Item 8.01. Other Events.
Litigation Related to the Merger
On August 8, 2022, subsequent to the announcement of the merger by and between
Unity Software Inc. ("Unity"), Ursa Aroma Merger Subsidiary Ltd., a direct
wholly owned subsidiary of Unity ("Merger Sub"), and ironSource Ltd.
("ironSource"), whereby Merger Sub will merge with and into ironSource (the
"Merger"), with ironSource continuing in existence as the surviving corporation
and a direct wholly owned subsidiary of Unity, a putative class action
complaint, captioned Assad v. Botha et al., Case No. 2022-0691, was filed in the
Delaware Court of Chancery against Unity and the Unity board of directors (the
"Unity board"). On September 9, 2022, the plaintiff filed an amended complaint.
The complaint alleges that the Unity board breached its fiduciary duties by
failing to disclose all material information necessary to allow Unity
stockholders to make a fully informed decision on whether to approve the
issuance of new shares of Unity common stock (the "Unity issuance proposal") as
a part of Unity's definitive joint proxy statement/prospectus filed with the
Securities and Exchange Commission (the "SEC") on September 8, 2022 (the
"Definitive Joint Proxy Statement/Prospectus"). The plaintiff is a purported
Unity stockholder and seeks to represent a class of Unity stockholders who will
vote in connection with the Unity issuance proposal. The complaint seeks
additional disclosure and an award of attorneys' fees, among other remedies.
The results of complex legal proceedings are difficult to predict, and these
matters could delay or prevent the Merger from becoming effective in a timely
manner. Although the ultimate outcome of this matter cannot be predicted with
certainty, Unity believes that the claims asserted against Unity and its
directors are without merit. Unity intends to defend against this action
vigorously.
Unity does not believe any supplemental disclosures are required or necessary
under applicable laws or that any information contained herein is material.
However, solely to moot the unmeritorious disclosure claims and minimize the
risk, costs, burden, nuisance and uncertainties inherent in litigation, and
without admitting any liability or wrongdoing, Unity has determined to
voluntarily supplement the Definitive Joint Proxy Statement/Prospectus as
described in this Current Report on Form 8-K (this "Form 8-K"). Nothing in this
Form 8-K shall be deemed an admission of the legal necessity or materiality
under applicable laws of any of the disclosures set forth herein. To the
contrary, Unity specifically denies all allegations made in the complaint that
any additional disclosure was or is required. Unity believes that the Definitive
Joint Proxy Statement/Prospectus disclosed all material information required to
be disclosed therein, and denies that the supplemental disclosures are material
or are otherwise required to be disclosed. Nothing in the supplemental
disclosures should be deemed an admission of the legal necessity or materiality
of any supplemental disclosures under applicable laws.
Supplemental Disclosures
The following disclosures should be read in conjunction with the Definitive
Joint Proxy Statement/Prospectus, which should be read in its entirety. To the
extent that information herein differs from or updates information contained in
the Definitive Joint Proxy Statement/Prospectus, the information contained
herein supersedes the information contained in the Definitive Joint Proxy
Statement/Prospectus. Capitalized terms used herein but not otherwise defined
herein shall have the meanings set forth in the Definitive Joint Proxy
Statement/Prospectus, unless otherwise defined below. All page references in the
information below are to the Definitive Joint Proxy Statement/Prospectus. New
text is underlined and deleted text is stricken through.
The following disclosure amends and restates the seventh paragraph appearing on
Page 92 of the Definitive Joint Proxy Statement/Prospectus in its entirety.
On the same day, the Unity Finance Committee held a meeting with representatives
of Unity's management team, Morgan Stanley, Morrison Foerster, and Cooley to
discuss updates with respect to the PIPE Transaction, including, among other
things, pricing considerations and strategic rationale. As a part of the
meeting, Morgan Stanley reviewed certain financial analyses regarding the PIPE
Transaction in comparison to other PIPE transactions and alternatives to the
PIPE Transaction, including with respect to the cost of capital of the PIPE
Transaction in multiple scenarios, and considerations around the proposed stock
buyback and potential consequences of the PIPE Transaction and stock buyback.
Morgan Stanley's review assigned a theoretical valuation to the PIPE Transaction
of 111% of par and identified comparable sponsor PIPE transactions
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ranging from 94% to 154% of par (with a median of 115% of par). Morgan Stanley
indicated that publicly marketed convertible notes price on average at a
theoretical value of approximately 102%, but noted that the public financing
markets were unavailable to Unity at the time due to the requirement to prepare
pro forma financials and the structure of the transaction, which precluded use
of publicly marketed convertible debt, and further noted the risk of further
market deterioration and that it would not have signaling value like the PIPE
Transaction which signaled large investors' support for the Merger.
The following disclosure amends and restates the second and third paragraphs
appearing on Page 94 of the Definitive Joint Proxy Statement/Prospectus in their
entirety.
On July 12, 2022, Unity entered into a formal written agreement with Goldman
Sachs to provide financial advice to Unity in connection with the potential
acquisition of ironSource, effective as of June 16, 2022. Pursuant to the
written agreement, Unity agreed to pay Goldman Sachs $2.0 million upon
consummation of the potential transaction with ironSource. In addition on
July 12, 2022, Goldman Sachs informed the Unity board regarding the investment
banking services it had provided to and the amount of fees received from
ironSource and affiliates of Silver Lake and Sequioa that, in the two years
prior to July 12, 2022., it had provided financial advisory and underwriting
services to and recognized compensation from ironSource and its affiliates (less
than $15 million); Silver Lake and its affiliates and portfolio companies (less
than $200 million); Sequoia and its affiliates and portfolio companies (less
than $100 million ); and the CVC Capital Partners network and CVC funds
portfolio companies.
On July 12, 2022, the Unity Finance Committee held a meeting by video
conference, together with representatives of Unity's management team, Morgan
Stanley, Morrison Foerster, and Cooley. Representatives of Morrison Foerster
reminded the Unity Finance Committee of their fiduciary duties and described the
legal terms of the PIPE Transaction. Prior to the meeting, Morgan Stanley
informed the Unity Finance Committee and the Unity board regarding the financial
advisory and financing services it had provided to and the amount of fees
received from affiliates of Silver Lake and its affiliates ($10 million-$25
million), Sequoia and its affiliates (none), and the CVC Capital Partners
network and CVC funds portfolio companies in the two years prior to July 12,
2022. Morgan Stanley also indicated that it was currently mandated on financial
advisory and financing assignments for the CVC Capital Partners network and CVC
funds portfolio companies and Silver Lake (including affiliates) that were
unrelated to the proposed merger with ironSource for which it expected to be
paid customary fees if the transactions were completed. On August 12, 2022,
Morgan Stanley informed the Unity board of an additional assignment for Sequoia
(including affiliates), which also was unrelated to the proposed merger with
ironSource and for which it expected to be paid customary fees if completed.
The following disclosure amends and restates the paragraph under the subheading
"Litigation Relating to the Merger" appearing on Page 136 of the Definitive
Joint Proxy Statement/Prospectus in its entirety.
Subsequent to the announcement of the merger, on August 8, 2022, a putative
class action complaint, captioned Assad v. Botha et al., Case No. 2022-0691, was
filed in the Delaware Court of Chancery against Unity and the Unity board. The
complaint alleges that the Unity board breached its fiduciary duties by failing
to disclose all material information necessary to allow Unity stockholders to
make a fully informed decision on whether to approve the issuance of new shares
of Unity common stock as a part of Unity's preliminary joint proxy
statement/prospectus on Form S-4 filed in connection with the merger. The
plaintiff is a purported Unity stockholder and seeks to represent a class of
Unity stockholders who will vote in connection with the Unity issuance proposal.
The complaint seeks additional disclosure and an award of attorneys' fees, among
other remedies. Unity believes this lawsuit is without merit and intends to
vigorously defend the case.
The results of complex legal proceedings are difficult to predict, and these
matters could delay or prevent the merger from becoming effective in a timely
manner. Although the ultimate outcome of this matter cannot be predicted with
certainty, Unity believes that the claims asserted against Unity and its
directors are without merit. Unity intends to defend against this action
vigorously.
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Cautionary Statement Regarding Forward-Looking Statements
This communication includes forward-looking statements. These forward-looking
statements generally can be identified by phrases such as "will," "expects,"
"anticipates," "foresees," "forecasts," "estimates" or other words or phrases of
similar import. These statements are based on current expectations, estimates
and projections about the industry and markets in which Unity and ironSource
operate and management's beliefs and assumptions as to the timing and outcome of
future events, including the transactions described in this communication. While
Unity's and ironSource's management believe the assumptions underlying the
forward-looking statements are reasonable, such information is necessarily
subject to uncertainties and may involve certain risks, many of which are
difficult to predict and are beyond management's control. These risks and
uncertainties include, but are not limited to the expected timing and likelihood
of completion of the proposed transaction, including the timing, receipt and
terms and conditions of any required governmental and regulatory approvals of
the proposed transaction; the occurrence of any event, change or other
circumstances that could give rise to the termination of that certain Agreement
and Plan of Merger, dated as of July 13, 2022 (the "Merger Agreement"), by and
between Unity, Merger Sub and ironSource; the outcome of any legal proceedings
that may be instituted against the parties and others following announcement of
the Merger Agreement; the inability to consummate the transaction due to the
failure to satisfy other conditions to completion of the transaction; risks that
the proposed transaction disrupts current plans and operations of Unity and
ironSource; the ability to recognize the anticipated benefits of the
transaction, including anticipated synergies; the amount of the costs, fees,
expenses and charges related to the transaction; Unity's expected stock buyback
occurring as planned or at all; and the other risks and important factors
contained and identified in Unity's and ironSource's filings with the SEC, such
as Unity's Annual Report on Form 10-K for the fiscal year ended December 31,
2021 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, and ironSource's Annual Report on Form 20-F for the fiscal year ended
December 31, 2021 and subsequent Current Reports on Form 6-K, any of which could
cause actual results to differ materially from the forward-looking statements in
this communication.
There can be no assurance that the proposed transaction will in fact be
consummated. We caution investors not to unduly rely on any forward-looking
statements. The forward-looking statements speak only as of the date of this
communication. Neither Unity nor ironSource is under any duty to update any of
these forward-looking statements after the date of this communication, nor to
conform prior statements to actual results or revised expectations, and neither
Unity nor ironSource intends to do so.
Important Information for Investors and Stockholders
In connection with the proposed transaction, Unity has filed with the SEC a
registration statement on Form S-4 (File No. 333-266418) (the "Registration
Statement") that was declared effective by the SEC on September 8, 2022. The
Registration Statement includes a joint proxy statement of Unity and ironSource
that also constitutes a prospectus of Unity, which joint proxy
statement/prospectus was mailed or otherwise disseminated to Unity's and
ironSource's respective shareholders, as applicable. Unity and ironSource also
plan to file other relevant documents with the SEC regarding the proposed
transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS,
THE SUPPLEMENTAL DISCLOSURE PROVIDED IN THIS CURRENT REPORT ON FORM 8-K AND
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE
CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and shareholders may obtain free copies of the
registration statement and the joint proxy statement/prospectus and other
relevant documents filed by Unity and ironSource with the SEC at the SEC's
website at www.sec.gov. Copies of the documents filed by the companies will be
available free of charge on their respective websites at www.unity.com and
www.is.com.
Participants in Solicitation
Unity, ironSource and their respective directors and executive officers may be
considered participants in the solicitation of proxies in connection with the
proposed transaction. Information about the directors and executive officers of
Unity is set forth in its proxy statement for its 2022 annual meeting of
stockholders, which was filed with the SEC on April 20, 2022. Information about
the directors and executive officers of ironSource is set forth in its Annual
Report on Form 20-F for the fiscal year ended December 31, 2021, which was filed
with the SEC on March 30, 2022.
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These documents can be obtained free of charge from the sources indicated above.
Additional information regarding the participants in the proxy solicitations and
a description of their direct and indirect interests, by security holdings or
otherwise, is contained in the joint proxy statement/prospectus and will be
contained in other relevant materials to be filed with the SEC when they become
available.
No Offer or Solicitation
This communication is not intended to and shall not constitute an offer to sell
or the solicitation of an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote of approval, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction. No offer of securities shall be made except by
means of a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
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