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Thoma Bravo Buys Magnet Forensics For $1.3B
January 24, 2023
 Magnet
Forensics, developer of digital investigation solutions for more than
4,000 enterprises and public safety organizations, is pleased to
announce that it has entered into a definitive arrangement agreement
with Morpheus Purchaser, a newly created corporation controlled by Thoma
Bravo, a leading software investment firm, whereby the Purchaser will
acquire the Company, subject to obtaining shareholder and other
customary approvals (the “Transaction”). Under the terms of the
Arrangement Agreement, holders of the outstanding Subordinate Voting
Shares of the Company (other than Messrs. Jad Saliba and Adam Belsher
and associates and affiliates thereof (collectively with Mr. Jim
Balsillie and his associates and affiliates, the “Rolling
Shareholders”)) will receive CA$44.25 cash per SV Share (the “Purchase
Price”) and the Rolling Shareholders will receive CA$39.00 for each
outstanding SV Share and Multiple Voting Share of the Company they sell
for cash to the Purchaser, representing an aggregate total equity value
of approximately CA$1.8 billion on a fully-diluted, in-the-money,
treasury method basis and inclusive of Rollover Shares. Upon completion
of the Transaction, Magnet will become a privately held company.
The Purchase Price represents a premium of approximately 15% to the
closing price on the Toronto Stock Exchange of the SV Shares on January
19, 2023, the last trading day prior to the announcement of the
Transaction, and a premium of approximately 41% to the 90-trading day
volume weighted average trading price per SV Share as at that date. The
Purchase Price is also above the 52-week high closing price of the SV
Shares as of January 19, 2023, and represents a premium of approximately
160% to the Company’s initial public offering price of the SV Shares of
CA$17.00. This value further represents an 87% premium to the closing
price on October 5, 2022, the last day prior to Thoma Bravo’s submission
of its initial non-binding proposal for an acquisition of the Company.
Following the closing of the Transaction, Thoma Bravo intends to combine
the Company and Grayshift, which Thoma Bravo acquired majority control
of in July 2022. The companies’ complementary offerings are expected to
create a powerful end-to-end digital investigations platform empowering
more public safety agencies around the world to seek justice, solve
crimes, and protect victims. Grayshift is a leading provider of mobile
device digital forensics, specializing in lawful access and extraction.
By combining Grayshift’s mobile access and extraction capabilities with
the Company’s digital investigation suite, customers are expected to be
able to leverage the platform to extract, process, examine, collaborate
on and manage digital forensic evidence. Adam Belsher and Jad Saliba,
Founders of Magnet, and David Miles and Braden Thomas, Founders of
Grayshift, will each hold critical leadership positions in the combined
company. Magnet’s Chair, Jim Balsillie, will serve on the board of the
combined company.
“We believe the combination of Magnet and Grayshift will unlock
tremendous value for our customers by further integrating and expanding
our product suite which will result in more seamless workflows in the
recovery and analysis of critical digital evidence to investigations and
ultimately contribute to our shared mission of the pursuit of justice,”
said Adam Belsher, CEO of Magnet. “We look forward to partnering with
Thoma Bravo and Grayshift to build upon our digital investigation suite
to further innovate and continue to serve a growing number of
organizations and use cases. We are confident that this transaction —
joining two complementary organizations to form a new private company —
offers the most compelling value creation for all our stakeholders and
is a testament to the value of digital investigation solutions, the
Magnet platform, our talented team, and loyal customer base.”
“Since early in Grayshift’s history, Magnet Forensics has been a trusted
and strategic partner,” said David Miles, Co-Founder and Chief Executive
Officer of Grayshift. “Bringing Magnet and Grayshift together will
accelerate innovation and ultimately transform digital investigations.
Today's announcement is a defining moment in the industry, and together
we will accelerate the future of digital forensics.”
“We look forward to bringing together the complementary capabilities of
Magnet and Grayshift to create a leader in the digital forensics and
cyber security space,” said Hudson Smith, a Partner at Thoma Bravo.
“Digital evidence is an increasingly critical aspect of investigations
and the combined company will be well-positioned to further market
expansion, accelerate innovation, and provide even greater solutions to
its customers. We look forward to leveraging Thoma Bravo’s deep
industry, operational and investment expertise to help the combined
company capture the tremendous growth opportunities ahead.”
Transaction Details
The Company entered into the Arrangement Agreement based on the
unanimous approval of the Company’s board of directors (the “Board”)
(with conflicted directors abstaining) and the unanimous recommendation
of a committee of independent directors (the “Special Committee”), that
the Transaction is fair from a financial point of view to the holders of
the Shares (the “Shareholders”) (other than the Rolling Shareholders),
and is in the best interests of the Company. The Arrangement Agreement
was the result of a comprehensive negotiation process that was
undertaken at arm’s length with the oversight and participation of the
Special Committee advised by independent and highly qualified legal and
financial advisors. See “Unanimous Board Approval” below.
The Rolling Shareholders are effectively rolling over 55% of their
Shares (in the aggregate approximately 15.9 million MV Shares and
approximately 0.2 million SV Shares, collectively, the “Rollover
Shares”) at an implied value per Share equal to CA$39.00 per Share, such
that upon completion of the Transaction, they will be minority
shareholders of the Purchaser. The remaining Shares owned by the Rolling
Shareholders (in the aggregate approximately 13.0millionMV Shares and
approximately 0.2millionSV Shares) will be sold to the Purchaser for
cash at CA$39.00 per Share. The Rolling Shareholders, at the request of,
and after negotiations with, the Special Committee, agreed to accept
less per Share in order to benefit the holders of SV Shares.
As at the date hereof, the Rolling Shareholders own or control, directly
or indirectly, all of the issued and outstanding 28,903,303 MV Shares,
and Messrs Saliba and Belsher, together, own or control, directly or
indirectly, an aggregate of 368,522 SV Shares, representing
approximately 3.0% of the Company’s issued and outstanding SV Shares.
Unanimous Board Approval
 The
Board, with Messrs Saliba, Belsher and Balsillie declaring their
conflicts of interest and abstaining from voting, unanimously approved
the Arrangement Agreement following receipt of the unanimous
recommendation of the Special Committee, which was appointed by the
Board to, among other matters, review strategic alternatives for the
Company including the Transaction, consider the Company’s best interests
and the implications to shareholders and other stakeholders, and provide
the Board with advice and recommendations with respect to the
Transaction. As such, the Board unanimously, with the conflicted
directors abstaining from voting, recommends that holders of SV Shares
vote in favour of the Transaction. The Company intends to hold a special
meeting of Shareholders in March 2023 (the “Shareholders’ Meeting”),
where the Transaction will be considered and voted upon by Shareholders
of record. |
