ADIA and GIC Help Fuel Buyout of Zendesk
Posted on 06/24/2022
Zendesk, Inc. (NYSE: ZEN) entered into a definitive agreement to be acquired by an investor group led by Permira and Hellman & Friedman LLC (H&F) in an all-cash transaction that values Zendesk at approximately US$ 10.2 billion. The private equity firms are getting Zendesk for a much cheaper price. In February 2022, Zendesk turned down around a US$ 17 billion buyout proposal from a group that included both Permira and Hellman & Friedman.
Under the terms of this agreement, Zendesk shareholders will receive US$ 77.50 per share. The offer represents a premium of approximately 34% over Zendesk’s closing stock price on June 23, 2022, the last full trading day prior to this announcement.
In addition to Hellman & Friedman and Permira, the investor group includes a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA), and Singapore’s GIC Private Limited. ADIA and GIC are frequent co-investors in U.S. tech buyout deals in recent years, according to data from the Sovereign Wealth Fund Institute (SWFI).
The transaction, which has been unanimously approved by Zendesk’s Board of Directors, is expected to close in the fourth quarter of this year and is subject to customary closing conditions, including Zendesk stockholder approval. Hellman & Friedman and Permira have arranged for debt and equity financing commitments for the purpose of financing the transaction. Upon closing of the transaction, Zendesk will operate as a privately-held company. In April 2022, Zendesk hired Qatalyst Partners to explore a sale.
JANA Partners
In June 2022, activist investor JANA Partners LLC announced that it intends to sue Zendesk for the company’s failure to set a date for its 2022 annual meeting under Delaware General Corporation Law Section 211, which grants shareholders a right of action if a company fails to hold an annual meeting within 13 months of the prior year’s meeting. Barry Rosenstein, Managing Partner of JANA, said in a press release on June 8, 2022, “Zendesk’s Board has inflicted significant damage on its shareholders and its incumbent directors must stop hiding from accountability. To protect against further value destruction, shareholders must be given the opportunity to vote on directors who will act in their best interests and restore desperately needed value and credibility.
In response to a June CNBC report, Rosenstein added, “If CNBC’s reporting is accurate, Zendesk shareholders should be furious. This report of a bungled sale process—following the Board’s rejection of real interest in the Company in February to instead pursue the ill-conceived acquisition of Momentive, which was subsequently shunned by more than 90% of Zendesk’s shareholders—would be the latest catastrophic example of the Board’s inability to properly oversee management and the Company. Zendesk’s stock price today hit a new 52-week low, illustrating that shareholders have lost confidence in the Company and further underscoring how desperately change is needed.”
On February 16, 2022, JANA Partners declared that absent the significant boardroom change at Zendesk, JANA had proposed to restore Zendesk’s credibility, JANA believes Zendesk must be sold.
Advisors
Qatalyst Partners and Goldman Sachs & Co. LLC are serving as financial advisors to Zendesk in connection with the proposed transaction. Wachtell, Lipton, Rosen & Katz is serving as Zendesk’s legal advisor.
Morgan Stanley & Co. LLC is serving as financial advisor to the investor group. Fried, Frank, Harris, Shriver & Jacobson LLP is serving as M&A counsel to the investor group and to Permira. Simpson Thacher & Bartlett LLP is serving as financing counsel to the investor group. Kirkland & Ellis LLP is serving as counsel to Hellman & Friedman.