Glass Lewis Warns Shareholders of
"Questionable" Deal Timing, "Apparent Conflicts of Interest" and an
"Uncompelling and Inadequate" Valuation of Avalara
SANTA
ROSA, Calif., Oct. 5, 2022
/PRNewswire/ -- Altair US, LLC ("Altair" or "we"), a pre-IPO angel
investor in Avalara, Inc. (NYSE: AVLR) (the "Company" or
"Avalara") and one of the Company's largest shareholders, today
noted that leading independent proxy advisory firm Glass, Lewis
& Co. ("Glass Lewis") has recommended that Avalara shareholders
vote AGAINST the Company's proposed sale to Vista Equity Partners
("Vista").
In its report, Glass Lewis concluded:
"We share Altair's view that the purchase price
and implied valuation metrics of the transaction are uncompelling
and, ultimately, inadequate when compared to the Company's
historical valuation and the prices paid for other software
companies in precedent transactions, including those selected by
Goldman Sachs for its fairness opinion. We also take a dim view of
the timing and other aspects of the process resulting in the
transaction, including apparent conflicts of interest stemming from
Goldman Sachs' longstanding relationship with Vista and certain
Avalara directors' ties to Vista, for which the Avalara board took
no action to attempt to mitigate. These concerns raise doubt, in
our view, as to whether the transaction is the result of a truly
robust and independent process and whether the interests of
Avalara's shareholders and the primary objective of maximizing
long-term shareholder value were the drivers of the process.
All factors considered, we believe these concerns justify voting
against the proposed transaction."
Altair welcomed Glass Lewis' opinion and said, "The timing of
the proposed merger was wrong and the sale process was deeply
flawed, resulting in a price that we believe is insufficient to
compensate Avalara shareholders for forfeiting their claim on the
Company's future earnings and prospects. We are pleased that Glass
Lewis recognizes that, given the Company's bright future and
near-term path to achieving operating profitability, an independent
Avalara remains a more compelling alternative than Vista's
opportunistic, low-ball offer."
In its report, Glass Lewis also wrote:
- "Upon review of the rationale, process and terms of the
proposed transaction, we have concerns about the questionable deal
timing, the sometimes inexplicable course of the deal discussions
and negotiations, the board's pessimistic reasoning for adopting
the merger agreement, apparent conflicts of interest in the
decision-making process, and the uncompelling and inadequate
valuation of Avalara in the transaction."
- "[T]he limited number of potential bidders involved in the
process, the fact that only one other party submitted even a
preliminary indication of interest, the deterioration in the
financial markets, and the disappearance of cheap and available
financing for private equity firms all contributed to the sale
process going more Vista's way than the way of Avalara
shareholders."
- "[W]e find more persuasive evidence to suggest that, near-term
challenges and uncertainty notwithstanding, under the oversight of
a capable board and management team, the Company could
reasonably deliver greater value for shareholders in the
medium-to-long term than that offered in the transaction."
- "Due to a variety of factors, not the least of them being the
current unfavorable market conditions for a large transaction
involving a high-growth software company, we believe the
proposed price meaningfully undervalues the ongoing intrinsic value
of the Company's business…"
- "We observe that, between late January and July 2022, the Company's strategic review process
quickly shifted from Avalara pursuing acquisition targets in order
to expand its international operations, to Avalara fielding
unsolicited interest from private equity firms, to Avalara actively
soliciting acquisition interest from a limited set of potential
buyers with little success, to the board terminating the sale
process, and finally, somewhat inexplicably, to the board accepting
the lone bidder's downward revised offer amid strained financing
conditions and a volatile, deteriorating market environment. At the
risk of stating the obvious, this is generally not how a
strategic review or sale process is supposed to go."
- "While the Company claims the proposed price is attractive and
compelling for investors, we see scant, if any, evidence to suggest
that is the case. The board points to a market premium relative to
a trading price for the Company that was close to a two-year low in
an unfavorable market environment, and a revenue multiple that
appears acceptable only when juxtaposed to a broad set of
historical transactions going back 10 years involving companies
which, for the most part, are not comparable to Avalara or the
proposed transaction, in our view. … [T]he proposed purchase
price is reflective of macro uncertainty, unfavorable market
conditions and a questionable sale process, not Avalara's business
fundamentals, growth trajectory and intrinsic value."
- "[W]e believe various paths continue to exist for Avalara as a
standalone company that could potentially deliver significant value
creation for shareholders over the medium-to-long term. In our
view, such value, even on a time- and risk-adjusted basis, appears
to be greater than Vista's all-cash offer."
- "[G]iven that Avalara's business fundamentals remain strong,
despite certain challenges and headwinds, we see little reason for
investors with a long-term horizon and moderate risk tolerance to
crystallize the value of their investments in Avalara at such an
inopportune time and unattractive price."
Although Institutional Shareholder Services Inc. ("ISS") issued
"cautionary" support for the transaction, ISS also noted:
- "Some shareholders, particularly those with a long investment
horizon and the patience that approach requires, may be frustrated
by the merger consideration's substantial discount to [Avalara's]
historical trading levels."
- "The differences between [Avalara's May
2022 and July 2022] forecasts
do not appear to indicate significantly deteriorating performance
that creates urgency for a sale… [T]he longer-term outlook does not
appear to change much in the updated projections."
- "The shift in narrative from [Avalara's] management is
concerning, with a whiplash turn from positive comments regarding
the business' prospects at the June investor day to current worries
about employee attrition, European growth, product development, and
squandered opportunities."
- "It is understandable that shareholders who are optimistic
about [Avalara's] long-term potential may question the urgency to
sell now."
Altair continues to urge Avalara shareholders to vote AGAINST
the sale to Vista on the GOLD proxy card, in line with the
recommendation of Glass Lewis.
For more information about why we believe Avalara's Board chose
the wrong time to sell, conducted a flawed sale process and agreed
to an inadequate price, we encourage shareholders to read our proxy
materials and our investor presentation, which is available here:
https://tinyurl.com/5n8v24ye
Permission to quote from the Glass Lewis and ISS reports was
neither sought nor obtained.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
In
connection with the proposed acquisition of Avalara, Inc. (the
"Company") ( NYSE: AVLR) by affiliates of Vista Equity
Partners Management, LLC (the "Merger"), the Company entered into
an Agreement and Plan of Merger, dated as of August 8, 2022, with Lava Intermediate, Inc., a
Delaware corporation ("Parent"),
and Lava Merger Sub, Inc., a Washington corporation and wholly owned
subsidiary of Parent (the "Merger Agreement"). The Participants (as
defined below) filed a definitive proxy statement and accompanying
proxy card with the SEC on September 30,
2022, to be used to solicit proxies for votes (the "Proxy
Solicitation") opposing the adoption of the Merger Agreement at the
special meeting of shareholders (the "Special Meeting") and
regarding other proposals that may come before the Special Meeting.
The Participants in the Proxy Solicitation are Altair US, LLC, a
Delaware limited liability company
("Altair US"), and Richard Bailey
(collectively, the "Participants"), the Manager of Altair US. As of
the date hereof, each of the Participants may be deemed to
beneficially own, in the aggregate, 850,892 shares of common stock
of the Company.
THE PARTICIPANTS STRONGLY ADVISE ALL SHAREHOLDERS OF THE COMPANY
TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS ARE AVAILABLE
AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN
ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE
COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO
SROWLAND@SHAREHOLDERSDESERVEBETTER.COM.
Disclaimer
This press release does not constitute an
offer to sell or a solicitation of an offer to buy any of the
securities described herein in any state to any person. In
addition, the discussions and opinions in this press release and
the material contained herein are for general information only and
are not intended to provide investment advice. All statements
contained in this press release that are not clearly historical in
nature or that necessarily depend on future events are
"forward-looking statements," which are not guarantees of future
performance or results, and the words "anticipate," "believe,"
"expect," "potential," "could," "opportunity," "estimate," and
similar expressions are generally intended to identify
forward-looking statements. The projected results and
statements contained in this press release and the material
contained herein that are not historical facts are based on current
expectations, speak only as of the date of this press release and
involve risks that may cause the actual results to be materially
different. Altair US, LLC disclaims any obligation to
update the information herein and reserves the right to change any
of its opinions expressed herein at any time as it deems
appropriate.
ALTAIR US, LLC HAS NEITHER SOUGHT NOR OBTAINED THE CONSENT FROM
ANY THIRD PARTY TO USE ANY STATEMENTS OR INFORMATION CONTAINED
HEREIN THAT HAVE BEEN OBTAINED OR DERIVED FROM STATEMENTS MADE OR
PUBLISHED BY SUCH THIRD PARTIES. EXCEPT AS OTHERWISE EXPRESSLY
STATED HEREIN, ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE
VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTIES FOR THE
VIEWS EXPRESSED HEREIN.
About Altair US, LLC
Altair is a family office.
Investor Contact
MacKenzie Partners, Inc.
Bob Marese
(212) 929-5500
Media Contact
Stanley
Rowland
Phone: (925) 708-5611
srowland@ShareholdersDeserveBetter.com
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SOURCE Altair US, LLC
