Shareholders of New York-based Diligent Corp have voted in favour of a takeover by venture capital firm Insight Venture Partners at a special shareholders' meeting in Auckland this morning, despite fiery opposition by New Zealand retail shareholders.
It means the company will delist from the NZX tomorrow after a decade and the deal will then close on Friday.
The outcome of today's vote was a foregone conclusion given the majority required - over 50 percent - had already voted in favour by proxy vote.
New Zealand Shareholders' Association chairman John Hawkins said his organisation, which held proxies on behalf of shareholders, voted against the deal because the "current offer is low compared to where the company's prospects have been in the past".
"It has been said that no better offer has been received. That is true, but that doesn't make a low offer acceptable," he said. "What has happened to boards acting in the best interests of the company and by extension the shareholders.
Or is the American way to say 'to hell with small shareholders, let's get rich ourselves' - something I would call the Donald Trump approach."
Chairman David Liptak, whose company Spring Street is the largest shareholder with a 22 percent stake, said the board had done an exhaustive five-month sales process involving 28 companies doing due diligence, and the Insight Ventures offer was the best it received.
Despite the fiery opposition from NZ small shareholders today, Liptak said he and the board believed the deal was in the best interests of the company, which sells corporate governance software, and all shareholders.
"You can argue with my judgement but not my motivation. In my view, this was the best outcome," he said.
But another shareholder Mike Cohen said it was a "black day" because another New Zealand-based company had been snuffed out.
Insight Ventures is based in Delaware where Diligent is domiciled and the takeover process of the company was based on US law which requires 50 percent of shareholders on the register to accept the deal. At that point the buyer can compulsorily acquire the rest of the shares. The threshold in New Zealand is 90 percent.
Under the terms of the deal, Diligent shareholders will receive $7.39 (US$4.90) in cash per share, valuing the company at $941 million and at a 31 percent premium to the pre-announcement share price.
You can argue with my judgement but not my motivation. In my view, this was the best outcome.
US investment bank Jefferies found the deal was fair, from a financial point of view, to shareholders. The firm was paid US$8.5 million for its report by Diligent, the proxy statement notes, with US$1 million paid on delivery of its opinion and the rest on the resolution of the merger.
Locally-based Simmons Corporate Finance also produced an independent appraisal report that found the offer fair and valued Diligent's shares in the range of US$4.44 to US$5.16 per share.
Diligent shares have risen to $7 from $1 when listed under its then name of Diligent Board Member Services in 2007, raising $24 million in an initial public offering of 23 percent of its shares.
The software-as-a-service (SaaS) company has had something of a rollercoaster ride since being founded by Kiwi Brian Henry who was later forced to resign. In June last year the company was censured by the New Zealand Markets Disciplinary Tribunal for the third time in two years after the sudden departure of director Mark Weldon meant the company breached NZX listing rules.
Harbour Asset Management, which had owned nearly 9.3 million shares or 10.7 percent of Diligent, had also sold 5.4 million shares ahead of today's vote, leaving it with just 4.7 per cent of the company. Harbour managing director Andrew Bascand previously criticised the takeover offer as opportunistic.
Investors not subject to the foreign investment fund regime - typically those with less than $50,000 invested overseas - will be taxed on the total income received from the deal, a move heavily criticised today by small shareholders.
Diligent's delisting allows natural health products company Comvita to take its place and enter the S&P/NZX 50 Index.
Diligent chief executive Brian Stafford and the current senior management team will continue to lead the business after the transaction closes. Stafford has said the company's game plan won't change as a private company - it wants to be the leading provider of collaboration software for boards, committees and leadership teams.
Diligent's results for the 2015 year released in late February showed gross profit rose 19 percent to US$65.4 million but earnings before interest, tax, and amortisation fell to US$15.8 million from US$17.9 million the prior year. Some 70 percent of its US$99.3 million revenue was derived from the American region.
The takeover documents forecast a revenue uplift to US$122 million this year and US$265 million by 2020, with gross profit rising from a forecast US$99 million in 2016 to US$225 by 2020.