Vitalogy Capital Partners, a Chicago-based alternative investment firm, today sent the following letter to the Board of Directors of Intralinks Holdings, Inc. (NYSE: IL) in response to its acquisition by Synchronoss Technologies, Inc. (NASDAQ: SNCR) announced earlier today:
To the Board of Directors of Intralinks:
As you know, Vitalogy has been a constructive, behind-the-scenes shareholder attempting to help the Company effectuate change and create value. We have had extensive correspondence with Intralinks’ senior management team and select board members between April and August 2016, including a discussion with select board members at the Company’s Annual General Meeting on July 26th. Through our dialogue, we have attempted to highlight the value that can be created by sharpening the Company’s corporate messaging to highlight its improving fundamentals, as well as running a parallel process of engaging a reputable investment banking firm to sell the company to the highest bidder.
While we applaud the agreement to sell the company that you announced today, we have significant concerns with the sale process and the transaction with Synchronoss Technologies, which we believe is flawed in many respects.
- The acquisition premium of ~17% is inadequate compared to the 20-day unaffected share price premium offer in comparable transactions.
- Moreover, the acquirer is paying a very low multiple of ~2.6x and ~12x enterprise value to sales and EBITDA respectively, using 2017E metrics. These are inadequate multiples for a SaaS business in the midst of a successful business transition, especially in light of the buyer paying 7.5x projected 2017E EBITDA, including synergies.
- No effort by Intralink’s management and board was undertaken to determine whether a superior offer exists, as evidenced by the absence of a go-shop provision.
- Unwillingness by management to answer a direct question on the transaction conference call regarding whether the company conducted a competitive auction process.
In addition, Ron Hovsepian, the current CEO of Intralinks, will become CEO of the pro-forma company. It is well known that CEOs of target companies often negotiate for lower acquisition consideration for their own shareholders in order to secure preferential treatment in the successor business.
Looking at the record, we believe Synchronoss’ standalone business is in a precarious position, with its founder stepping down and challenging fundamentals. We believe Synchronoss is desperate to acquire Intralinks in order to diversify its business. We also believe that a substantial Intralinks shareholder with board representation was a forced seller, due to the upcoming expiration of its fund, which likely accelerated the sale process and created a difficult negotiating dynamic.
Until Intralinks’ shareholders receive satisfactory disclosure and background regarding the strategic alternatives that the Company’s Board considered, as well as information about Ron Hovsepian’s new compensation and accompanying agreements, which cannot be realized under the customary disclosure through a tender document, we believe that selling the Company for $13 per share is a sub-optimal outcome. Although Intralinks shares are trading above the current transaction price, we ask other shareholders to stand with us in demanding additional transparency and higher consideration.
Clearly, we are encouraged that Intralinks’ Board of Directors has taken the important step of selling the Company as a means to create shareholder value, but we are deeply concerned by the price, terms, and structure of the transaction. Under these conditions, the sale of Intralinks, for $13 per share, is inadequate.
As always, you have my contact information. I look forward to speaking with you soon.
Best,
Jonathan Tunick
Chief Executive Officer, Vitalogy Capital Partners
About Vitalogy Capital Partners
Vitalogy Capital Partners is a private investment firm focused on long/short investing across the capital structure with an emphasis on the direction of fundamentals. Vitalogy is a joint partnership between Jonathan Tunick, CEO/CIO and Founder, and Victory Park Capital (“VPC”). VPC is an SEC-registered alternative investment firm based in Chicago with over $3.5 billion in assets under management.
For more information, visit:
http://www.victoryparkcapital.com/
View source version on businesswire.com: http://www.businesswire.com/news/home/20161206006465/en/
Contacts:
Jonathan Tunick, (312) 701-1777
jtunick@vitalogycap.com
