- Urges Company to Maximize Shareholder Value by Accepting Offer -
SAN FRANCISCO, MARCH 25 /PRNewswire/ -- Vector Capital, a leading
private equity firm specializing in spinouts, buyouts and recapitalizations
of established technology businesses, today sent the following letter to
Captaris Inc.'s (Nasdaq: CAPA or "the Company") Board of Directors
regarding its $4.75 per share proposal, a 36.1% premium, for the Company.
The full text of the letter that Vector Capital sent to Captaris' Board
of Directors can be found below along with a copy of a letter Captaris sent
to Vector on March 21:
The Board of Directors
c/o Bruce L. Crockett
Non-Executive Chairman of the Board
Captaris, Inc.
10885 NE 4th Street, Suite 400
Bellevue, WA 98004
Dear Members of the Board of Directors:
As Captaris' (the "Company") largest shareholder with an ownership
stake of 10.2%, Vector Capital ("Vector") is extremely disappointed that
the Company continues to refuse to engage with us in any meaningful
discussions about our proposal to purchase Captaris for $4.75 per share, or
a 36.1% premium, as outlined in our March 17, 2008 letter to you. Our offer
represents immediate and certain value, does not preclude the continuation
of your exploration of other strategic alternatives, and thus would clearly
be in the best interests of all Captaris shareholders. Vector has also
received significant feedback from several other large Captaris
shareholders who strongly support our proposal.
Given your commitment to conclude the process as "expeditiously as
possible," we were surprised and disappointed by the following:
1) No one from Captaris or its banking and legal advisors has contacted
Vector to ask any questions about our offer;
2) Captaris has not offered Vector any meetings;
3) No information has been provided on the sale process or a timeline;
4) No additional due diligence access has been provided; and
5) No attempt has been made by Captaris or its advisors to negotiate
price, due diligence, length of the go-shop or any of the terms of our
proposal.
In addition, your March 21 response letter, attached below, mistakenly
asserts that we are seeking to "preempt" your process, and that we are
requesting an exclusive negotiation period. Instead, it is clear from our
past communications, and we will reiterate, that our "go-shop" proposal
does not preempt your exploration of strategic alternatives. Instead, it
assures your shareholders a price no less than $4.75 per share and gives
you the opportunity to concurrently seek a higher offer.
Captaris has stated in the past, without providing any evidence, that
it believes our "go-shop" transaction structure will not maximize
shareholder value. We would like to highlight empirical, third-party
evidence supporting that an acceptance of our "go-shop" provision will
likely maximize shareholder value.
A comprehensive January 2008 analysis by Guhan Subramanian, a Professor
at the Harvard Business School and the Harvard Law School, entitled
Go-Shops vs. No-Shops in Private Equity Deals: Evidence and Implications
concluded that, "on average, go-shops yield more aggregate searches,
significant post-signing competition, and slightly higher returns to target
shareholders than traditional no-shop deals." Our proposal is less
preclusive than most "go-shop" transactions in only entitling Vector to
expense reimbursement in the event of acceptance of a topping bid during
the go-shop period.
Vector strongly believes it is imperative to act with urgency to
prevent further shareholder loss. The risk of continuing to execute the
unsuccessful Captaris strategy is compounded by the highly uncertain market
environment.
Vector reiterates its offer to acquire Captaris for $4.75 per share
and, if accepted, will commit to providing a draft of the definitive
agreement within 24 hours. In addition, Vector is willing to minimize its
due diligence timeframe to just seven days and only focus on the following
areas:
1) Reviewing a breakdown of the total current cash balance (to ensure that
at least 50% of it is available to use immediately without any
restrictions) by geography and timeline of repayment of the inter-
company loan of EUR31.6 million, per the Company's 2007 10-K filed
March 17, 2008;
2) Reviewing the methodology used to value the pension fund liabilities of
the ODT transaction and confirm that the liabilities do not exceed
EUR12.1 million, as reported in the Company's 2007 10-K, filed
March 17, 2008;
3) Reviewing 2008 year-to-date actual revenue results and 2008 sales
pipeline to support management's revenue guidance of $140 million as
provided on the Company's Q4 2007 earnings call on February 14, 2008;
4) Confirming the Company's maintenance renewal rates;
5) Holding meetings with key individuals of senior management. We require
no additional meetings with your CEO or CFO; and
6) Conducting expedited public technology company legal and accounting due
diligence.
Furthermore, assuming a definitive agreement can be signed by April 4,
2008, Vector is willing to extend the go-shop period to 45 days and cap its
expense reimbursement at $1 million in the event of acceptance of a higher
bid during this period. This provides Captaris' Board until May 19, 2008,
which we believe is an ample amount of time to run a thorough process and
find a higher offer, should one exist. By pursuing this proposal, the
Company can seek to avoid further erosion to shareholder value and damage
to Captaris' future market value and prospects while preserving its ability
to run a full process.
If we do not hear favorably from you by 12 p.m. PDT on March 27, 2008,
we will assume you have no interest in pursuing our proposal that provides
shareholders with a price no less than $4.75 per share.
It is important that the Board of Captaris recognize that our offer
will not remain in place beyond March 27. Following that date, any
re-evaluation will be a function of market conditions and the health of
Captaris' business at that time.
We urge the Captaris Board to reconsider and accept our proposal. We
look forward to hearing from you.
This letter is not intended to create or reflect any legally binding
obligation by us regarding the proposed transaction and no such obligation
shall arise unless and until a mutually acceptable definitive agreement is
executed.
Sincerely,
VECTOR CAPITAL CORPORATION
Amish Mehta
Authorized Signatory
About Vector Capital
Vector Capital is a leading private equity firm specializing in
spinouts, buyouts and recapitalizations of established technology
businesses. Vector identifies and pursues these complex investments in both
the private and public markets. Vector actively partners with management
teams to devise and execute new financial and business strategies that
materially improve the competitive standing of these businesses and enhance
their value for employees, customers and shareholders. Among Vector's
notable investments are LANDesk Software, Savi Technology, SafeNet, Corel
Corporation, Precise Software Solutions, Printronix, Register.com, Tripos,
WinZip and Watchguard Technologies. For more information, visit
http://www.vectorcapital.com.
Contact
Brunswick Group
Erin Becker, 212-333-3810
Mike Buckley, 415-293-8461
Text of Captaris Letter to Vector on March 21, 2008
March 21, 2008
Vector Capital Corporation
456 Montgomery Street, 19th Floor
San Francisco, CA 94104
Attention: Alex Slusky
Dear Alex:
In response to Amish Mehta's letter and as stated in our press release
of March 18, 2008, we are committed to an expeditious process to identify
and pursue the strategic alternative that best enhances value for our
shareholders. Your proposal to acquire the outstanding common stock of
Captaris will be carefully considered and reviewed together with all other
proposals that are developed during our evaluation of strategic
alternatives. In furtherance of that goal, our financial advisors have
reached out to you to include you in our process.
The special committee of independent directors of the Board is focused
on undertaking a thorough and expeditious process in order to realize full
value for all Captaris shareholders. We firmly believe that the best way to
achieve maximum value for Captaris shareholders is through the successful
completion of the strategic alternatives process. For that reason, although
we welcome your continued interest in our Company, we do not plan to
preempt the process at this time by entering into exclusive negotiations or
offering any of the special accommodations requested by you.
Sincerely,
Bruce L. Crockett
Chairman of the Board
cc: Peter Malloy, Esq.
Andrew Bor, Esq.
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