ENDURANCE INTERNATIONAL GROUP HOLDINGS, INC. Item 8.01. Other Events.
As previously disclosed, (i) onNovember 1, 2020 ,Endurance International Group Holdings, Inc. (the "Company") entered into an Agreement and Plan of Merger (the "merger agreement") withEndure Digital Intermediate Holdings, Inc. (formerly known asRazorback Technology Intermediate Holdings, Inc. ) ("Parent") andEndure Digital, Inc. (formerly known asRazorback Technology, Inc. ), a wholly owned subsidiary of Parent ("Merger Sub"), providing for the merger of Merger Sub with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent (the "merger"); (ii) onDecember 8, 2020 , a lawsuit, captioned Stamps v.Endurance International Group Holdings Inc. , Civil Action No. 1:20-cv-10321, was filed against the Company and each of the Company's directors in theUnited States District Court for the Southern District of New York ; (iii) onDecember 11, 2020 , a lawsuit, captioned Baker v.Endurance International Group Holdings Inc. , Civil Action No. 1:20-cv-01691, was filed against the Company and each of the Company's directors in theUnited States District Court for the District of Delaware ; (iv) onDecember 18, 2020 , a lawsuit, captioned Heinrich v.Endurance International Group Holdings Inc. , Civil Action No. 1:20-cv-03702, was filed against the Company and each of the Company's directors in theUnited States District Court for the District of Colorado ; (v) onDecember 23, 2020 , a lawsuit, captioned Wilhelm v.Endurance International Group Holdings, Inc. , Civil Action No. 1:20-cv-03779, was filed against the Company and each of the Company's directors in theUnited States District Court for the District of Colorado ; and (vi) also onDecember 23, 2020 , a lawsuit, captioned Johnson v.Endurance International Group Holdings, Inc. , Civil Action No. 1:20-cv-10889, was filed against the Company and each of the Company's directors in theUnited States District Court for the Southern District of New York . The actions referenced in clauses (ii) through (vi) above are referred to collectively as the "Federal Actions." Each of the Federal Actions alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder against the defendants for allegedly disseminating a materially incomplete and misleading proxy statement in connection with the proposed merger. The plaintiffs in the Federal Actions seek various forms of injunctive and declaratory relief, as well as awards of damages, costs, expert fees and attorneys' fees. The Company believes that no further supplemental disclosure is required under applicable laws and that the definitive proxy statement filed with theSecurities and Exchange Commission (the "SEC") onDecember 14, 2020 (the "Proxy Statement") disclosed all material information required to be disclosed therein. However, to avoid the risk of the Federal Actions delaying or adversely affecting the merger and to minimize the expense of defending such actions, it has agreed to make certain supplemental disclosures related to the proposed merger, all of which are set forth below and which should be read in conjunction with the Proxy Statement. -------------------------------------------------------------------------------- SUPPLEMENT TO PROXY STATEMENT In connection with the settlement of the shareholder suits as described in this Form 8-K, the Company has agreed to make the following supplemental disclosures to the Proxy Statement. This supplemental information should be read in conjunction with the Proxy Statement, which should be read in its entirety. Defined terms used but not defined herein have the meanings set forth in the Proxy Statement.
1. The section of the Proxy Statement titled "The Merger-Background of the Merger" is hereby supplemented as follows:
A. The last two sentences of the last paragraph on page 38 (such paragraph
beginning with "On
read as follows:
Management reviewed with the board of directors a draft of the Company's three-year financial plan, and the board of directors proposed certain modifications to the three-year financial plan, including changes to reflect the increase in product demand being experienced by the Company and the acquisition of Retention Science, which would be announced the following day. After discussion regarding the Company's strategic alternatives, including whether to initiate a sale process or to explore raising additional capital, the board of directors determined that management should instruct Centerview and Goldman Sachs to initiate outreach to the potential buyers identified by the financial advisors and reviewed with the board of directors. The board of directors agreed that this outreach would include sharing the three-year financial plan after it had been revised to include the updates discussed at the meeting.
B. The following paragraph is hereby inserted immediately following the last
paragraph on page 38 (such paragraph beginning with "On
OnAugust 11, 2020 , the Company's management sent a revised three-year financial plan to the board of directors by email, which reflected the updates discussed during the meeting of the board of directors onJuly 29, 2020 .
C. The penultimate sentence of the first paragraph on page 39 (such
paragraph beginning with "Following the
board of directors") is hereby amended and restated to read as follows:
Each of the 12 parties that executed a non-disclosure agreement with the Company received a telephonic management presentation regarding the business of the Company and access to a limited virtual data room containing financial and organizational information regarding the Company, including the three-year financial plan, which had been provided to the board of directors onAugust 11, 2020 . D. The second paragraph on page 43 (such paragraph beginning with "On
language immediately after the fourth sentence of such paragraph:
The Company's management next presented to the board of directors projections for 2020 through 2025 proposed for use by Centerview and Goldman Sachs in their financial analyses. Management noted that these projections consisted of the three-year financial plan previously provided to the board of directors, with two additional years added to facilitate discounted cash flow analyses by Centerview and Goldman Sachs, and described the assumptions underlying the two additional years. Thereafter, the board of directors approved the projections for 2020 through 2025, including their use by Centerview and Goldman Sachs for purposes of their financial analyses.
E. The third sentence of the last full paragraph on page 43 (such paragraph
beginning with "Thereafter, representatives of Centerview and Goldman
Sachs contacted each of Clearlake, Party A and Party C by telephone …")
is hereby amended and restated to read as follows:
Party A stated that its decision to increase its price to the price in its last proposal had been difficult and that, while it might be able to offer a few additional cents, it was essentially out of room to increase its price.
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2. The section of the Proxy Statement entitled "The Merger-Opinion of
A. The table appearing immediately after the third paragraph under the
heading "Selected Public Company Analysis" on page 53 (such table
immediately following the phrase "The selected companies and the results
of this analysis are summarized as follows…") and its associated footnote
are amended and restated to read as follows:
EV /2021E Adj.
Selected Companies EBITDA Multiple
Blucora, Inc.(1) 7.4x
Cimpress PLC 7.5x
dotdigital Group PLC 21.5x
GoDaddy Inc. 22.3x
J2 Global, Inc. 7.0x
Tucows Inc. 15.3x
United Internet AG 7.2x
Yelp Inc. 7.3x
Median EV / 2021E Adjusted EBITDA Multiple 7.5x
EV / 2021E
(1) Pro forma for acquisition ofHK Financial Services . B. The table appearing immediately after the fourth paragraph under the heading "Selected Precedent Transaction Analysis" on page 54 (such table
immediately following the phrase "The selected precedent transactions
considered in this analysis are summarized as follows…") is amended and
restated to read as follows:
TEV/
Announcement LTM Adj.
Date Target Acquiror EBITDA (1)
October 22, 2019 Cision Ltd. Platinum Equity Advisors, LLC 10.2x (2)
April 14, 2019 Epsilon Data Management, LLC Publicis Groupe SA 9.5x (3)
August 6, 2018 Web.com Group, Inc. Siris Capital Group, LLC 11.1x
July 18, 2017 PlusServer GmbH BC Partners LLP 11.1x
December 15, 2016 Strato AG United Internet AG 12.4x
December 6, 2016 Host Europe Group GoDaddy Inc. 12.9x (4)
November 8, 2016 1&1 Internet SE Warburg Pincus LLC 12.5x
November 2, 2015 Constant Contact, Inc. Endurance International Group 13.2x
Holdings, Inc.
October 23, 2014 Digital River, Inc. Siris Capital Group, LLC 12.9x
September 11, 2014 Conversant, Inc. Alliance Data Systems 10.4x
Corporation
July 19, 2013 Host Europe Group Cinven 12.0x
November 7, 2011 Endurance International Group Warburg Pincus LLC 10.8x (5)
Holdings, Inc. GS Capital Partners, LLC
August 3, 2011 Network Solutions LLC Web.com Group, Inc. 9.5x
July 1, 2011 GoDaddy Inc. KKR & Co. Inc. 15.8x
Silver Lake Partners
November 19, 2009 Strato AG Deutsche Telekom AG 7.6x
Median TEV / LTM Adjusted EBITDA Multiple: 11.1x
TEV / LTM Adjusted EBITDA Multiple Range: 7.6x to 15.8x
(1) Multiples reflect LTM Adjusted EBITDA when sufficient information was
available to determine Adjusted EBITDA; otherwise reflect LTM EBITDA on an
unadjusted basis.
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(2) Reflects midpoint of estimated 2019 Adjusted EBITDA range provided by target
company's management.
(3) Does not reflect value of target company after tax step-up to be recognized
by acquiror. If tax step-up were represented, multiple would be 8.5x.
(4) Reflects estimated Adjusted EBITDA for fiscal year 2016.
(5) Reflects transaction value reported by Reuters.
C. The first sentence in the second paragraph appearing under the heading"Discounted Cash Flow Analysis" beginning on page 56 (such paragraph
beginning with "In performing this analysis…") is hereby amended and
restated to read as follows:
In performing this analysis, Centerview calculated a range of implied equity
values for the Company's shares by (a) discounting to present value, as of
September 30, 2020 , using discount rates ranging from 9.0% to 10.0% (reflecting
Centerview's analysis of the Company's weighted average cost of capital, which
was calculated using the capital asset pricing model and based on considerations
that Centerview deemed relevant in its professional judgment and experience,
taking into account certain metrics including levered and unlevered betas for
comparable companies) and the mid-year convention: (i) the forecasted unlevered
free cash flows of the Company over the period beginning October 1, 2020 and
ending December 31, 2025 as set forth in the Forecasts, (ii) a range of implied
terminal values of the Company, calculated by Centerview applying an
illustrative range of equity values to forward Adjusted EBITDA multiples of
7.0x-8.5x to the terminal year, which Centerview selected utilizing its
professional judgment and experience and which implied perpetuity growth rates
ranging from 0.6% to 2.9% to the terminal year estimate of unlevered free cash
flow set forth in the Forecasts and (iii) the Company Tax Assets, and
(b) subtracting from the foregoing results the Company's net debt of
approximately $1.5 billion as of September 30, 2020 , as set forth in the
Internal Data.
3. The section of the Proxy Statement entitled "The Merger- Opinion of
A. The table appearing immediately after the third paragraph under the
heading "Selected Companies Analysis" on page 60 (such table immediately
following the phrase "The results of this analysis are summarized as
follows…") is amended and restated to read as follows:
EV/2021E Adjusted
Selected Companies EBITDA Multiples
Go Daddy 22.3x
dotdigital Group plc 21.5x
Tucows Inc. 15.3x
Cimpress plc 7.5x
Blucora 7.4x
Yelp 7.3x
United Internet AG 7.2x
J2 Global, Inc. 7.0x
7.5x
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B. The table appearing immediately after the first paragraph under the
heading "Selected Transaction Analysis" on page 61 (such table
immediately following the phrase "Goldman Sachs analyzed certain publicly
available information relating to the following selected transactions in
the SMB digital enablement industry since
and restated to read as follows:
TEV /LTM
Announced Acquiror Target Adjusted EBITDA(1)
November 11, 2009 Deutsche Telekom Strato 7.6x
July 1, 2011 KKR & Silver Lake GoDaddy 15.8x
August 3, 2011 Web.com Network Solutions 9.5x
November 7, 2011 Warburg Pincus & Endurance 10.8x(2)
GS Capital
July 19, 2013 Cinven Host Europe 12.0x
September 11, 2014 Alliance Data Conversant 10.4x
October 23, 2014 Siris Digital River 12.9x
November 2, 2015 Endurance Constant Contact 13.2x
November 8, 2016 Warburg Pincus 1&1 Hosting 12.5x
December 6, 2016 GoDaddy Host Europe 12.9x(3)
December 15, 2016 United Internet Strato 12.4x
July 18, 2017 BC Partners PlusServer 11.1x
August 6, 2018 Siris Web.com 11.1x
April 14, 2019 Publicis Epsilon 9.5x(4)
October 22, 2019 Platinum Equity Cision 10.2x(5)
(1) Multiples reflect LTM Adjusted EBITDA when sufficient information was
available to determine Adjusted EBITDA; otherwise reflect LTM EBITDA on
an unadjusted basis.
(2) Reflects transaction value reported by Reuters.
(3) Reflects estimated Adjusted EBITDA for fiscal year 2016.
(4) Does not reflect value of target company after tax step-up to be
recognized by acquiror. If tax step-up were represented, multiple would
be 8.5x.
(5) Reflects midpoint of estimated 2019 Adjusted EBITDA range provided by
target company's management.
C. The second sentence in the last paragraph appearing under the heading"Selected Transactions Analysis" on page 56 (such paragraph beginning
with "Goldman Sachs then applied an illustrative range of multiples…") is
hereby amended and restated to read as follows:
Goldman Sachs then subtracted net debt of approximately
D. The fifth sentence in the first paragraph appearing under the heading
"Illustrative Present Value of Future Share Price Analysis" beginning on
page 61 (such paragraph beginning with "Goldman Sachs performed an
illustrative analysis…") is hereby amended and restated to read as
follows:
To derive illustrative implied equity values per Company common stock, Goldman
Sachs then subtracted the amount of the Company's projected net debt as of
December 31, 2020 , 2021, 2022, and 2023 (which was approximately $1.5 billion ,
$1.4 billion , $1.2 billion , and $1.0 billion , respectively), as provided by
management of the Company and both excluding and including adjustments (the
"Equity Issuance Adjustments") by management of the Company to reflect the
illustrative impact of a $100,000,000 issuance of shares of the Company's common
stock for $5.00 per share and the use of the proceeds and $75,000,000 of balance
sheet cash to pay down senior notes of the Company, from the range of implied
EVs.
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E. The first paragraph appearing under the heading "Illustrative Present
Value of Future Share Price Analysis" beginning on page 61 (such
paragraph beginning with "Goldman Sachs performed an illustrative
analysis…") is hereby supplemented by adding the following sentence
immediately following the sixth sentence thereof:
The numbers of fully diluted shares of the Company's common stock that were used in the calculation described in the preceding sentence were approximately 158 million, 164 million, 169 million, and 173 million shares as ofDecember 31, 2020 , 2021, 2022, and 2023, respectively when excluding the Equity Issuance Adjustments, and approximately 178 million, 184 million, 189 million, and 193 million shares as ofDecember 31, 2020 , 2021, 2022, and 2023, respectively when including the Equity Issuance Adjustments. F. The sixth sentence in the first paragraph appearing under the heading
"Illustrative Discounted Cash Flow Analysis by Goldman Sachs" beginning
on page 62 (such paragraph beginning with "Using the Forecasts, Goldman
Sachs performed an illustrative discounted cash flow analysis…") is
hereby amended and restated to read as follows:
Goldman Sachs then subtracted net debt as of September 30, 2020 of approximately
$1.5 billion , as provided by management of the Company, from the range of
illustrative EVs it derived for the Company to calculate an illustrative range
of implied equity values for the Company.
G. The fifth paragraph appearing under the heading "General - Goldman Sachs"
beginning on page 63 (such paragraph beginning with "Goldman Sachs andits affiliates are engaged in…") is hereby supplemented by adding the
following sentence immediately following the fifth sentence thereof:
During the two-year period ended
4. The section of the Proxy Statement titled "The Merger-Financial Forecasts" is hereby supplemented as follows:
A. The table under the heading "Financial Forecasts" on page 66 and its
associated footnotes is hereby amended and restated to read as follows:
(in millions) 2020(1) 2021 2022 2023 2024(2) 2025(2)
Revenue $ 1,104 $ 1,145 $ 1,198 $ 1,266 $ 1,323 $ 1,377
Adjusted EBITDA(3) $ 308 $ 311 $ 336 $ 380 $ 387 $ 404
Unlevered Free Cash Flow (Cash
EBITDA-CapEx)(4) $ 243 $ 254 $ 283 $ 332 n/a n/a
Depreciation(5) $ 50 $ 50 $ 50 $ 50 $ 50 $ 50
Stock-Based Compensation(5) $ 35 $ 37 $ 39 $ 41 $ 43 $ 45
Changes in Deferred Revenue and Domain
COGS $ 13 $ 7 $ 9 $ 10 $ 10 $ 10
ASC 606 Sales and Marketing Adjustment $ 17 $ 14 $ 11 $ 8 $ 9 $ 10
Capital Expenditures $ 55 $ 50 $ 50 $ 50 $ 50 $ 50
Restructuring Expenses $ 5 $ 1 $ 1 $ 1 $ 0 $ 0
Retention Science Acquisition
Payments(5) $ 17 $ 8 $ 7 $ 3 $ 0 $ 0
AppMachine & Ecomdash Payments(5) $ 3 $ 0 $ 0 $ 0 $ 0 $ 0
COVID-19 Payroll Tax / FICA(6) $ 10 $ (5 ) $ (5 ) $ 0 $ 0 $ 0
Miscellaneous & Other(5)(7) $ 2 $ 0 $ 0 $ 0 $ 0 $ 0 (1) At the direction of the Company, Centerview and Goldman Sachs used values for
2020 for Revenue, Changes in Deferred Revenue and Domain COGS, ASC 606 Sales
and Marketing Adjustment, Restructuring Expenses and COVID-19 Payroll Tax /
FICA for purposes of their financial analyses of
quarter of 2020 that was not available at the time the revenue forecasts were
made available to potential bidders. The Adjusted EBITDA forecast for 2020
included an amount for the fourth fiscal quarter of 2020 of
(2) The financial forecasts provided to prospective bidders did not include
forecasts for fiscal years 2024 or 2025, which were subsequently prepared by
the Company and provided by the Company to Centerview and Goldman Sachs to
use in their financial analyses.
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(3) Adjusted EBITDA is calculated as earnings from continuing operations (before
deducting non-recurring items and stock-based compensation expense) before
interest, taxes, depreciation and amortization. The Company is unable to
reconcile the forecasts of Adjusted EBITDA to net (loss) income because
certain information necessary for this reconciliation is not available
without unreasonable efforts since it is difficult to predict and/or
dependent on future events that are outside of the Company's control.
(4) Unlevered Free Cash Flow (Cash EBITDA-CapEx) is calculated as Adjusted
EBITDA, plus changes in deferred revenue and changes in costs of goods sold
for domain registration fees, less an ASC 606 adjustment to sales and
marketing expenses, less capital expenditures.
(5) Not included in the financial forecasts provided to prospective bidders.
(6) COVID-19 Payroll Tax / FICA represents the positive impact in 2020, and the
negative impact in 2021 and 2022, of payroll tax deferrals under the CARES
Act.
(7) Miscellaneous & Other represents proceeds from the sale of intangible assets.
B. The last sentence of the penultimate paragraph on page 66 (such paragraph
beginning with "Based solely on the financial forecasts provided by the
Company…") is hereby amended and restated to read as follows:
The Unlevered Free Cash Flow forecasts calculated by Centerview and Goldman
Sachs also included an amount for the fourth fiscal quarter of 2020 of
$18 million . Unlevered free cash flow is calculated as (i) EBITA, which is
calculated as Adjusted EBITDA less depreciation and stock-based compensation;
less (ii) taxes, before the use of tax assets, at an assumed effective tax rate
of 25% of EBITA; plus (iii) depreciation; plus (iv) changes in deferred revenue
and changes in costs of goods sold for domain registration fees; less (v) an
adjustment reflecting the impact of ASC 606 on sales and marketing expenses;
less (vi) capital expenditures; less (vii) restructuring expenses; less
(viii) payments associated with the Retention Science acquisition; less
(ix) payments associated with the AppMachine and Ecomdash acquisitions; plus
(x) the positive or negative impact of payroll tax deferrals under the CARES
Act; plus (xi) proceeds from the sale of intangible assets.
Important Additional Information Filed with the
The Company filed with theSEC a proxy statement (the "proxy statement"), including a form of proxy card, onDecember 14, 2020 . The proxy statement and form of proxy card have been mailed to the Company's stockholders. The proxy statement contains important information about Parent, the Company, the transaction and related matters. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT, AND OTHER RELEVANT DOCUMENTS, AND ANY RELATED AMENDMENTS OR SUPPLEMENTS, FILED WITH THE SEC CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders can obtain free copies of the proxy statement and other documents that the Company filed with theSEC through the website maintained by theSEC at www.sec.gov. Copies of the documents filed with theSEC by the Company are available free of charge on the Company's investor relations website at ir.endurance.com or by contacting the Company's Investor Relations Department at ir@endurance.com. The Company and certain of its directors, executive officers and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information regarding the persons who may, under the rules of theSEC , be deemed participants in the solicitation of the shareholders of the Company in connection with the transaction, including a description of their respective direct or indirect interests, by security holdings or otherwise, are included in the proxy statement datedDecember 14, 2020 , described above. Additional information regarding the Company's directors and executive officers is also included in the Company's proxy statement for its 2020 Annual Meeting of Stockholders, which was filed with theSEC onApril 9, 2020 . As ofDecember 11, 2020 , the record date for the special meeting, the Company's directors and executive officers beneficially owned approximately 77,688,275 shares, or 53.2%, of the Company's common stock. These documents are available free of charge as described above.
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Safe Harbor for Forward-Looking Statements
This filing contains "forward-looking statements" as defined in theU.S. Private Securities Litigation Reform Act of 1995. The reader is cautioned not to rely on these forward-looking statements, such as statements regarding the proposed transaction between Parent and the Company, the expected timetable for completing the transaction, future financial and operating results, benefits and synergies of the transaction, future opportunities for the combined company and any other statements about the Parent's and the Company's managements' future . . .
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