior by Redknee to
the transaction contemplated by the Constellation Agreement, the
Constellation Investor had the right (the "Matching Right")
to offer to amend the Constellation Agreement such that the
competing proposal was no longer a superior proposal within a 5
business day matching period (the "Response Period").
The Company provided notice to Constellation and thereafter
announced that it had received an offer from ESW Capital and the
ESW Capital Investor which the Company's Board of Directors had, in
good faith after receiving the advice of its financial advisors and
outside counsel, unanimously determined constituted a superior
proposal within the meaning of the Constellation Agreement.
The Constellation Investor has provided notice in writing to the
Company that it will not exercise the Matching Right and is waiving
the remainder of the Response Period. Accordingly, the Company has
terminated the Constellation Agreement in accordance with its terms
with the Company obligated to pay the Constellation Investor a
termination fee of US$3.2 million
(the "Constellation Termination Payment"). Under the terms
of the ESW Agreement, the ESW Capital Investor has assumed the
obligation to pay the Constellation Termination Payment, which
payment will be non-refundable and credited against the ESW Capital
Investor's obligation to pay the proceeds of US$83.2 million to the Company on closing of the
Transaction.
The ESW Agreement provides for, among other things, a
non-solicitation covenant on the part of the Company, subject to a
customary "fiduciary out" provision that entitles the Company to
consider and accept a superior proposal subject to the right of the
ESW Capital Investor to match, over a period of two business days,
the superior proposal and the payment to the ESW Capital Investor
of a termination payment of US$3.2
million.
The closing of the Transaction is subject to the approval of the
holders of Common Shares ("Shareholders") of the Company at
a meeting of Shareholders expected to be held on January 25, 2017 (the "Company Meeting").
The Company expects to mail the management information circular
which will include additional information about the Transaction to
its Shareholders in the first week of January.
Redknee's largest investor, Invesco Canada Ltd., which holds
Common Shares representing approximately 19.9% of the outstanding
Common Shares, has agreed to vote its Common Shares in favour of
the Transaction. In addition, all directors, certain officers and a
shareholder of the Company holding Common Shares representing in
aggregate approximately 16% of the outstanding Common Shares have
also agreed to vote their Common Shares in favour of the
Transaction.
At the Company Meeting, Shareholders will be asked to consider,
and if thought advisable, approve:
- the issuance of the Preferred Shares and the Warrant, in
accordance with Multilateral Instrument 61-101 Protection of
Minority Security Holders in Special Transactions ("MI
61-101") and the policies of the TSX (the "Private Placement
Resolution"); and
- the termination of Redknee's Shareholder Rights Plan dated
March 9, 2016 (the "Shareholder
Rights Plan Termination Resolution").
The Private Placement Resolution requires approval by a simple
majority of the votes cast at the Company Meeting by the
Shareholders (excluding votes cast by ESW Capital, the ESW Capital
Investor, and their affiliates as required by MI 61-101 and the
policies of the TSX). The Shareholder Rights Plan Termination
Resolution requires approval by a simple majority of the votes cast
at the Company Meeting by the Independent Shareholders (as defined
under Redknee's Shareholder Rights Plan).
Closing of the Transaction is also subject to approval of the
TSX and customary closing conditions.
About Redknee
Redknee monetizes today's digital world. We provide a complete
portfolio of mission-critical monetization and subscriber
management solutions and services that allow communications service
providers, utility companies, auto makers and enterprise businesses
of all types to charge for things in new and innovative ways.
Redknee's real-time billing, charging, policy and customer care
offerings provide the agility and scalability to drive a unique
user experience, increase profitability and support any new product
or business model. Available on premise, cloud-based, or as a
Software-as-a Service, Redknee's low-risk, flexible solutions power
more than 250 businesses across the globe. Established in 1999,
Redknee Solutions Inc. (TSX: RKN) is the parent of the wholly-owned
operating subsidiary Redknee Inc. and its various subsidiaries.
References to Redknee refer to the combined operations of those
entities. For more information about Redknee and its solutions,
please go to www.redknee.com.
About ESW Capital, LLC
Based in Austin, Texas, the ESW
Capital group (www.eswcapital.com) focuses on buying,
strengthening, and growing mature business software companies. By
taking advantage of its unique operating platform, ESW revitalizes
its acquisitions for sustainable success while making customer
satisfaction a top priority. The ESW family of companies have been
in the enterprise software space since 1988, and the group includes
notable brands such as Aurea, Ignite Technologies, Trilogy, and
Versata. For more information, email info@eswcapital.com.
Forward-Looking Information
Certain statements in this document may constitute
"forward-looking" statements regarding Redknee and its business,
which may include, but are not limited to the anticipated benefits
of the ESW Agreement to Redknee and its Shareholders, the Company's
ability to close the Transaction, the use of proceeds from the
Transaction, assumption of the Constellation Termination Payment by
the ESW Capital Investor, the timing of the Company Meeting and
mailing of the management information circular and similar
statements concerning anticipated future events, results,
circumstances, performance or expectations, that reflect
management's current expectations and are based on information
currently available to management or Redknee. Forward-looking
statements are provided for the purpose of providing information
about management's current expectations and plans relating to the
future. Persons reading this news release are cautioned that such
information may not be appropriate for other purposes.
Forward-looking statements involve significant risks and
uncertainties, should not be read as guarantees of future events or
results, and will not necessarily be accurate indications of
whether or not such events or results will be achieved. Actual
events or results could differ materially from those contemplated
in forward-looking statements as a result of risks and
uncertainties relating to among other things, Redknee's inability
to obtain TSX or Shareholder approval of the Transaction,
litigation proceedings related to the Transaction, Redknee's
inability to complete the Transaction, the occurrence of a material
adverse change in the business, operating results or financial
condition of Redknee, and other factors discussed under the "Risk
Factors" section of Redknee's most recently filed annual
information form and management's discussion and analysis for the
fiscal year ended September 30, 2016,
which are available on SEDAR at www.sedar.com and on
Redknee's web-site at www.redknee.com. Other unknown or
unpredictable factors or underlying assumptions subsequently
proving to be incorrect could cause actual events or results to
differ materially from those in the forward-looking statements.
Redknee does not undertake or accept any obligation or undertaking
to release publicly any updates or revisions to any forward-looking
statements to reflect any change in its expectations or any change
in events, conditions or circumstances on which any such statement
is based, except as required by law.
SOURCE Redknee Solutions Inc.