DEFA14A: Zuora to be Acquired by Silver Lake in $10.00 Per Share Cash Deal

Zuora, Inc. has entered into a definitive agreement to be acquired by Silver Lake for $10.00 per share in cash.

Summary

• Zuora, Inc. has agreed to be acquired by Zodiac Purchaser, L.L.C., an entity indirectly controlled by Silver Lake Group, L.L.C., in a merger transaction.
• The transaction involves a significant minority investment from an affiliate of GIC Pte. Ltd.
• Zuora stockholders will receive $10.00 in cash for each share of Class A and Class B common stock.
• Shares held by the company, Silver Lake, or rolled over by certain stockholders will be canceled.
• The Special Committee and the Board of Directors of Zuora have unanimously approved the merger agreement.
• Outstanding stock options with an exercise price below $10.00 will be cashed out, while those at or above $10.00 will be canceled.
• Restricted stock units (RSUs) and performance stock units (PSUs) will be converted into cash payments based on the merger consideration, vesting according to their original schedules.
• The completion of the merger is subject to customary closing conditions, including stockholder approval and regulatory approvals.
• The deal is expected to close by July 17, 2025, with a possible extension to October 17, 2025.
• Zuora will pay Parent a termination fee of $50.5 million under certain circumstances, while Parent will pay Zuora a reverse termination fee of $101.1 million under other circumstances.
• Silver Lake and GIC have provided equity commitment letters and guarantees to finance the transaction.
• Tien Tzuo and certain affiliates have entered into a support and rollover agreement, contributing shares valued at $70 million (potentially increasing by up to $30 million) in exchange for equity in a parent company of Parent.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. The deal provides a cash premium for stockholders, but also involves the company going private.

Positives

• Zuora stockholders will receive $10.00 per share in cash, providing immediate value.
• The Special Committee and Board of Directors have unanimously approved the merger, indicating a fair deal.
• The transaction is backed by equity commitment letters and guarantees from Silver Lake and GIC, ensuring financial stability.
• The merger agreement includes a reverse termination fee of $101.1 million payable by Parent to the Company under specified circumstances.

Negatives

• The merger will result in Zuora becoming a private company, potentially reducing transparency for investors.
• The deal is subject to customary closing conditions, including regulatory approvals, which could delay or prevent the transaction.
• Zuora is subject to restrictions on its ability to solicit alternative acquisition proposals.

Risks

• The merger may not be completed if the required stockholder and regulatory approvals are not obtained.
• A material adverse effect on Zuora could allow Parent to terminate the merger agreement.
• Potential litigation relating to the proposed transaction could delay the consummation of the Merger.
• The Company and its subsidiaries collectively must have at least $400 million in cash for Parent to consummate the Merger.
• The Company is required to pay Parent a termination fee of $50,500,000 in cash on termination of the Merger Agreement under specified circumstances.

Future Outlook

The document outlines the terms and conditions for the acquisition of Zuora by Silver Lake, with an expected completion date in 2025, pending regulatory and stockholder approvals.

Management Comments

• The Special Committee has unanimously determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of the Company and the Unaffiliated Company Stockholders.
• The Company Board, upon the unanimous recommendation of the Special Committee, has unanimously determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of the Company and the Company's stockholders.

Industry Context

The acquisition reflects the ongoing trend of private equity firms investing in and consolidating companies in the software and technology sectors.

Comparison to Industry Standards

• Comparable companies acquired by private equity firms often see a similar premium to their stock price.
• The termination fees and deal protections are generally consistent with industry standards for transactions of this size.
• Silver Lake's involvement indicates a strategic move to leverage Zuora's subscription management platform within its portfolio.

Related Party Transactions

• Tien Tzuo and certain affiliates have entered into a support and rollover agreement, contributing shares valued at $70 million (potentially increasing by up to $30 million) in exchange for equity in a parent company of Parent.

Stakeholder Impact

• Stockholders will receive cash for their shares.
• Employees face potential changes in compensation and benefits, but Parent is committed to providing substantially similar benefits for at least 12 months.
• Customers and partners may experience changes as a result of the acquisition.

Next Steps

• Zuora will file a proxy statement with the SEC and mail it to its stockholders.
• The Company will hold a special meeting of stockholders to vote on the adoption of the Merger Agreement.
• The parties will seek regulatory approvals to complete the transaction.

Key Dates

Keywords

merger, acquisition, silver lake, zuora, stockholders, gic, agreement, rollover