Item 8.01. Other Events
On May 31, 2022, SailPoint Technologies Holdings, Inc. ("SailPoint" or the
"Company") filed a Proxy Statement on Schedule 14A (the "Definitive Proxy
Statement") with the Securities and Exchange Commission (the "SEC") in
connection with the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of April 10, 2022, by and among the Company, Project Hotel California
Holdings, LP, a Delaware limited partnership ("Parent"), and Project Hotel
California Merger Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub will merge
with and into the Company (the "Merger"), with the Company surviving the Merger
as a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of
Thoma Bravo Fund XV, L.P., managed by Thoma Bravo, L.P. ("Thoma Bravo"). The
special meeting of SailPoint stockholders (the "Special Meeting") will be held
virtually on June 30, 2022, at 12:30 p.m. Central time, to, among other things,
act on the proposal to adopt the Merger Agreement, as disclosed in the
Definitive Proxy Statement.
Regulatory Approvals
On June 21, 2022, SailPoint received written notice from the UK Department for
Business, Energy and Industrial Strategy ("BEIS") that BEIS has concluded that
no further action is to be taken in relation to the proposed transaction under
the UK National Security and Investment Act 2021, as amended.
Receipt of the BEIS clearance satisfies one of the conditions to closing of the
proposed transaction. The transaction remains subject to other customary closing
conditions, including approval by SailPoint stockholders and receipt of certain
other regulatory approvals, and is expected to close in the second half of 2022.
Litigation Related to the Merger
On June 1, 2022, a purported individual shareholder of SailPoint filed a
complaint in the United States District Court for the Southern District of New
York, captioned Bushansky v. SailPoint Technologies Holdings, Inc., et al., No.
1:22-cv-04504, naming as defendants the Company and each member of the Company
Board as of the date of the Merger Agreement (Bushansky). On June 9 and June 16,
two additional cases were filed by purported individual shareholders of
SailPoint in the same court, captioned Finger v. SailPoint Technologies
Holdings, Inc., et al., 1:22-cv-04837 (Finger) and Nathan v. SailPoint
Technologies Holdings, Inc., et al., 1:22-cv-05046 (Nathan). On June 2, 2022,
one additional case was filed by a purported individual shareholder of SailPoint
in the United States District Court for the Eastern District of New York,
captioned Holness v. SailPoint Technologies Holdings, Inc., et al., No.
1:22-cv-03268 (Holness). The Bushansky, Finger, Nathan and Holness cases, and
any similar subsequently filed cases involving the Company, the Company Board or
any committee thereof and/or any of the Company's directors or officers relating
directly or indirectly to the Merger Agreement, the Merger or any related
transaction, are referred to as the "Merger Litigations."
The Merger Litigations filed to date generally allege that the Definitive Proxy
Statement is materially incomplete and misleading by allegedly failing to
disclose certain purportedly material information. The Merger Litigations assert
violations of Section 14(a) of the Securities Exchange Act of 1934 (the
"Exchange Act"), Rule 14a-9 promulgated thereunder against SailPoint and the
Company Board and violations of Section 20(a) of the Exchange Act against the
Company Board. The Merger Litigations seek, among other things: an injunction
enjoining consummation of the Merger, rescission of the Merger Agreement, a
declaration that the Company and the Company Board violated Sections 14(a) and
20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, an order
directing the Company Board to comply with the Exchange Act, damages, costs of
the action, including attorneys' fees and experts' fees and expenses, and any
other relief the court may deem just and proper.
SailPoint cannot predict the outcome of each Merger Litigation, nor can
SailPoint predict the amount of time and expense that will be required to
resolve each Merger Litigation. SailPoint believes that the Bushansky, Finger,
Nathan, and Holness cases are without merit and that no supplemental disclosures
are required under applicable law, and SailPoint and its directors intend to
vigorously defend against each Merger Litigation and any subsequently filed
similar actions. It is possible that additional similar complaints could be
filed in connection with the Merger. SailPoint cannot predict the outcome of or
estimate the possible loss or range of loss from the Merger Actions. If any
additional complaints are filed, absent new or significantly different
allegations, SailPoint will not necessarily disclose such additional demand
letters or filings.
While SailPoint believes that the disclosures set forth in the Definitive Proxy
Statement comply fully with all applicable law and denies the allegations in the
Merger Litigations, in order to moot plaintiffs' disclosure claims, avoid
nuisance and possible expense and business delays, and provide additional
information to its shareholders, SailPoint has determined voluntarily to
supplement certain disclosures in the Definitive Proxy Statement related to
plaintiffs' claims with the supplemental disclosures set forth below (the
"Supplemental Disclosures"). Nothing in this Current Report on Form 8-K shall be
deemed an admission of the legal merit, necessity or materiality under
applicable laws of any of the disclosures set forth herein. To the contrary,
SailPoint specifically denies all allegations in the Merger Litigations that any
additional disclosure was or is requested or material.
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Supplement to Definitive Proxy Statement
All page references used herein refer to pages in the Definitive Proxy Statement
before any additions or deletions resulting from the Supplemental Disclosures,
and capitalized terms used below, unless otherwise defined, have the meanings
set forth in the Definitive Proxy Statement. Underlined and bolded text shows
text being added to a referenced disclosure in the Definitive Proxy Statement
and stricken-through text shows text being deleted from a referenced disclosure
in the Definitive Proxy Statement. This Current Report on Form 8-K is
incorporated into, and amends and/or supplements, the Definitive Proxy Statement
as provided herein. Except as specifically noted herein, the information set
forth in the Definitive Proxy Statement remains unchanged.
The disclosure under the heading "Summary of Financial Analyses" on page 53 of
the Definitive Proxy Statement is hereby amended and supplemented by adding the
following sentences immediately following the second paragraph under that
heading:
Unless otherwise noted, Morgan Stanley based its analyses on a standalone
valuation of SailPoint. In each of its analyses described below, Morgan Stanley
utilized the number of outstanding shares of SailPoint common stock on a
fully-diluted basis, based on the following inputs from SailPoint management,
which included (A) 94.3 million basic shares outstanding of SailPoint common
stock, (B) 2.15 million options outstanding exercisable at a weighted-average
exercise price of $28.36 per share, and (C) 4.76 million RSUs outstanding and
(D) the excess conversion value attributable to the Convertible Notes, based on
the outstanding principal amount of such Convertible Notes of $390 million and
an upper strike price of the Convertible Notes of $41.34, where such upper
strike price assumes the full intrinsic value of the capped call transactions
and the underlying principal amount is assumed to be settled as cash.
The first sentence of the second paragraph under the heading "Discounted Equity
Value Analysis" on page 55 of the Definitive Proxy Statement is hereby amended
and supplemented as follows:
To calculate these discounted fully diluted equity values, Morgan Stanley
utilized calendar year 2024 revenue estimates under each of the Street Consensus
and Projections, which were $794 million and $955 million, respectively.
The second paragraph under the heading "Discounted Cash Flow Analysis" on page
55 of the Definitive Proxy Statement is hereby amended and supplemented as
follows:
Morgan Stanley first calculated the estimated unlevered free cash flow, which is
defined as non-GAAP adjusted earnings before interest, taxes, depreciation and
amortization (burdened by stock based compensation), less taxes and capital
expenditures, and adjusted for changes in net working capital. The Projections
included extrapolations through calendar year 2036 prepared by Morgan Stanley
with the guidance of SailPoint management (which extrapolations were reviewed
and approved for Morgan Stanley's use by SailPoint management). The free cash
flows and terminal values were discounted to present values as of April 8, 2022,
at a discount rate ranging from 8.6% to 10.5%, which discount rates were
selected, upon the application of Morgan Stanley's professional judgment and
experience, to reflect an estimate of SailPoint's weighted average cost of
capital estimated using the capital asset pricing model method and utilizing a
6% market risk premium, a risk-free rate of 2.7% based on the 10-year U.S.
Treasury yield as of April 8, 2022, and a 1.2 predicted beta per Barra. To
calculate terminal values, Morgan Stanley utilized perpetual growth rates of
2.5 percent to 3.5 percent as part of its analyses, with such rates selected
upon the application of Morgan Stanley's professional judgment and experience.
The undiscounted terminal values ranged from $9.9 billion to $15.6 billion. The
resulting aggregate value was then adjusted for net debt of $24 million as
provided by SailPoint management and further adjusted to add the net present
value of net operating losses, ranging from $70 million to $82 million.
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The chart following the second paragraph under the heading "Precedent
Transactions Multiples Analysis" on pages 56 and 57 of the Definitive Proxy
Statement is hereby amended and supplemented as follows:
AV/NTM
Year Revenue
Selected Software Transactions (Target/Acquiror) Announced Multiple
Strategic Acquirors
Adaptive Insights Inc. / Workday, Inc. 2018 11.0x
Auth0, Inc. / Okta, Inc. 2021 ~39x
Avast Plc / NortonLifeLock Inc. 2021 9.6x
Callidus Software Inc. / SAP America, Inc. 2018 8.3x
Carbon Black, Inc. / VMware, Inc. 2019 8.0x
Livongo Health, Inc. / Teladoc Health, Inc. 2020 44.9x
Mulesoft, Inc. / Salesforce.com, Inc. 2018 15.7x
Qualtrics International Inc. / SAP America, Inc. 2018 16.5x
SendGrid, Inc. / Twilio Inc. 2018 15.7x
Slack Technologies, Inc. / Salesforce.com, Inc. 2020 24.9x
Tableau Software Inc. / Salesforce.com, Inc. 2019 11.0x
Financial Sponsor Acquirors
Anaplan, Inc. / Thoma Bravo, LLC 2022 13.9x
Apptio Inc. / Vista Equity Partners Management, LLC 2018 7.0x
Cambium Learning Group, Inc. / Veritas Capital Fund
Management, L.L.C.
2018 4.2x
Cloudera, Inc. / Clayton Dubilier & Rice, LLC;
Kohlberg Kravis Roberts & Co. L.P. 2021 5.3x
Ellie Mae Inc. / Thoma Bravo LP 2019 6.8x
Forescout Technologies, Inc. / Advent International
Corporation; Crosspoint Capital Partners
2020 4.9x
Imperva Inc. / Thoma Bravo LP 2018 4.7x
Instructure Inc. / Thoma Bravo LP 2019 6.6x
LogMeIn, Inc. / Francisco Partners; Evergreen Coast
Capital Corp.
2019 3.4x
Medallia / Thoma Bravo, LLC 2021 10.8x
McAfee Corp. / Advent International Corporation;
Permira Advisers LLC; Crosspoint Capital Partners LP 2021 7.3x
MINDBODY, Inc. / Vista Equity Partners Management, LLC 2018 6.8x
Pluralsight, Inc. / Vista Equity Partners Management,
LLC
2020 7.8x
Proofpoint, Inc. / Thoma Bravo LP 2021 9.3x
QAD Inc. / Thoma Bravo LP 2021 5.3x
RealPage, Inc. / Thoma Bravo LP 2020 8.2x
Sophos Ltd. / Thoma Bravo LP 2019 5.1x
Talend S.A. / Thoma Bravo LP 2021 7.3x
Ultimate Software / Hellman & Friedman LLC 2019 8.2x
Important Additional Information and Where to Find It
In connection with the proposed transaction between SailPoint and Thoma Bravo,
SailPoint filed with the SEC the Definitive Proxy Statement, a copy of which has
been or will be sent or provided to SailPoint stockholders. SailPoint may also
file other documents with the SEC regarding the proposed transaction. Other than
to the extent specifically provided herein, this document is not a substitute
for the Definitive Proxy Statement or any other document which SailPoint filed
or may file with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR
WILL BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE
DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS.
Investors and security holders may obtain free copies of the Definitive Proxy
Statement and other documents that are filed or will be filed with the SEC by
SailPoint through the website maintained by the SEC at www.sec.gov, SailPoint's
investor relations website at https://investors.sailpoint.com/ or by contacting
the SailPoint investor relations department at the following:
investor@sailpoint.com
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Participants in the Solicitation
SailPoint and certain of its directors and executive officers may be deemed to
be participants in the solicitation of proxies in respect of the proposed
transaction. Information regarding SailPoint's directors and executive officers,
including a description of their direct interests, by security holdings or
otherwise, is contained in SailPoint's proxy statement for its 2022 annual
meeting of stockholders, which was filed with the SEC on March 18, 2022.
SailPoint stockholders may obtain additional information regarding the direct
and indirect interests of the participants in the solicitation of proxies in
connection with the proposed transaction, including the interests of SailPoint
directors and executive officers in the transaction, which may be different than
those of SailPoint stockholders generally, by reading the Definitive Proxy
Statement and any other relevant documents that are filed or will be filed with
the SEC relating to the proposed transaction. You may obtain free copies of
these documents using the sources indicated above.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains "forward-looking statements" within the
meaning of the federal securities laws, including Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Exchange Act. These
forward-looking statements are based on SailPoint's current expectations,
estimates and projections about the expected date of closing of the proposed
transaction and the potential benefits thereof, its business and industry,
management's beliefs and certain assumptions made by SailPoint and Thoma Bravo,
all of which are subject to change. In this context, forward-looking statements
often address expected future business and financial performance and financial
condition, and often contain words such as "expect," "anticipate," "intend,"
"plan," "believe," "could," "seek," "see," "will," "may," "would," "might,"
"potentially," "estimate," "continue," "expect," "target," similar expressions
or the negatives of these words or other comparable terminology that convey
uncertainty of future events or outcomes. All forward-looking statements by
their nature address matters that involve risks and uncertainties, many of which
are beyond our control, and are not guarantees of future results, such as
statements about the consummation of the proposed transaction and the
anticipated benefits thereof. These and other forward-looking statements,
including the failure to consummate the proposed transaction or to make or take
any filing or other action required to consummate the transaction on a timely
matter or at all, are not guarantees of future results and are subject to risks,
uncertainties and assumptions that could cause actual results to differ
materially from those expressed in any forward-looking statements. Accordingly,
there are or will be important factors that could cause actual results to differ
materially from those indicated in such statements and, therefore, you should
not place undue reliance on any such statements and caution must be exercised in
relying on forward-looking statements. Important risk factors that may cause
such a difference include, but are not limited to: (i) the completion of the
proposed transaction on anticipated terms and timing, including obtaining
shareholder and regulatory approvals, anticipated tax treatment, unforeseen
liabilities, future capital expenditures, revenues, expenses, earnings,
synergies, economic performance, indebtedness, financial condition, losses,
future prospects, business and management strategies for the management,
expansion and growth of SailPoint's business and other conditions to the
completion of the transaction; (ii) the impact of the COVID-19 pandemic on
SailPoint's business and general economic conditions; (iii) SailPoint's ability
to implement its business strategy; (iv) significant transaction costs
associated with the proposed transaction; (v) potential litigation relating to
the proposed transaction; (vi) the risk that disruptions from the proposed
transaction will harm SailPoint's business, including current plans and
operations; (vii) the ability of SailPoint to retain and hire key personnel;
(viii) potential adverse reactions or changes to business relationships
resulting from the announcement or completion of the proposed transaction;
(ix) legislative, regulatory and economic developments affecting SailPoint's
business; (x) general economic and market developments and conditions; (xi) the
evolving legal, regulatory and tax regimes under which SailPoint operates;
(xii) potential business uncertainty, including changes to existing business
relationships, during the pendency of the merger that could affect SailPoint's
financial performance; (xiii) restrictions during the pendency of the proposed
transaction that may impact SailPoint's ability to pursue certain business
opportunities or strategic transactions; and (xiv) unpredictability and severity
of catastrophic events, including, but not limited to, acts of terrorism or
outbreak of war or hostilities, as well as SailPoint's response to any of the
aforementioned factors. These risks, as well as other risks associated with the
proposed transaction, are more fully discussed in the Definitive Proxy Statement
filed with the SEC in connection with the proposed transaction. While the list
of factors presented here and the list of factors
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presented in the Definitive Proxy Statement are considered representative, no
such list should be considered to be a complete statement of all potential risks
and uncertainties. Unlisted factors may present significant additional obstacles
to the realization of forward looking statements. Consequences of material
differences in results as compared with those anticipated in the forward-looking
statements could include, among other things, business disruption, operational
problems, financial loss, legal liability to third parties and similar risks,
any of which could have a material adverse effect on SailPoint's financial
condition, results of operations, or liquidity. SailPoint does not assume any
obligation to publicly provide revisions or updates to any forward-looking
statements, whether as a result of new information, future developments or
otherwise, should circumstances change, except as otherwise required by
securities and other applicable laws.
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