This Amendment No. 1 (“Amendment No. 1”) amends Items 3, 4, 5 and 8 in the Solicitation/Recommendation Statement on Schedule 14D-9 filed by Bsquare Corporation, a Washington corporation (the “Company” or “BSQR”), with the Securities and Exchange Commission (the “SEC”) on October 24, 2023 (as amended and supplemented from time to time, and including the documents annexed thereto or incorporated therein the “Schedule 14D-9”). The Schedule 14D-9 relates to a tender offer by Kontron Merger Sub, Inc., a Delaware corporation (“Merger Sub”), a wholly-owned subsidiary of Kontron America, Incorporated, a Delaware corporation (“Kontron” or “Parent”), to purchase all of the outstanding Shares of BSQR for $1.90 per Share, net to the seller in cash (the “Offer Price”), without interest and less any applicable withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 24, 2023 (as amended or supplemented from time to time, the “Offer to Purchase”), and in the related Letter of Transmittal (as amended or supplemented from time to time, the “Letter of Transmittal,” which, together with the Offer to Purchase, constitute the “Offer”). The Offer is described in a Tender Offer Statement on Schedule TO (as amended or supplemented from time to time, and together with the exhibits thereto, the “Schedule TO”), filed by Parent and Merger Sub with the SEC on October 24, 2023. Capitalized terms used in this Amendment No. 1 have the meanings ascribed to them in the Schedule 14D-9.
On November 1, 2023, plaintiff Sal Carbone, a purported shareholder of the Company, filed a complaint against the Company and its directors (collectively, the “Defendants”) in the U.S. District Court for the Southern District of New York (the “Carbone Complaint”). The Carbone Complaint challenges statements in the Schedule 14D-9 and asserts claims under §§ 14(e), 14(d) and 20(a) of the Exchange Act. On November 7, 2023, plaintiff William Johnson, a purported shareholder of the Company, filed a putative class complaint against the Company and the Defendants in the King County Superior Court in the State of Washington (the “Johnson Complaint,” together with the Carbone Complaint, the “Complaints”). The Johnson Complaint challenges statements in the Schedule 14D-9 and asserts they give rise to a single claim for breach of fiduciary duty. The Complaints seek fees, costs, and an injunction of the Transaction, but they do not assert a specific monetary demand. The Company has also received several demand letters from purported shareholders challenging various disclosures in the Schedule 14D-9 (the “Letters,” and together with the Complaints, the “Claims”).
The Company believes that the Claims lack merit and that no supplemental disclosure is required or necessary under applicable laws. The Claims allege the Company should disclose additional information regarding a number of highly technical and generally irrelevant matters, such as requesting substantial additional information regarding the DCF methodology used by TeleHill, the Company’s financial advisor. As previously noted in the Schedule 14D-9, a DCF methodology results in the lowest valuation of all methodologies considered, reflecting a negative implied enterprise value primarily because, as the Company has disclosed for several quarters, the Company’s PS business (which has historically generated a substantial majority of its revenue) has been contracting for several years and is expected to continue to do so. Other Claims relate to the liquidation methodology, which by any approach results in a distribution per share far below the Offer Price. And other Claims request disclosure about non-existent facts, such as alleged discussions regarding post-closing employment or standstill provisions that prohibit requesting a waiver. Against the backdrop of a months-long marketing process, the Company believes the Offer Price provides the best value reasonably available to the Company’s shareholders and that the disclosure in the Schedule 14D-9 adequately equips investors to make informed decisions about whether to tender their Shares.
While the Company believes that the disclosures set forth in the Schedule 14D-9 comply fully with applicable law, to moot certain of the Claims, and to avoid nuisance, potential expense and delay, the Company has determined to voluntarily amend and supplement the Schedule 14D-9 as described in this Amendment No. 1. Nothing in these supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable law of any of the disclosures set forth herein. The Company denies that it has violated any laws or breached any duties to the Company’s shareholders, and it believes that the additional information in this Amendment No. 1 is immaterial.
Except as otherwise set forth below, the information set forth in the Schedule 14D-9 remains unchanged and is incorporated herein by reference as relevant to items in this Amendment No. 1. This Amendment No. 1 should be read together with the Schedule 14D-9. If additional demands or complaints are filed or submitted, absent new or different allegations that are material, the Company, Parent and/or Merger Sub will not necessarily announce such additional demands or complaints.
The text below that is bolded and underlined is new language that has been added to the Schedule 14D-9 by this Amendment No. 1 (except that tables introduced by such text are not bold or underlined for presentational convenience), and deleted text is highlighted with bolded and crossed-out text.