Consortium Acquisition Provides Immediate and
Certain Value to All Zendesk Stockholders and Zendesk Board
Continues to Believe It Represents Best Path Forward
Recent Business Deceleration Creates
Significant Risk for Zendesk Stockholders in Pursuing a Standalone
Alternative as a Public Company
Special Meeting of Zendesk Stockholders to be
Held on September 19, 2022, and Zendesk Board Encourages
Stockholders to Vote for the Proposed Transaction
Zendesk, Inc. (NYSE: ZEN) (“Zendesk” or the “Company”) today
released an investor presentation that provides significant
additional information to stockholders in connection with the
proposed transaction with the consortium led by Hellman &
Friedman and Permira (the “Consortium”).
The Company stated: “Our Board believes that the acquisition by
the Consortium is the best path forward for Zendesk and our
stockholders. It is important for stockholders to understand the
challenges facing the Zendesk business, including the significant
deceleration of key leading indicators and measures of Zendesk’s
business performance. To ensure full transparency and help
investors make an informed decision, we disclosed certain recent
monthly performance metrics so that Zendesk stockholders are able
to understand that the standalone alternative, under any structure,
carries material risk for Zendesk stockholders given
Zendesk-specific performance challenges, as well as a challenging
market and macroeconomic environment. The Board conducted a
thorough and extensive strategic review process before determining
to enter into the Consortium transaction, which the Board believes
offers immediate and certain value that is superior to the
standalone alternatives, including the recapitalization proposal
from Light Street Capital.”
The presentation notes the following:
- Zendesk’s business momentum continues to deteriorate, both
operationally and financially, with preliminary net bookings having
sequentially declined for six months and having declined 63%
year-over-year since the announcement of the Consortium transaction
(June through August), resulting in ARR growth of only $2 million
between June and the end of August 2022.
- The Board engaged in an extensive strategic review process that
included several months of engagement with 26 prospective acquirors
(including 16 strategics and 10 financial sponsors). Process
participants were heavily focused on the net bookings trends
described above. The Consortium proposal represented the only
final, fully-financed proposal received as a result of the
process.
- The Board considered feedback from stockholders, including JANA
Partners, which indicated support for pursuing a transaction that
resulted from a robust strategic review process. JANA, when
provided information about the process and Consortium transaction
under a confidentiality agreement, indicated that it would not
oppose the transaction.
- During the process, Zendesk’s business performance resulted in
a much sharper reduction in near-and long-term outlook relative to
the rest of the market, with the Company’s June 2022 projections
implying a 9% decrease in growth relative to the March 2022
projections. Notably, software companies that have recently
provided guidance between 0% to 5% below Street expectations have
seen reductions in value of between 17% and 42%.
- The Company has underperformed its projections, generating
$65MM less ARR than the assumptions underlying the revised June
2022 projections to-date. This shortfall creates downside risk for
the June 2022 revenue projections and associated revenue growth
rates for FY22 and FY23. Moreover, it validates the reasonableness
of the Board utilizing the revised June 2022 projections, which
were lower than the prior March 2022 projections, to compare the
Consortium transaction to the standalone alternative.
- The Company believes the performance of comparable cloud
software indices and companies implies a current hypothetical
unaffected stock price for Zendesk well below the value of the
Consortium transaction, with significant potential downside
relative to peers given Zendesk’s slowing momentum and the trading
multiples of software companies that have experienced similar
decelerations in growth.
The Company is continuing to advance toward completing the
transaction with the Consortium, subject to customary closing
conditions. A special meeting of Zendesk stockholders to vote on
the transaction will be held on September 19, 2022 (the “Special
Meeting”).
The Board unanimously recommends that stockholders vote
“FOR” the Consortium
transaction.
Stockholders’ votes are very important, regardless of the number
of shares owned. To complete the Consortium transaction, the merger
agreement must be adopted by the affirmative vote of the holders of
at least a majority of the outstanding shares of Zendesk common
stock entitled to vote at the Special Meeting.
If stockholders have any questions or need assistance voting
their shares, please contact Zendesk’s proxy solicitor:
MACKENZIE PARTNERS, INC.
1407 Broadway, 27th Floor
New York, NY 10018
Toll-Free: +1 (800) 322-2885
Email: proxy@mackenziepartners.com
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 the 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220905005477/en/
Investor: Jason Tsai, +1 415-997-8882 ir@zendesk.com
Media: 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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