Thoma Bravo’s $2 billion agreement to acquire Instructure, the ed-tech provider of Canvas learning management systems (LMS), has created a whirlwind amongst the company's most significant shareholders. The deal was announced early last month, and within a week, multiple SEC filings made by private equity firm Rivulet Capital and hedge fund Praesidium Investment Management announced their intent to vote against the proposal.
Rivulet and Praesidium – whose combined holdings represent a 12.7 percent stake in the company – expressed concerns that Instructure failed to conduct a comprehensive search for a buyer and settled too quickly on a $47.50 per share price that doesn't correctly reflect the real value of the company. There were also questions whether Instructure engaged in the "comprehensive and deliberate process, lasting eleven months" to find a buyer they described. Praesidium's partners stated they were familiar with at least three large, reputable private equity companies whose offers were rebuffed during the reported review period.
“Due to our growing concerns over the potentially flawed and conflicted process and the resulting bid that we feel undervalues the company, Pradesidium believes the proposed deal is not in the best interests of shareholders and intends to vote against the deal as it is currently presented,” Praesidium’s two founders wrote to Instructure’s board in mid-December.
In addition, the partners pointed to reports received about CEO Dan Goldsmith expressing his disinclination to work for specific prospective acquirers and perhaps placing his interests above those of Instructure's shareholders. They also expressed their opinions about board member Kevin Thompson’s “significant dealings with Thoma Bravo” in his role as president and CEO of Solarwinds Inc.
Instructure has refuted the claims, stating they met with dozens of possible buyers over several months before making a deal with Thoma Bravo, who the company said made the highest offer. The LMS provider also attests to meeting with five potential financial advisors this month before making JP Morgan its exclusive advisor on the negotiations.
According to a PE Hub press release, the agreement stipulated the private equity firm would pay an 18 percent premium on Instructure's 3-month volume-weighted average price as of October 27, 2019. This date was the day before the learning software provider made its third-quarter earnings call, in which it announced a strategic review of its Bridge products.
Instructure’s board voted unanimously in favor of the all-cash transaction and have recommended that shareholders approve the merger. Terms of the deal state that CEO Dan Goldsmith and his leadership team will remain in their roles while Thoma Bravo will support the Utah-based company as it innovates its cloud-based on its education tech offerings and expands into new international markets.
Instructure was founded by two computer science graduate students, Brian Whitmer and Devlin Daley, in 2008 and upended the legacy learning management system with a new platform they called Canvas. Designed as a simple, yet powerful, software solution for delivering courses – it transformed how open technology was thought about in education. The Canvas Network has provided more than 300 courses in cooperation with 150 institutional partners to date.