Instructure Rejects Increased Thoma Bravo Offer, Delays Vote

(Bloomberg) -- Educational software company Instructure Inc. said its board has rejected an increased offer from Thoma Bravo and plans to put the original $2 billion takeover proposal from the private equity firm before a shareholder vote Friday.

Preliminary tallies showed Thoma Bravo failed to win the necessary majority support for its original bid of $47.60 a share in cash, Bloomberg News reported Thursday. Instructure said in a regulatory filing that the private equity firm then increased its bid to $48.50 a share, which was subsequently rejected by the board.

A representative for Thoma Bravo declined to comment.

The bid was rejected by Instructure’s board, partly because the new proposal had a more complex structure that would include a two-part tender offer. The board also determined the new price still wouldn’t be sufficient to win investor support, according to people familiar with the matter.

At least four of Instructure’s sizable shareholders reached Thursday said, under the condition of anonymity, that they wouldn’t support the revised terms. Those holders said they would only consider potential acquisitions for Instructure at the mid-to-high $50-a-share range, arguing its Canvas business is extremely valuable.

Instructure’s shares fell 2.8% to $46 at 3:48 p.m. Thursday in New York trading, giving the company a market value of about $1.76 billion.

Board’s Concerns

Instructure said in the filing that the board had concerns about the certainty of closing a transaction under the revised terms, and the impact the new structure of the deal would have on the company’s operations and its relationships with clients, business partners and other stakeholders.

The board unanimously decided to reject the offer, considering, among other concerns, feedback from more than 20 shareholders, according to the filing. The board decided it was in the best interest of shareholders to put the original offer to a vote.

Thoma Bravo agreed to acquire Instructure in December before the price and sale process received investor pushback. Praesidium Investment Management, Rivulet Capital, Lateef Investment Management and Oberndorf Enterprises wrote letters to the board expressing their concerns about both the process and the price.

One-Third Opposed

Shareholders representing about a third of the investor base said they planned to vote against the deal in interviews with Bloomberg and through public statements.

Compounding matters, two prominent shareholder advisory firms -- Institutional Shareholder Services Inc. and Glass Lewis & Co. -- recommended investors vote against the deal.

Both said there was little risk for the Salt Lake City-based company to remain a standalone entity.

Instructure’s board supported the original deal terms, arguing the transaction came after 11 months of talks with potential suitors and followed a strategic review in which 40 parties were contacted and 19 confidentiality agreements signed.

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