DEFM14C: SolarWinds to be Acquired by Turn/River Capital for $18.50 Per Share in All-Cash Deal

SolarWinds Corporation has entered into a definitive agreement to be acquired by Starlight Parent, LLC, an affiliate of Turn/River Capital, in an all-cash transaction valued at $18.50 per share.

Summary

• SolarWinds Corporation is set to be acquired by Starlight Parent, LLC, an affiliate of Turn/River Capital, in a merger agreement dated February 7, 2025.
• Under the terms of the agreement, Starlight Merger Sub, Inc., a wholly-owned subsidiary of Parent, will merge with SolarWinds, with SolarWinds continuing as the surviving corporation.
• SolarWinds stockholders will receive $18.50 in cash per share, without interest, upon completion of the merger.
• The Principal Stockholders, holding approximately 65% of SolarWinds' outstanding shares, have already provided written consent approving the merger, eliminating the need for a stockholder vote.
• The transaction is expected to close in the second quarter of 2025, pending regulatory approvals and customary closing conditions.
• Goldman Sachs & Co. LLC and Jefferies LLC have provided fairness opinions to the SolarWinds board of directors regarding the merger consideration.
• Investment funds affiliated with Turn/River have committed to provide equity financing, and debt financing has been committed by debt commitment parties.
• The merger agreement includes a termination fee of $230 million payable by Parent under certain circumstances and a termination fee of $119.2 million payable by SolarWinds under other circumstances.
• SolarWinds' directors and executive officers have interests in the merger that may differ from those of the stockholders.
• The exchange of shares for cash will generally be a taxable transaction for U.S. federal income tax purposes.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. The deal provides a cash exit for shareholders at a premium, but it also removes future upside potential. The presence of fairness opinions and secured financing commitments adds confidence.

Positives

• Stockholders will receive $18.50 per share in cash, providing immediate liquidity.
• The Principal Stockholders' approval eliminates uncertainty regarding stockholder approval.
• The deal is expected to close relatively quickly, in the second quarter of 2025.
• Fairness opinions from Goldman Sachs and Jefferies support the financial terms of the merger.
• Turn/River has secured financing commitments, increasing the likelihood of the deal closing.

Negatives

• Stockholders will no longer participate in the future growth of SolarWinds.
• The merger agreement restricts SolarWinds' ability to solicit other offers, although a 'go-shop' period was initially included.
• The deal is subject to regulatory approvals, which could potentially delay or prevent the merger.
• The exchange of shares for cash will be a taxable transaction for stockholders.
• Executive officers and directors have interests in the merger that may differ from those of stockholders.

Risks

• The merger may not be completed in a timely manner or at all.
• The occurrence of any event, change, or other circumstance that could give rise to the termination of the merger agreement.
• Potential litigation relating to the merger.
• Uncertainty as to the timing of completion of the merger.
• Risks that the benefits of the merger are not realized when and as expected.

Future Outlook

The merger is expected to be completed in the second quarter of 2025, subject to regulatory approvals and customary closing conditions.

Industry Context

The document does not provide specific details on how this announcement relates to broader industry trends or competitors beyond the selected precedent transactions analysis. However, the transaction reflects ongoing private equity interest in the software sector.

Comparison to Industry Standards

• The financial advisors performed selected public company comparables analysis and selected precedent transactions analysis.
• Goldman Sachs reviewed certain publicly available information relating to selected transactions in the software industry since 2015.
• The selected transactions included Hewlett Packard Enterprise Software Operations Business/Micro Focus International plc (EV/NTM EBITDA of 11.0x), CA, Inc./Broadcom Inc. (EV/NTM EBITDA of 11.1x), and Citrix Systems, Inc./Vista Equity Partners & Elliott Management Corporation (EV/NTM EBITDA of 14.1x).
• Jefferies reviewed publicly available financial, stock market and operating information of SolarWinds and twelve selected publicly traded companies in the security and infrastructure software industry.
• The selected companies included Akamai Technologies, Inc., Check Point Software Technologies Ltd., and Informatica Inc.

Stakeholder Impact

• Stockholders will receive cash for their shares.
• Employees' future employment is subject to the acquirer's plans.
• Customers and partners may experience changes as a result of the acquisition.
• The impact on suppliers and creditors is not explicitly detailed.

Next Steps

• Obtain regulatory approvals.
• Satisfy customary closing conditions.
• Complete the merger in the second quarter of 2025.
• Delist Company Common Stock from the NYSE and deregister it under the Exchange Act.

Key Dates

Keywords

Merger, Acquisition, SolarWinds, Turn/River Capital, Stockholders, Agreement, Financing, Shares, Consideration, Delaware