Item 8.01. Other Events.
As previously disclosed, onJune 24, 2022 ,Zendesk, Inc. (the "Company" or "Zendesk") entered into an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement") withZoro BidCo, Inc. , aDelaware corporation ("Parent"), andZoro Merger Sub, Inc. , aDelaware corporation and a direct wholly owned subsidiary of Parent ("Merger Sub"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent. In connection with the proposed Merger,Zendesk filed with theU.S. Securities and Exchange Commission (the "SEC") a preliminary proxy statement onJuly 25, 2022 and a definitive proxy statement onAugust 8, 2022 (the "proxy statement"), whichZendesk first mailed to its stockholders on or aboutAugust 8, 2022 . Following the announcement of the Merger Agreement, as of the date of this Current Report on Form 8-K, nine lawsuits challenging the Merger have been filed (each, a "Lawsuit" and collectively, the "Lawsuits"). Five Lawsuits, captionedRyan O'Dell v.Zendesk, Inc. et al. (Case No. 1:22-cv-06418),Sarah Siah v.Zendesk, Inc. et al. (Case No. 1:22-cv-06611),Matthew Whitfield v.Zendesk, Inc. et al. (Case No. 1:22-cv-06631),Alex Ciccotelli v.Zendesk, Inc. et al. (Case No. 1:22-cv-06654) andCatherine Coffman v.Zendesk, Inc. et al. (Case No. 1:22-cv-07047), were filed in theUnited States District Court for the Southern District of New York ; two Lawsuits, captionedLiam Butler v.Zendesk, Inc. et al. (Case No. 3:22-cv-04414) andNoam Fruchter v.Zendesk, Inc. et al. (Case No. 3:22-cv-04610), were filed in theUnited States District Court for the Northern District of California ; one Lawsuit, captionedRichard Lawrence v.Zendesk, Inc. et al. (Case No. 1:22-cv-01089), was filed in theUnited States District Court for the District of Delaware ; and one Lawsuit, captionedJoel Zalvin v.Zendesk, Inc. et al. (Index No. 156806/2022), was filed in theSupreme Court of the State of New York in the County ofNew York . In addition,Zendesk received four demand letters from counsel representing individual stockholders ofZendesk (the "Demand Letters").Zendesk also received demand letters pursuant to Section 220 of the General Corporation Law of theState of Delaware seeking inspection of certainZendesk books and records from counsel representing individual stockholders ofZendesk (the "220 Demand Letters" and together with the Demand Letters and the Lawsuits, the "Matters"). The Matters allege, among other things, that the defendants filed or caused to be filed a materially false and misleading proxy statement with theSEC relating to the Merger in violation of Section 14(a) and Section 20(a) of theU.S. Securities Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder.Zendesk believes that the claims asserted in the Matters are without merit and supplemental disclosures are not required or necessary under applicable laws. However, in order to avoid the risk that the Matters delay or otherwise adversely affect the Merger, and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing,Zendesk has agreed to supplement the proxy statement as described in this Current Report on Form 8-K.Zendesk and the other named defendants deny that they have violated any laws or breached any duties toZendesk's stockholders. Nothing in this Current Report on 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,Zendesk specifically denies all allegations in the Matters that any additional disclosure was or is required.
Supplemental Disclosures to Proxy Statement in Connection with the Matters
The additional disclosures (the "supplemental disclosures") in this Current Report on Form 8-K supplement the disclosures contained in the proxy statement and should be read in conjunction with the disclosures contained in the proxy statement, which should be read in its entirety. To the extent that information set forth in the supplemental disclosures differs from or updates information contained in the proxy statement, the information in this Current Report on Form 8-K shall supersede or supplement the information contained in the proxy statement. All page references are to the proxy statement and terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the proxy statement.
1. The following bolded language is added to the last sentence of the third full
paragraph on page 30 of the proxy statement in the section entitled "Proposal
1: Adoption of the Merger Agreement-Background of the Merger":
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The non-disclosure agreements with nine of the potential counterparties (including and counting the members of the Consortium and their potential co-investors as one potential counterparty) included standstill provisions with don't-ask-don't-waive provisions, and none of the standstill provisions (including the don't-ask-don't-waive provisions) are currently in effect.
2. The following bolded language is added to the fourth paragraph on page 31 of
the proxy statement in the section entitled "Proposal 1: Adoption of the
Merger Agreement-Background of the Merger":
On or aroundApril 12, 2022 , a representative of the Consortium met withMikkel Svane , the CEO ofZendesk , to discuss the potential transaction between the Consortium andZendesk .Mr. Svane and the representative of the Consortium discussed the potential transaction at a high level, as well as the experience and track record of members of the Consortium in the industry.
3. The following bolded language is added to the sixth paragraph on page 33 of
the proxy statement in the section entitled "Proposal 1: Adoption of the
Merger Agreement-Background of the Merger":
Also onMay 11, 2022 , representatives of the Consortium andMr. Svane met to discuss, among other things,Zendesk's business and growth opportunities.Mr. Svane and the representatives also discussed the advantages and disadvantages of operatingZendesk as a public company and the current challenging market environment.
4. The following bolded language is added to the tenth paragraph on page 33 of
the proxy statement in the section entitled "Proposal 1: Adoption of the
Merger Agreement-Background of the Merger":
OnMay 16, 2022 , to address Bidder 2's concerns aroundZendesk's business momentum,Mr. Svane met with the CEO of Bidder 2 to discuss underlying trends drivingZendesk's then current business momentum and implications for the long-term financial prospects ofZendesk's business. Among other things,Mr. Svane and the CEO of Bidder 2 discussed the challenges facingZendesk in achieving its current operating plan as well as potential actions that might be taken to help improveZendesk's performance.
5. The following bolded language is added to the second-to-last paragraph on page
37 of the proxy statement in the section entitled "Proposal 1: Adoption of
the Merger Agreement-Background of the Merger":
Following receipt of theJune 17 Proposal and after consultation with members of the Board of Directors, representatives ofZendesk proposed a limited duration confidentiality agreement withJANA Partners to disclose toJANA Partners theJune 17 Proposal in the context of settlement discussions withJANA Partners .JANA Partners agreed to enter into a limited duration confidentiality agreement onJune 18, 2022 . No consideration was provided byZendesk toJANA Partners in connection with the confidentiality agreement.
6. The following bolded language is added to the second full paragraph on page 40
of the proxy statement in the section entitled "Proposal 1: Adoption of the
Merger Agreement-Background of the Merger":
Representatives ofWachtell Lipton then summarized the terms of the proposed merger agreement and financing documents compared to the terms previously reviewed, including a reverse termination fee of approximately 6% ofZendesk's equity value payable by the Consortium under certain circumstances, the regulatory approvals that would be required in connection with the transaction and the obligations of the parties in the proposed transaction documents related to such regulatory efforts. Representatives ofWachtell Lipton also provided a summary of a proposed retention equity award and severance program to promote the retention of certain key employees during the pendency of a transaction. Following discussion, the members of the Board of Directors and the compensation committee of the Board of Directors approved the proposed compensation arrangements. After discussion, the Board of Directors directed representatives ofWachtell Lipton to discuss withJANA Partners the potential imminent entry byZendesk into definitive agreements with respect to a sale ofZendesk and determine whetherJANA Partners would be prepared to enter into an agreement to withdraw its nominations. The Board of Directors recessed the meeting and representatives ofWachtell Lipton contacted counsel forJANA Partners , who expressedJANA Partners' willingness to agree, for no consideration, to withdraw its director nomination notice effective as of5:00 p.m. onJune 24, 2022 ifZendesk were to announce an agreement for a sale ofZendesk at the$77.50 per share cash price no later than the opening of market onJune 24, 2022 .
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7. The following bolded language is added to the third and fourth sub-bullets of
the first bullet on page 48 of the proxy statement in the section entitled
"Proposal 1: Adoption of the Merger Agreement-Opinion of
LP-Discounted Cash Flow Analysis":
• the cash and cash equivalents of
• the implied net present value of estimated federal tax savings due to its net
operating losses and research and development tax credits for calendar years
2028 and beyond, discounted to present value using the same range of discount
rates used in the first bullet above, which was between
million depending on the discount rate used; and
8. The following bolded language is added to the first sub-bullet of the second
bullet on page 48 of the proxy statement in the section entitled "Proposal 1:
Adoption of the Merger Agreement-Opinion of Qatalyst Partners LP-Discounted
Cash Flow Analysis":
• the face value of
as provided by
9. The following bolded column is added to the table on page 50 of the proxy
statement in the section entitled "Proposal 1: Adoption of the Merger
Agreement-Opinion of Qatalyst Partners LP-Selected Transactions Analysis":
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Fully Diluted LTM NTM Announcement Enterprise Revenue Revenue Date Target Acquiror Value ($B) Multiple Multiple 12/01/20 Slack Technologies, Inc. Salesforce, Inc.$28.8 37.4x 29.0x 03/20/18 MuleSoft, Inc. Salesforce, Inc.$6.5 21.8x 15.7x 04/11/22 SailPoint Technologies Holdings, Inc. Thoma Bravo, L.P.$6.9 15.7x 13.3x 06/06/22 Anaplan, Inc. Thoma Bravo, L.P.$10.1 16.0x 12.8x* 10/15/18 SendGrid, Inc. Twilio Inc.$1.8 14.3x 11.5x 06/10/19 Tableau Software, Inc. Salesforce, Inc.$15.7 13.2x 10.9x 07/26/21 Medallia, Inc. Thoma Bravo, L.P.$6.4 13.0x 10.8x 09/18/14 Concur Technologies, Inc. SAP SE$8.3 12.6x 10.2x 04/26/21 Proofpoint, Inc. Thoma Bravo, L.P.$11.3 10.8x 9.4x 10/28/18 Red Hat, Inc. International Business Machines Corporation$33.6 10.8x 9.3x 07/28/16 NetSuite Inc. Oracle Corporation$9.4 11.8x 9.1x 06/01/16 Demandware, Inc. Salesforce, Inc.$2.8 11.2x 8.9x 08/19/21 Inovalon Holdings, Inc. Nordic Capital Limited$7.2 10.0x 8.8x 12/07/21 Mimecast Limited Permira Holdings Limited$5.5 10.0x 8.8x 12/03/11 SuccessFactors, Inc. SAP SE$3.5 10.9x 8.7x 03/08/21 Pluralsight, Inc. Vista Equity Partners Management, LLC$3.8 9.8x 8.4x
04/11/22 Datto Holding Corp. Kaseya Inc. & Insight Partners, LLC$6.0 9.7x 8.3x 01/29/18 Callidus Software Inc. SAP SE$2.4 9.8x 8.3x 12/21/20 RealPage, Inc. Thoma Bravo, L.P.$10.2 9.1x 8.2x 12/17/17 Aconex Limited Oracle Corporation$1.2 9.4x 8.1x 05/22/12 Ariba, Inc. SAP SE$4.4 8.8x 7.8x 06/12/19 Medidata Solutions, Inc. Dassault Systèmes SE$5.8 8.8x 7.5x 03/10/21 Talend S.A. Thoma Bravo, L.P.$2.4 8.5x 7.4x 11/11/18 Apptio Inc. Vista Equity Partners Management, LLC$1.8 8.1x 7.0x 12/20/13 Responsys, Inc. Oracle Corporation$1.6 8.1x 6.9x 12/24/18 MINDBODY, Inc. Vista Equity Partners Management, LLC$1.9 7.8x 6.7x 04/18/16 Cvent, Inc. Vista Equity Partners Management, LLC$1.5 8.0x 6.5x 06/04/13 ExactTarget, Inc. Salesforce, Inc.$2.6 7.9x 6.5x 12/04/19 Instructure Holdings, Inc. Thoma Bravo, L.P.$1.9 7.7x 6.5x 08/01/16 Fleetmatics Group PLC Verizon Communications, Inc.$2.4 7.6x 6.3x 10/24/11 RightNow Technologies, Inc. Oracle Corporation$1.6 7.4x 6.2x 05/31/16 Marketo, Inc. Vista Equity Partners Management, LLC$1.7 7.5x 5.9x 02/09/12 Taleo Corporation Oracle Corporation$1.9 6.3x 5.3x 10/23/17 BroadSoft, Inc. Cisco Systems, Inc.$1.9 5.3x 4.6x 06/15/15 DealerTrack Technologies, Inc. Cox Automotive, Inc.$4.6 4.9x 4.1x 05/18/16 inContact, Inc. NICE Ltd.$1.0 4.2x 3.6x 08/27/12 Kenexa Corporation International
07/01/11 Blackboard Inc.Providence Equity Partners L.L.C. $1.8 3.7x 3.2x 11/02/15 Constant Contact, Inc. Endurance
* Based on the total consideration payable byThoma Bravo ,
L.P. for
10. The following bolded language is added to, and the bolded, crossed-out
language is deleted from, pages 54 and 55 of the proxy statement in the
section entitled "Proposal 1: Adoption of the Merger Agreement-Opinion of
Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis ofZendesk . Using a mid-year discounting convention and discount rates ranging from 10.0% to 12.0%, reflecting estimates ofZendesk's weighted average cost of capital, Goldman Sachs discounted to present value as ofMarch 31, 2022 (a) estimates of the unlevered free cash flows (excluding the impact of net operating losses), which are referred to as ''UFCF,'' for the second, third and fourth quarters of fiscal year 2022 and fiscal years 2023 through 2030 as reflected in the Forecasts, and (b) a range of illustrative terminal values forZendesk , which were calculated by applying exit terminal year, next twelve months', which we refer to as ''NTM,'' UFCF multiples ranging from 20.0x to 32.5x, to a terminal year NTM UFCF of$980 million , to be generated byZendesk , as reflected in the Forecasts (which analysis implied perpetuity growth rates ranging from 5.0% to 8.9%). Goldman Sachs derived the discount rates referenced above by application of the Capital Asset Pricing Model, which is referred to as "CAPM," which requires certain company-specific inputs, includingZendesk's target capital structure weightings, the cost of long-term debt, future applicable marginal cash tax rate and a beta forZendesk , as well as certain financial metrics forthe United States financial markets generally. The illustrative terminal value to NTM UFCF multiple range forZendesk was derived by Goldman Sachs utilizing its professional judgment and experience, taking into account, among other things, enterprise value over NTM UFCF as ofJune 23, 2022 of certain publicly traded companies, as described below in the section of this proxy statement entitled "-Selected Public Company Comparables." -------------------------------------------------------------------------------- Goldman Sachs derived a range of illustrative enterprise values forZendesk by adding the ranges of present values it derived as described in the immediately preceding paragraph. Goldman Sachs then added to the range of illustrative enterprise values it derived forZendesk $307 million , the amount of net cash ofZendesk as ofMarch 31, 2022 , and the net present value of net operating losses as reflected in the Forecasts, in each case, as provided byZendesk management and approved for Goldman Sachs' use byZendesk management, to derive a range of illustrative equity values forZendesk . Goldman Sachs then divided the range of illustrative equity values it derived by the corresponding number of fully diluted outstanding shares ofZendesk common stock, calculated using the treasury stock method, the range of which was 131 million to 132 million, as provided byZendesk management and approved for Goldman Sachs' use byZendesk management, calculated using the treasury stock method, to derive a range of illustrative present values per share ofZendesk common stock ranging from$66 to$116 , rounded to the nearest dollar.
11. The following bolded language is added to, and the bolded, crossed-out
language is deleted from, the second full paragraph on page 55 in the section
entitled "Proposal 1: Adoption of the Merger Agreement-Opinion of Goldman
Sachs & Co. LLC-Illustrative Present Value of Future Share Price":
Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per share ofZendesk common stock. For this analysis, Goldman Sachs used the Forecasts for each of the fiscal years 2022 through 2025. Goldman Sachs first calculated the implied enterprise value per share ofZendesk common stock as ofDecember 31 , for each of the fiscal years 2022 through 2024, by applying multiples of enterprise value to NTM revenue, which we refer to as "EV/NTM revenue" in this section of this proxy statement, of 4.5x to 8.0x to estimates ofZendesk's revenue for each of the fiscal years 2023 to 2025. These illustrative EV/NTM revenue multiple estimates were derived by Goldman Sachs utilizing its professional judgment and experience, taking into account current and historical EV/NTM revenue multiples forZendesk during the six-month, one-year, three-year and five-year periods endingJune 23, 2022 , as described below in the section of this proxy statement entitled ''-Historical EV/NTM Trading Multiples.'' Goldman Sachs then added the amount ofZendesk's forecasted net cash of$457 million ,$693 million and$1,022 million as ofDecember 31 for each of the fiscal years 2022 to, 2023 and 2024, respectively, each as provided byZendesk management, from the respective implied enterprise values in order to derive a range of illustrative equity values forZendesk . Goldman Sachs then divided the results by the number of projected year-end fully diluted outstanding shares ofZendesk common stock for each of the fiscal years 2022 to 2024, calculated based on estimated annual dilution and 131 million, the number of fully diluted shares ofZendesk common stock estimated to be outstanding as ofJune 22, 2022 , calculated using the treasury stock method, each as provided and approved byZendesk management. Goldman Sachs then discounted the implied per share future equity values for the twelve-month periods ending onDecember 31, 2022 ,December 31, 2023 andDecember 31, 2024 , respectively, back toMarch 31, 2022 , using an illustrative discount rate of 10.9%, reflecting an estimate ofZendesk's cost of equity. Goldman Sachs derived such discount rate by application of CAPM, which requires certain company-specific inputs, including a beta for the company as well as certain financial metrics forthe United States financial markets generally. This analysis resulted in a range of implied present values per share ofZendesk common stock of$64 to$124 , rounded to the nearest dollar.
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12. The following bolded column is added to the table on page 56 of the proxy
statement in the section entitled "Proposal 1: Adoption of the Merger
Agreement-Opinion ofGoldman Sachs & Co. LLC-Selected Precedent Transactions Analysis": Enterprise Value Announcement EV/NTM (in Date Target Acquiror Revenue billions)
Apr 2022 SailPoint Technologies Thoma Bravo, L.P. 13.3x$7 Holdings, Inc. Mar 2022 Anaplan, Inc. Thoma Bravo, L.P. 13.9x*$10 Jul 2021 Medallia, Inc. Thoma Bravo, L.P. 10.8x$6 Apr 2021 Nuance Communications, Microsoft Corporation 14.2x$20 Inc. Dec 2020 Slack Technologies, Inc. Salesforce.com, inc. 29.2x$28 Jun 2019 Tableau Software, Inc. Salesforce.com, inc. 11.0x$16 Feb 2019 The Ultimate Software Hellman & Friedman LLC 8.3x$11 Group, Inc. Dec 2018 MINDBODY, Inc. Vista Equity Partners 6.7x$2 Management, LLC Nov 2018 Qualtrics International SAP SE 15.0x$8 Inc. Nov 2018 Apptio, Inc. Vista Equity Partners 7.1x$2 Management, LLC Oct 2018 SendGrid, Inc. Twilio Inc. 11.5x$2 Oct 2018 Red Hat, Inc. International Business 9.4x$34 Machines Corporation Oct 2018 Hortonworks, Inc. Cloudera, Inc. 5.3x$2 Jun 2018 Adaptive Insights, Inc. Workday, Inc. 10.9x$2 Mar 2018 MuleSoft, Inc. Salesforce.com, inc. 15.7x$6 Jan 2018 Callidus Software Inc. SAP SE 8.3x$2 Jul 2016 NetSuite Inc. Oracle Corporation 9.2x$9 Jun 2016 Demandware, Inc. Salesforce.com, inc. 8.9x$3 Jun 2016LinkedIn Corporation Microsoft Corporation 6.8x$26 May 2016 Marketo, Inc. Vista Equity Partners 5.9x$2 Management, LLC Apr 2016 Textura Corporation Oracle Corporation 6.1x$1 Median 9.4x N/A 25th Percentile 7.0x 75th Percentile 13.6x
13. The following bolded language is added to the first sentence of the first
full paragraph on page 57 in the section entitled "Proposal 1: Adoption of
the Merger Agreement-Opinion ofGoldman Sachs & Co. LLC-Precedent M&A Premia": Goldman Sachs reviewed and analyzed, using publicly available information, the acquisition premia for 19 all-cash acquisition transactions announced during the time period fromApril 2016 throughJune 2022 involving a public company in the software industry as the target where the disclosed enterprise values for the transaction were greater than$1 billion .
14. The following bolded language is added to the last paragraph on page 60 in
the section entitled "Proposal 1: Adoption of the Merger Agreement-Opinion
of
Goldman Sachs has also provided certain financial advisory and/or underwriting services to Permira and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to Permira Advisers (UK ), an affiliate of Permira, with respect to its acquisition of a majority stake inGolden Goose inJune 2020 ; as joint bookrunner with respect to the initial public offering by Allegro.eu, a portfolio company of Permira, of 187,826,087 of its ordinary shares inSeptember 2020 and the public offering of 76,500,000 of its ordinary shares inMarch 2021 ; as lead left bookrunner with respect to the issuance byLowell Financial Ltd. , a portfolio company of Permira, of EUR/GBP high yield bonds (aggregate principal amount of £400,000,000 plus €1,340,000,000) inOctober 2020 ; as joint bookrunner with respect to the initial public offering by Dr. Martens plc, a portfolio company of Permira, of 350,000,000 of its ordinary shares inJanuary 2021 ; as bookrunner with respect to the sale by Permira of 12,000,000 shares of TeamViewer AG, a portfolio company of Permira, inFebruary 2021 ; as bookrunner with respect to the public offering byGolden Goose , a portfolio company of Permira, of its Senior Secured Notes due 2027 (aggregate principal amount of €480,000,000) inMay 2021 ; as bookrunner with respect to the initial public offering by Clearwater Analytics Holdings, Inc., a portfolio company of Permira, of 34,500,000 of its Class A common stock inSeptember 2021 ; as bookrunner with respect to the initial public . . .
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