Item 8.01 Other Events
On September 14, 2022, Zymergen Inc. ("Zymergen" or the "Company") filed a
Definitive Proxy Statement on Schedule 14A (the "Definitive Proxy Statement")
with the Securities and Exchange Commission ("SEC") in connection with the
Agreement and Plan of Merger, dated July 24, 2022 (as it may be amended from
time to time, the "Merger Agreement"), by and among Ginkgo Bioworks Holdings,
Inc., a Delaware corporation ("Parent"), and Pepper Merger Subsidiary Inc., a
Delaware corporation and indirect wholly owned subsidiary of Parent ("Merger
Sub"). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with
and into Zymergen and the separate corporate existence of Merger Sub will cease,
with Zymergen surviving as an indirect wholly owned subsidiary of Ginkgo (the
"Merger"). The special meeting of Zymergen stockholders (the "Special Meeting")
will be held virtually on October 17, 2022 at 11:00 a.m. Pacific Daylight Time,
to vote on the proposal to adopt the Merger Agreement, as disclosed in the
Definitive Proxy Statement.
In addition, between September 8, 2022 and October 2, 2022, five lawsuits were
filed against Zymergen and its directors: Kunz v. Zymergen Inc., et al.,
3:22-cv-0599 in the United States District Court for the Northern District of
California; Bushansky v. Zymergen Inc., et al., 4:22-cv-05222 in the United
States District Court for the Northern District of California; Dixon v. Zymergen
Inc., et al., 1:22-cv-01278 in the United States District Court for the District
of Delaware; Ballard v. Zymergen Inc., et al., 1:22-cv-08283 in the United
States District Court for the Southern District of New York; and Riley v.
Zymergen Inc., et al., 1:22-cv-08410 in the United States District Court for the
Southern District of New York.
The complaints each allege that the Definitive Proxy Statement filed on
September 14, 2022, omitted material information that rendered it false and
misleading. As a result of the alleged omissions, the lawsuits seek to hold
Zymergen and its directors liable for violating Section 14(a) of the Exchange
Act and Rule 14a-9 promulgated thereunder, and additionally seek to hold
Zymergen's directors liable as control persons pursuant to Section 20(a) of the
Exchange Act. Each complaint seeks, among other relief, supplemental disclosures
or 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. In
addition, Zymergen received seven substantially similar shareholder demands
seeking similar supplemental disclosures.
Zymergen's management believes that the lawsuits and demands 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 Zymergen and without
admitting any liability or wrongdoing, Zymergen has determined to voluntarily
supplement the Definitive Proxy Statement with the disclosures set forth herein
in the section entitled Supplement to the Definitive Proxy Statement. 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. Zymergen specifically takes the position that no further
disclosure of any kind is required to supplement the Definitive Proxy Statement
under applicable law.
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Supplement to the Definitive 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. Paragraph and page references used
herein refer to the Definitive Proxy Statement before any additions or deletions
resulting from the supplemental disclosures. The below updated disclosures are
with respect to the litigation and demands related to the Merger.
The disclosure on page 98 of the Definitive Proxy Statement is hereby
supplemented by replacing the below paragraph in its entirety as follows:
In response to these significant challenges, the non-management members of the
Zymergen Board engaged in regular discussions, including in meetings held on
June 19, June 22, June 30, July 8, July 14, July 21 and July 28, 2021, to better
understand the change in expectations by Zymergen management and reasons
therefor. From time to time at such meetings, Zymergen management and advisors
from Freshfields and Boston Consulting Group ("BCG") were requested to
participate and assist the Zymergen Board in its review. As part of Zymergen
management's development of an updated strategic plan over the coming months,
BCG was asked to review and provide a market assessment of Zymergen's business
programs, provide input on which programs to prioritize, and work with
management to simplify the organization and reduce Zymergen's cash burn. The
Zymergen Board also considered certain organizational changes that it believed
were necessary to implement in light of the significant challenges that Zymergen
faced. After extensive discussions, the Zymergen Board unanimously appointed
Mr. Flatley as acting Chief Executive Officer to replace Josh Hoffman,
Zymergen's Chief Executive Officer at the time, and authorized the formation of
a strategic oversight committee (the "Committee") to assist with, among other
things, overseeing and evaluating the formulation of a new strategic plan for
Zymergen. The Committee's role focused on evaluating strategic options available
to the Company and did not include any mandate or delegated authority to accept
or reject any specific transaction. Based on their respective skills and
experience, the Zymergen Board appointed Jay Flatley, Sandra Peterson, Steven
Chu and Travis Murdoch to serve on the Committee. Each of Ms. Peterson and
Messrs. Chu and Murdoch are non-management members of the Zymergen Board.
The disclosure on page 102 of the Definitive Proxy Statement is hereby
supplemented by replacing the below paragraph in its entirety as follows:
Between April 11 and June 4, 2022, at the direction of, and in regular
communication with, the Zymergen Board, including at Zymergen Board meetings
held on April 15, May 4, May 18, May 19, May 27, June 2 and June 3, 2022, Cowen
contacted 41 potentially interested strategic parties. Eight such parties
(including Ginkgo, which previously had executed a confidentiality agreement,
and, as described below, Party A, Party B, Party C and a DCVC-affiliated party)
executed confidentiality agreements, each of which contained a customary "don't
ask don't waive" standstill provision, but which permitted such party to make a
private proposal to the Zymergen Board, and received diligence information,
including the Zymergen Projections. Only the Ginkgo confidentiality agreement
contained a fall away of the standstill in the event that another party entered
into a definitive agreement to acquire 50% or more of Zymergen, a tender offer
was made by another party to acquire 50% or more of Zymergen or Zymergen entered
into a bankruptcy or insolvency process. Three such parties participated in
meetings with Zymergen's management. Four such parties (Ginkgo, Party A, Party B
and Party C) expressed interest in submitting a formal proposal to acquire
Zymergen and were provided bid process letters, but only Ginkgo and Party A
submitted proposals to acquire Zymergen. Prior to signing the Merger Agreement,
the other parties that declined to pursue such transaction cited, among other
reasons, concerns with Zymergen's cash burn and anticipated challenges
integrating Zymergen's diverse businesses within such parties' existing
organizations.
The disclosure on page 113 of the Definitive Proxy Statement is hereby
supplemented by replacing the below paragraph in its entirety as follows:
The following day on Sunday, July 24, 2022, Zymergen, Ginkgo and Merger Sub
executed and delivered the Merger Agreement and the related transaction
documents (including the Voting Agreements entered into by the Voting Agreement
Stockholders), and prior to the start of trading on July 25, 2022, Zymergen and
Ginkgo issued a joint press release announcing the execution of the Merger
Agreement. At no time prior to signing the Merger Agreement were
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there any discussions by the Company's management with any interested party
participating in the sale process, including Ginkgo, regarding the terms of any
post-closing continuing employment with the surviving company in connection with
a potential transaction.
The disclosure on page 124 of the Definitive Proxy Statement is hereby
supplemented by replacing the first two paragraphs of the subsection summarizing
the Select Public Companies Analysis of the Company in their entirety as
follows:
To provide contextual data and comparative market information, Cowen compared
selected operating and financial data and multiples for Zymergen to the
corresponding financial data and multiples of certain other companies (which we
refer to in this section as the "selected companies") whose securities are
publicly traded and that Cowen believed, in the exercise of its professional
judgment and experience, have one or more businesses or operating
characteristics similar to Zymergen. These companies were:
• Amyris, Inc.
• Berkeley Lights, Inc.
• Codex DNA, Inc.
• Codexis, Inc.
• Twist Bioscience Corporation
The data and multiples reviewed by Cowen included the market capitalization of
common stock, based on fully-diluted shares outstanding (calculated using the
treasury stock method, which takes into account outstanding in-the-money stock
options, restricted stock units and non-vested stock, all as provided by
Zymergen management), plus total debt less cash and cash equivalents (which we
refer to in this section as "enterprise value"), of each of the selected
companies, as a multiple of revenue, calculated on a forecasted basis for the
calendar years 2022 and 2023 (which we refer to in this section as "2022E
Revenue" and "2023E Revenue", respectively) based on public filings and S&P
Global Market Intelligence consensus estimates for the selected companies.
The selected companies and the financial data reviewed included the following:
Enterprise Value / Enterprise Value /
Selected Companies 2022E Revenue(1) 2023E Revenue(1)
Amyris, Inc. 3.14x 2.12x
Berkeley Lights, Inc. 1.73x 1.33x
Codex DNA, Inc. 0.00x 0.00x
Codexis, Inc. 2.86x 3.31x
Twist Bioscience Corporation 9.41x 7.15x
(1) Negative multiples are treated as if they are a 0.00x multiple.
The disclosure on page 125 of the Definitive Proxy Statement is hereby
supplemented by replacing the fourth paragraph of the subsection summarizing the
Select Public Companies Analysis of the Company in its entirety as follows:
Based upon the information presented above, Cowen's experience in the synthetic
biology and specialty chemical industry and its professional judgment, Cowen
applied a reference multiple range equal to the low and median multiples,
rounded up to the nearest 0.25x, observed in Cowen's review of the selected
companies to Zymergen's revenue, calculated on a forecasted basis for calendar
years 2022 and 2023, based on the Zymergen Forecasts, to calculate an implied
enterprise value reference range for Zymergen. Cowen then subtracted total debt
of $55.2 million and added cash and cash equivalents of $337.0 million, each as
of March 31, 2022, plus an additional $800.0 million in net cash (consisting of
$851.0 million in projected gross cash raised from equity offerings from 2022 to
2026, net of 6% in projected underwriting discounts and commissions) from the
projected equity financings of Zymergen (the "Projected Equity Financings")
included on the low end of the range, to derive an implied equity value
reference range for Zymergen. The figures in the implied equity value reference
range for Zymergen were then divided by the number of fully-diluted shares
outstanding as of July 15, 2022 (calculated using the treasury stock method,
taking into account 104.1 million outstanding shares of common stock,
outstanding in-the-money options to purchase 6.3 million shares with a weighted
average exercise price of $13.16 per share, outstanding in-the-money options
with market-based vesting to purchase 0.5 million shares with a weighted average
exercise price of $31.00 per share, and 7.8 million
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restricted stock units and non-vested shares, all as provided by Zymergen
management utilizing the same methodology as described above in the select
public companies analysis), plus an additional 472.8 million shares to be issued
in the Projected Equity Financings included on the low end of the range, to
calculate a reference range of implied equity values per share of Zymergen
Common Stock. This analysis resulted in (i) the ranges of implied per share
equity values of Zymergen Common Stock set forth in the table below, as compared
to the implied merger consideration of $2.68 per share of Zymergen Common Stock
derived from the exchange ratio of 0.9179 and the closing price of Ginkgo
Class A Common Stock of $2.92 per share as of July 22, 2022, and (ii) the ranges
of implied exchange ratios, based on the closing price of Ginkgo Class A Common
Stock of $2.92 per share as of July 22, 2022, set forth in the table below, as
compared to the exchange ratio of 0.9179.
The disclosure on pages 125 and 126 of the Definitive Proxy Statement is hereby
supplemented by replacing the first two paragraphs of the subsection summarizing
the Selected Transactions Analysis of the Company in their entirety as follows:
Cowen reviewed the financial terms, to the extent publicly available based on
public filings, press releases and Wall Street consensus estimates as of
July 22, 2022, of seven transactions (which we refer to in this section as the
"selected transactions") involving the acquisition of companies in the synthetic
biology and specialty chemical industry and which Cowen believed, in the
exercise of its professional judgment and experience, have one or more
businesses or operating characteristics that Cowen deemed relevant. These
transactions and the dates announced were:
The data and multiples reviewed by Cowen included the implied enterprise value
paid in each of the selected transactions as a multiple of the target company's
revenue for the latest twelve months prior to the announcement of the applicable
selected transaction (which we refer to in this section as "LTM Revenue").
The selected transactions and the financial data reviewed included
the following:
Enterprise Value /
Announcement Date Target Acquiror LTM Revenue
May 6, 2016 Air Products, Inc. (PMD) Evonik Industries AG 3.65x
December 9, 2016 Huber Silica Evonik Industries AG 2.10x
November 8, 2018 PeroxyChem Holding Company Evonik Industries AG 2.13x
August 26, 2020 Porocel Group Evonik Industries AG 2.10x
December 18, 2020 Microbiome Labs Novozymes AS 6.25x
November 9, 2021 Eton Bioscience Inc. Codex DNA, Inc. 1.90x
November 30, 2021 Synergia Life Sciences Pte. Ltd. Novozymes AS 11.11x
The data and multiples reviewed by Cowen included the implied enterprise value
paid in each of the selected transactions as a multiple of the target company's
revenue for the latest twelve months prior to the announcement of the applicable
selected transaction (which we refer to in this section as "LTM Revenue").
The disclosure on page 126 of the Definitive Proxy Statement is hereby
supplemented by replacing the fourth paragraph of the subsection summarizing the
Selected Transactions Analysis of the Company in its entirety as follows:
Based upon the information presented above, Cowen's experience in the synthetic
biology and specialty chemical industry and its professional judgment, Cowen
applied a selected multiple range of 2.00x to 6.25x (which corresponds to the
low and seventy-fifth percentile multiple, rounded up to the nearest 0.25x,
observed in Cowen's review of the selected transactions) to Zymergen's revenue,
estimated by the management of Zymergen for the twelve-month period ended on
June 30, 2022 (which we refer to in this section as "Q2 2022E LTM Revenue"), to
calculate an implied enterprise value reference range for Zymergen. Cowen then
subtracted total debt of $0 and added cash and cash equivalents of
$213.6 million, each as of June 30, 2022 and as estimated by Zymergen
management, to derive an implied equity value reference range for Zymergen. The
figures in the implied equity value reference range for Zymergen were then
divided by the number of fully-diluted shares outstanding as of July 15, 2022
(calculated using the treasury stock method, taking into account 104.1 million
outstanding shares of common stock, outstanding in-the-money options to purchase
6.3 million shares with a weighted average exercise price of $13.16 per share,
outstanding in-the-money options with market-based vesting to purchase
0.5 million shares with a weighted average exercise price
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of $31.00 per share, and 7.8 million restricted stock units and non-vested
shares, all as provided by Zymergen management utilizing the same methodology as
described above in the select public companies analysis), to calculate a
reference range of implied equity values per share of Zymergen Common Stock.
This analysis resulted in (i) the range of implied per share equity values of
Zymergen Common Stock set forth in the table below, as compared to the implied
merger consideration of $2.68 per share of Zymergen Common Stock derived from
the exchange ratio of 0.9179 and the closing price of Ginkgo Class A Common
Stock of $2.92 per share as of July 22, 2022, and (ii) the range of implied
exchange ratios, based on the closing price of Ginkgo Class A Common Stock of
$2.92 per share as of July 22, 2022, set forth in the table below, as compared
to the exchange ratio of 0.9179.
The disclosure on page 127 of the Definitive Proxy Statement is hereby
supplemented by replacing the first paragraph of the subsection summarizing the
Discounted Cash Flow Analysis of the Company in its entirety as follows:
Cowen estimated a range of implied per share equity values for the shares of
Zymergen Common Stock based upon the discounted present value of Zymergen's
forecasted unlevered free cash flows for the six-month period ending
December 31, 2022 and for the fiscal years ending December 31, 2023 through
December 31, 2031, each as provided by the management of Zymergen as part of the
Zymergen Forecasts, and the discounted terminal value of Zymergen based on a
range of perpetuity growth rates of 3% to 5% applied to Zymergen's 2031
forecasted revenue and EBITDA, as provided by the management of Zymergen as part
of the Zymergen Forecasts, and assuming a transaction closing date of June 30,
2022. Unlevered free cash flow was calculated by taking projected earnings
before interest expense and income taxes, including the burden of stock-based
compensation expense, and subtracting from this amount projected taxes, capital
expenditures and changes in working capital and adding back projected
depreciation and amortization. These analyses were based upon certain
assumptions described by, projections supplied by, and discussions held with the
management of Zymergen. In performing these analyses, Cowen utilized discount
rates ranging from 18.75% to 20.75%, which were selected based on an estimate of
Zymergen's weighted average cost of capital determined by applying the capital
asset pricing model, which was derived based on Cowen's experience and
professional judgement and included assumptions regarding after-tax cost of
debt, market risk premium, equity size premium, risk free rate, beta and debt to
total capitalization. Cowen then subtracted total debt of $0 and added cash and
cash equivalents of $213.6 million, each as of June 30, 2022 and as estimated by
Zymergen management, plus an additional $800,000,000 in net cash proceeds from
the Projected Equity Financings, to derive an implied equity value reference
range for Zymergen. The figures in the implied equity value reference range for
Zymergen were then divided by the number of fully diluted shares outstanding as
of July 15, 2022 (calculated using the treasury stock method, taking into
account 104.1 million outstanding shares of common stock, outstanding
in-the-money options to purchase 6.3 million shares with a weighted average
exercise price of $13.16 per share, outstanding in-the-money options with
market-based vesting to purchase 0.5 million shares with a weighted average
exercise price of $31.00 per share, and 7.8 million restricted stock units and
non-vested shares, all as provided by Zymergen management utilizing the same
methodology as described above in the select public companies analysis), plus an
additional 472.8 million shares to be issued in the Projected Equity Financings,
to calculate a reference range of implied equity values per share of Zymergen
Common Stock. In performing this analysis, Cowen also calculated the discounted
present value of Zymergen's estimated federal net operating loss carryforwards,
as provided by the management of Zymergen as part of the Zymergen Forecasts,
utilizing a discount rate of 19.75%, which was selected based on Zymergen's
estimated cost of equity of 19.81%, rounded to the nearest 0.25%.
The disclosure on pages 127 and 128 of the Definitive Proxy Statement is hereby
supplemented by replacing the subsection summarizing the Present Value of
Analyst Price Targets of the Company in its entirety as follows:
Cowen reviewed threethe following public market trading price targets for the
shares of Zymergen Common Stock prepared and published during the preceding
twelve-month period by three equity research analysts that were publicly
available as of July 22, 2022.:
Firm Price Target
UBS $ 4.00
Goldman Sachs $ 3.00
Bank of America $ 2.00
These price targets reflected the analysts' estimates of the future public
market trading price of the shares of Zymergen Common Stock at the time such
price targets were published. As of July 22, 2022, the undiscounted range of
price targets of such equity research analysts per share of Zymergen Common
Stock was $2.00 to $4.00. Cowen calculated
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the present value of this range of selected equity research analyst price
targets by applying a discount rate of 19.81%, which was selected based on
Zymergen's estimated cost of equity, which resulted in a range of present values
of $1.67 to $3.34 per share of Zymergen Common Stock and a range of implied
exchange ratios, based on the closing price of Ginkgo Class A Common Stock of
$2.92 per share as of July 22, 2022, of 0.5717x to 1.1434x.
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Additional Information About the Merger and Where to Find It
This communication is being made in respect of the proposed transaction
involving the Company, Parent, and Merger Sub. A special meeting of the
stockholders of the Company will be held on October 17, 2022 to seek stockholder
approval in connection with the proposed Merger. Parent has filed with the SEC a
registration statement on Form S-4 that included a proxy statement of the
Company and that also constituted a prospectus of Parent. The Company has filed
with the SEC a definitive proxy statement and other relevant documents in
connection with the proposed Merger. The Company and Parent may also file other
relevant documents with the SEC regarding the Merger. This document is not a
substitute for the proxy statement/prospectus or registration statement or any
other document that the Company or Parent has filed with the SEC. The definitive
proxy statement has been sent or given to the stockholders of the Company and
contains important information about the proposed transaction and related
matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT, PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT MAY
BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE
DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER. Investors
and security holders are able to obtain free copies of the registration
statement and proxy statement/prospectus and other documents containing
important information about the Company, Parent and the Merger, once such
documents are filed with the SEC through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by the Company
are available free of charge on the Company's website at
https://investors.zymergen.com or by contacting the Company's Investor Relations
department by email at investors@zymergen.com. Copies of the documents filed
with the SEC by Parent are available free of charge on Parent's website at
https://investors.ginkgobioworks.com or by contacting Parent's Investor
Relations department by email at investors@ginkgobioworks.com.
Participants in the Solicitation
The Company, Parent, their respective directors and certain of their executive
officers and other employees may be deemed to be participants in the
solicitation of proxies from the Company's stockholders in connection with the
Merger. Information regarding the persons who may, under the rules of the SEC,
be deemed participants in the solicitation of the Company's stockholders in
connection with the Merger, including a description of their direct or indirect
interests, by security holdings or otherwise, may be found in the proxy
statement/prospectus filed with the SEC. Information about the directors and
executive officers of the Company, including a description of their direct or
indirect interests, by security holdings or otherwise, is set forth in the
Company's proxy statement for the Special Meeting, which was filed with the SEC
on September 14, 2022, the Company's proxy statement for its 2022 annual meeting
of shareholders, which was filed with the SEC on April 20, 2022, and the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2021, which was filed with the SEC on March 30, 2022. Information about the
directors and executive officers of Parent, including a description of their
direct or indirect interests, by security holdings or otherwise, is set forth in
Parent's prospectus, which was filed with the SEC on September 14, 2022,
Parent's proxy statement for its 2022 annual meeting of shareholders, which was
filed with the SEC on April 26, 2022, and Parent's Annual Report on Form 10-K
for the fiscal year ended December 31, 2021, which was filed with the SEC on
March 29, 2022. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, is contained in
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the proxy statement/prospectus and other relevant materials filed with the SEC
regarding the Merger. Investors should read the proxy statement/prospectus
carefully before making any voting or investment decisions. You may obtain free
copies of these documents from the Company or Parent using the sources indicated
above.
No Offer Or Solicitation
This communication is not intended to and shall not constitute an offer to buy
or sell or the solicitation of an offer to buy or sell any securities, or a
solicitation of any vote or 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 offering of securities shall be made, except by means of a
prospectus meeting the requirements of Section 10 of the U.S. Securities Act of
1933, as amended.
Forward Looking Statements
This communication contains forward-looking statements within the meaning of
. . .
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ZYMERGEN INC. 