Item 8.01. Other Events.
Litigation Related to the Transaction
On December 14, 2021, Casper Sleep Inc. ("Casper" or the "Company") filed a
Definitive Proxy Statement on Schedule 14A with the Securities and Exchange
Commission ("SEC") in connection with the Agreement and Plan of Merger (as it
may be amended from time to time, the "Merger Agreement") dated as of November
14, 2021, by and among Marlin Parent, Inc., a Delaware corporation ("Parent"),
Marlin Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Casper. Parent and Merger Sub are each subsidiaries
of Durational Consumer SPV IV, LP (the "Durational Vehicle"), an investment
vehicle managed by Durational Capital Management, LP ("Durational"), a
U.S.-based private equity firm. Pursuant to the terms of the Merger Agreement,
Merger Sub will merge with and into Casper and the separate corporate existence
of Merger Sub will cease, with Casper continuing as the surviving corporation
(the "Merger") and a wholly-owned subsidiary of Parent. The special meeting of
Casper stockholders (the "Special Meeting") will be held virtually on January
19, 2022, at 10:00 a.m. Eastern Time, to act on the proposal to adopt the Merger
Agreement, as disclosed in the Definitive Proxy Statement.
Between December 9 and December 28, 2021, eleven lawsuits were filed against
Casper and its directors: Agyekum v. Casper Sleep Inc., et al., 1:21-cv-10913 in
the United States District Court for the Southern District of New York;
Ciccotelli v. Casper Sleep Inc. et al., 2:21-cv-05612 in the United States
District Court for the Eastern District of Pennsylvania; Jones v. Casper Sleep
Inc. et al., 1:21-cv-11105 in the United States District Court for the Southern
District of New York; Justice v. Casper Sleep Inc., et al., 1:21-cv-01767 in the
United States District Court for the District of Delaware; Keel v. Casper Sleep
Inc., et al., 1:21-cv-10546 in the United States District Court for the
Southern District of New York; Lawrence v. Casper Sleep Inc., et al.,
1:21-cv-01805 in the United States District Court for the District of Delaware;
McPherson v. Casper Sleep Inc., et al., 1:21-cv-07107 in the United States
District Court for the Eastern District of New York; Munoz v. Casper Sleep Inc.,
et al., 1:21-cv-10881 in the United States District Court for the Southern
District of New York; O'Neill v. Casper Sleep Inc., et al., 1:21-cv-01803 in
the United States District Court for the District of Delaware; Robles v. Casper
Sleep Inc. et al., 1:21-cv-10547 in the United States District Court for the
Southern District of New York; and Schumacher v. Casper Sleep Inc., et al.,
1:21-cv-1772 in the United States District Court for the District of Delaware.
The complaints each allege that the Preliminary Proxy Statement filed on
December 3, 2021 and/or the Definitive Proxy Statement filed on December 14,
2021 omitted material information that rendered them false and misleading. As a
result of the alleged omissions, the lawsuits seek to hold Casper and its
directors liable for violating Section 14(a) of the Exchange Act and Rule 14a-9
promulgated thereunder, and additionally seek to hold Casper's directors liable
as control persons pursuant to Section 20(a) of the Exchange Act. Each
complaint seeks, among other relief, an injunction preventing the closing of the
merger, rescission of the merger agreement or any of its terms to the extent
already implemented or awarding of rescissory damages, damages, and an award of
attorneys' and experts' fees.
Casper believes that the lawsuits are without merit and that no supplemental
disclosures are required under applicable law. However, in order to avoid
nuisance, potential expense and delay from the lawsuits and to provide
additional information to the stockholders of Casper and without admitting any
liability or wrongdoing, Casper has determined to voluntarily supplement the
Definitive Proxy Statement with the disclosures set forth herein. Nothing in
this Current Report on Form 8-K shall be deemed an admission of the legal
necessity or materiality under applicable law of any of the disclosures set
forth herein. Casper specifically takes the position that no further disclosure
of any kind is required to supplement the Definitive Proxy Statement under
applicable law.
Supplement to Proxy Statement
The following supplemental disclosures should be reviewed in conjunction with
the disclosures in the Definitive Proxy Statement, which should be carefully
read in its entirety. To the extent information set forth herein differs from
or updates information contained in the Definitive Proxy Statement, the
information contained herein supersedes the information contained in the
Definitive Proxy Statement. Any defined terms used but not defined herein have
the meanings set forth in the Definitive Proxy Statement.
The below supplemental disclosure replaces the last paragraph on page 28 of the
Proxy and contained under the heading "Events Leading Up to the Merger
Agreement":
During the period beginning on September 10, 2021, and continuing until October
19, 2021, at the direction of the Board of Directors, representatives of
Jefferies contacted 25 potential counterparties, including 6 potential strategic
counterparties and 19 financial sponsors, including Durational, to solicit
interest in a potential acquisition of or debt or equity financing of Casper (a
"Potential Transaction"). Of these parties (i) 16 parties indicated to
representatives of Jefferies that they were not interested in a potential
transaction involving Casper following initial contact, and informed
representatives of Jefferies that they were not interested in pursuing a
transaction either because Casper was too small and did not present a perceived
attractive investment scenario or that they were not interested in pursuing a
transaction with Casper at that time, or they did not provide a reason for their
decision not to pursue a potential transaction, and (ii) 9 parties, including 2
financial sponsors ("Party A" and "Party B"), executed non-disclosure agreements
with Casper that included a "standstill" provision. Six of the non-disclosure
agreements contained language that the standstill provision would fall-away upon
the entry or public announcement of certain acquisition transactions. Three of
the non-disclosure agreements, including the agreement with Party A and one with
a financial sponsor that was executed on August 25, 2021, did not contain
fall-away provisions but allowed the potential financing-source counterparty to
approach the Board of Directors with a potential equity bid. Ultimately, none
of the 9 non-disclosure agreement counterparties submitted a proposal to acquire
Casper. At the direction of the Board of Directors, representatives of
Jefferies sent process letters to the 5 parties that had executed
confidentiality agreements with Casper and expressed continued interest
(including Party A and Party B but excluding Durational), inviting them to
submit non-binding proposals for a Potential Transaction by October 19, 2021.
The letters stated that all proposals should include an indication of the
purchase price, or the commitment amount the bidder would be prepared to pay or
provide for a Potential Transaction, to specify the bidder's proposed form of
consideration or commitment amount, key conditions and assumptions, proposed
financing sources, required approvals, anticipated timing, due diligence
requirements and proposed Potential Transaction structure.
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The below supplemental disclosure replaces the disclosure on page 43 of the
Definitive Proxy Statement under the heading "Discounted Cash Flow Analysis":
Jefferies performed a discounted cash flow analysis of Casper by calculating the
estimated present value of the stand-alone unlevered, after-tax free cash flows
that Casper was forecasted to generate during the calendar years ending December
31, 2022 through December 31, 2026 based on the Casper Forecasts. The terminal
values of Casper were calculated by applying a selected range of perpetuity
growth rates of 2% to 4% to Casper's estimated unlevered free cash flows for the
calendar year ending December 31, 2026 (including normalized levels of capital
expenditures, working capital and depreciation and amortization), based on the
Casper Forecasts. The present values of the unlevered free cash flows and
terminal values were then calculated using a selected discount rate range of
16.25% to 17.75%, based on an estimate of Casper's weighted average cost of
capital, to determine a range of implied enterprise values for Casper.
Jefferies then added the present value of Casper's net operating losses,
calculated using a discount rate of 19.0% based on an estimate of Casper's cost
of equity, and subtracted Casper's projected net debt as of December 31, 2021 of
$8 million (excluding any adjustment for extended payables), as provided by
Company management, to calculate a range of implied equity values, and divided
the result by the number of fully diluted Casper common stock shares outstanding
to calculate a range of implied per share equity values for Casper. This
analysis indicated a reference range of implied per share equity values of $5.00
to $6.70 per share, as compared to the Per Share Merger Consideration of $6.90
per share.
The below supplemental disclosure replaces the disclosure that begins with
"Selected Public Companies Analysis" on page 43 and ends with "Selected Public
Companies Analysis" on page 44 of the Definitive Proxy Statement:
Jefferies reviewed publicly available financial, stock market and operating
information of Casper and ten selected publicly traded companies in the
mattress, home furnishing, and e-commerce industries that Jefferies considered
generally relevant for purposes of its analysis, which are collectively referred
to as the "selected companies."
Jefferies reviewed, among other information and to the extent publicly
available, enterprise values of the selected companies, calculated as fully
diluted equity values based on closing stock prices on November 12, 2021, plus
total debt, preferred equity and non-controlling interests, minus cash and cash
equivalents, as a multiple of each such company's estimated earnings before
interest, taxes, depreciation and amortization, and excluding stock-based
compensation expense ("Adjusted EBITDA"), for the fiscal year 2023, which we
refer to as FY 2023E. Financial data of the selected companies were based on
publicly available research analysts' estimates, public filings and other
publicly available information.
The selected companies and the financial data reviewed included the following:
Selected Public Companies Analysis
Company Enterprise Value / FY 2023E EBITDA
Mattress
Purple Innovation, Inc. 8.7x
Sleep Number Corporation 6.9x
Tempur Sealy International, Inc. 8.2x
Home Furnishing
Ethan Allen Interiors, Inc. N/A
Kirkland's, Inc. N/A
RH (formerly Restoration Hardware, Inc.) 14.7x
Wayfair, Inc. 29.0x
Williams-Sonoma, Inc. 9.7x
e-Commerce
Blue Apron Holdings, Inc. NM
Made.com Group plc 14.2x
Note: "N/A" means not available. "NM" means not meaningful because the
multiple is less than 0.0x.
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The multiple ranges for the selected companies were as follows:
Participants in the Solicitation
Casper 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 Casper's directors and executive officers, including a
description of their direct interests, by security holdings or otherwise, is
contained in Casper's proxy statement for its 2021 annual meeting of
stockholders, which was filed with the SEC on April 27, 2021 and in the
Definitive Proxy Statement. Casper 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 Casper's directors and executive officers in the
transaction, which may be different than those of Casper 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 transaction. You may
obtain free copies of these documents using the sources indicated above.
Cautionary Statements Regarding Forward-Looking Information
This report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements are statements that
are not historical facts, and may relate to future events or the Company's
anticipated results, business strategies or capital requirements, among other
things, all of which involve risks and uncertainties. You can identify many (but
not all) such forward-looking statements by looking for words such as "assumes,"
"approximates," "believes," "expects," "anticipates," "estimates," "projects,"
"seeks," "intends," "plans," "could," "would," "may" or other similar
expressions. Important factors which could cause actual results to differ
materially from those in the forward-looking statements, include, but are not
limited to, risks related to the ability of the Company to consummate the
proposed transaction with Durational on a timely basis or at all, including: the
satisfaction of the conditions precedent to consummation of the proposed
transaction; the Company's ability to secure regulatory approvals on the terms
expected in a timely manner or at all; the risk of disruption from the
transaction making it more difficult to maintain business and operational
relationships; the risk of negative side effects of the announcement or the
consummation of the proposed transaction on the market price of the Company's
common stock or on the Company's operating results; significant transaction
costs; unknown liabilities; the risk of litigation and/or regulatory actions
related to the proposed transaction; and competitive factors, including
competitive responses to the transaction and changes in the competitive
environment, pricing changes and increased competition. Matters described in
forward-looking statements may also be affected by other known and unknown
risks, trends, uncertainties and factors, many of which are beyond the Company's
ability to control or predict.
Further information on these and other risk and uncertainties relating to the
Company can be found in its reports on Forms 10-K, 10-Q and 8-K and in other
filings the Company makes with the SEC from time to time and which are available
at www.sec.gov. These documents are available under the SEC filings heading of
the Investors section of the Company's website at https://ir.casper.com/.
The forward-looking statements included in this report are made only as of the
date hereof. The Company assumes no obligation and does not intend to update
these forward-looking statements, except as required by law.
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