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.
Preferred Stockholders Under Light Street’s Proposal Would
Receive Disproportionate and Controlling Governance Rights and
Receive Economic Interests That Are Not Aligned with Remaining
Public Zendesk Stockholders
- Light Street’s proposal gives the preferred stockholders
disproportionate governance rights with 66% of the voting power for
the preferred equity in exchange for investing approximately 26% of
the equity value, relegating public investors to minority
stockholders in a controlled company.
- In addition, Light Street would have the right to appoint half
of the Board and the majority of a newly created special
committee.
The Consortium Acquisition Provides Immediate, Certain and
Superior Value to All Zendesk
Stockholders
- In comparison, the transaction with the Consortium is an
all-cash transaction for all Zendesk shares.
- Under the terms of the agreement, Zendesk stockholders will
receive $77.50 per share, a 34% premium to the unaffected stock
price, for all of their shares.
- The Consortium has arranged for debt and equity financing
commitments to finance the transaction and the transaction is not
subject to any financing conditions.
Remaining Public Under Any Structure Carries Material Risk
for Zendesk Stockholders
- Macroeconomic conditions and the Company's business momentum
have continued to weaken since the deal announcement. Leading
indicators for business performance and revenue growth are trending
lower than the assumptions underlying the Company's June 2022
projections.
- Market conditions and public market valuations also continue to
be challenging for enterprise software companies.
The Company will continue to advance toward completing the
transaction with the Consortium, which is expected to close in the
fourth quarter of this year and is subject to customary closing
conditions, including Zendesk stockholder approval. A special
meeting of Zendesk stockholders to vote on the transaction will be
held on September 19, 2022. The Zendesk Board of Directors
continues to recommend unanimously that stockholders vote in favor
of the transaction with the Consortium.
Advisors
Qatalyst Partners and Goldman Sachs & Co. LLC are serving as
financial advisors to Zendesk. Wachtell, Lipton, Rosen & Katz
is serving as Zendesk’s legal advisor.
About Zendesk
Zendesk started the customer experience revolution in 2007 by
enabling any business around the world to take their customer
service online. Today, Zendesk is the champion of great service
everywhere for everyone, and powers billions of conversations,
connecting more than 100,000 brands with hundreds of millions of
customers over telephony, chat, email, messaging, social channels,
communities, review sites and help centers. Zendesk products are
built with love to be loved. The company was conceived in
Copenhagen, Denmark, built and grown in California, taken public in
New York City, and today employs more than 6,000 people across the
world. Learn more at www.zendesk.com.
Additional Information and Where to Find It
This communication relates to the proposed transaction involving
Zendesk, Inc. (“Zendesk”). In connection with the proposed
transaction, Zendesk has filed with the U.S. Securities and
Exchange Commission (the “SEC”) a definitive proxy statement on
Schedule 14A (the “Proxy Statement”). The Proxy Statement was first
mailed to Zendesk’s stockholders on or about August 8, 2022. This
communication is not a substitute for the Proxy Statement or for
any other document that Zendesk may file with the SEC and send to
its stockholders in connection with the proposed transaction. The
proposed transaction will be submitted to Zendesk’s stockholders
for their consideration. Before making any voting decision,
Zendesk’s stockholders are urged to read all relevant documents
filed or to be filed with the SEC, including the Proxy Statement,
as well as any amendments or supplements to those documents, when
they become available because they will contain important
information about the proposed transaction.
Zendesk’s stockholders will be able to obtain a free copy of the
Proxy Statement, as well as other filings containing information
about Zendesk, without charge, at the SEC’s website (www.sec.gov).
Copies of the Proxy Statement and the filings with the SEC that
will be incorporated by reference therein can also be obtained,
without charge, by directing a request to Zendesk, Inc., 989 Market
Street, San Francisco, CA 94103, Attention: Investor Relations,
email: ir@zendesk.com, or from Zendesk’s website
www.zendesk.com.
Participants in the Solicitation
Zendesk and certain of its directors, executive officers and
employees may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information
regarding Zendesk’s directors and executive officers is available
in Zendesk’s proxy statement on Schedule 14A for the 2022 annual
meeting of stockholders, which was filed with the SEC on July 11,
2022. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the Proxy Statement and other relevant materials to be filed with
the SEC in connection with the proposed transaction when they
become available. Free copies of the Proxy Statement and such other
materials may be obtained as described in the preceding
paragraph.
Forward-Looking Statements
This communication includes information that could constitute
forward-looking statements made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995.
These statements include those set forth above relating to the
proposed transaction as well as those that may be identified by
words such as “will,” “intend,” “expect,” “anticipate,” “should,”
“could” and similar expressions. These statements are subject to
risks and uncertainties, and actual results and events could differ
materially from what presently is expected, including regarding the
proposed transaction. Factors leading thereto may include, without
limitation, the risks related to Ukraine conflict or the COVID-19
pandemic on the global economy and financial markets; the
uncertainties relating to the impact of the Ukraine conflict or the
COVID-19 pandemic on Zendesk’s business; economic or other
conditions in the markets Zendesk is engaged in; impacts of actions
and behaviors of customers, suppliers and competitors;
technological developments, as well as legal and regulatory rules
and processes affecting Zendesk’s business; the timing, receipt and
terms and conditions of any required governmental and regulatory
approvals of the proposed transaction that could reduce anticipated
benefits or cause the parties to abandon the proposed transaction;
the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement entered
into pursuant to the proposed transaction; the possibility that
Zendesk stockholders may not approve the proposed transaction; the
risk that the parties to the merger agreement may not be able to
satisfy the conditions to the proposed transaction in a timely
manner or at all; risks related to disruption of management time
from ongoing business operations due to the proposed transaction;
the risk that any announcements relating to the proposed
transaction could have adverse effects on the market price of
Zendesk’s common stock; the risk of any unexpected costs or
expenses resulting from the proposed transaction; the risk of any
litigation relating to the proposed transaction; the risk that the
proposed transaction and its announcement could have an adverse
effect on the ability of Zendesk to retain customers and retain and
hire key personnel and maintain relationships with customers,
suppliers, employees, stockholders and other business relationships
and on its operating results and business generally; the risk the
pending proposed transaction could distract management of Zendesk;
and other specific risk factors that are outlined in Zendesk’s
disclosure filings and materials, which you can find on
www.zendesk.com, such as its 10-K, 10-Q and 8-K reports that have
been filed with the SEC. Please consult these documents for a more
complete understanding of these risks and uncertainties. This list
of factors is not intended to be exhaustive. Such forward-looking
statements only speak as of the date of these materials, and
Zendesk assumes no obligation to update any written or oral
forward-looking statement made by Zendesk or on its behalf as a
result of new information, future events or other factors, except
as required by law.
1 The findings are based on the facts specified in the letter
and exhibits sent by Light Street to the Zendesk Board of Directors
on August 28, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220901005652/en/
Investor Contact: Jason Tsai, +1 415-997-8882
ir@zendesk.com
Media Contacts: Courtney Blake, +1 816-520-5503
press@zendesk.com
John Christiansen +1 415-618-8750 Danielle Berg +1 212-687-8080
FGS Global Zendesk-SVC@sardverb.com
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