Thoughtworks Holding, Inc. (Thoughtworks) recently announced an Agreement and Plan of Merger with affiliates of Turing EquityCo II L.P., guided by Apax Partners LLP. Following a passed stockholder vote, the acquisition is now set to close, and Thoughtworks will cease trading on the Nasdaq after the close of extended hours trading on November 12th. This article explores the terms of the merger, the stockholder considerations, and financial implications of Thoughtworks’ transition to private ownership.
Key Merger Details
Under the terms of the approved merger, Thoughtworks will be acquired by Tasmania Midco, LLC, with Thoughtworks set to operate as a wholly owned subsidiary following the merger. This merger is expected to impact a range of stakeholders, especially Thoughtworks’ stockholders, as the merger finalizes on November 12th, and the company’s stock will be delisted. Here’s a closer look at how the merger is structured and the implications for those involved.
Merger Parties and Structure
The primary entities involved in this merger are:
Thoughtworks Holding, Inc.: The company being acquired, offering a blend of digital consulting and software development services.
Tasmania Midco, LLC and Tasmania Merger Sub, Inc.: Subsidiaries of Turing EquityCo II L.P., affiliated with Apax Partners LLP, these entities will jointly absorb Thoughtworks, making it a private entity.
With Apax Partners LLP driving this acquisition, Thoughtworks will be able to adopt a long-term, strategy-driven focus under private ownership, without the constraints of public market pressures.
Consideration Offered to Stockholders
Per the merger agreement, Thoughtworks stockholders will receive $4.40 in cash per share of common stock they hold, payable without interest, though subject to tax withholdings. This cash payment will be the final consideration for each share of Thoughtworks common stock.
Two categories of shares will not be eligible for this payment:
Treasury Shares: Shares currently held by Thoughtworks as treasury shares or shares already owned by Parent or Merger Sub subsidiaries.
Dissenting Shares: Shares held by stockholders who do not consent to the merger and opt for appraisal rights under Delaware law.
Dissenting stockholders must follow specific procedures if they wish to seek appraisal rights, which could entitle them to a judicially determined fair value for their shares as an alternative to the $4.40 per-share payout.
Treatment of Equity Awards
As part of the merger’s structure, existing equity awards and stock options granted to Thoughtworks employees and executives will undergo specific treatments:
Conversion to Topco Shares: Significant stockholders and certain management members who hold Thoughtworks stock will roll over their shares into Topco, the parent entity created for the merger, receiving newly issued Topco shares valued at the per-share price of the merger.
Assumption of Equity Awards: Select equity awards will be converted into Topco-based equity, aligning with the terms of the merger to provide continuity for key executives and alignment with Topco’s future growth objectives.
Role of the Special Committee
Thoughtworks formed a Special Committee of independent directors to evaluate and recommend the merger’s terms. After consulting financial advisors and rigorously assessing the merger’s fairness, the Special Committee unanimously determined that the terms are fair and advisable for the unaffiliated stockholders. With financial insights from Lazard Frères & Co. LLC, the Special Committee’s endorsement was critical in gaining full board approval.
This reliance on the Special Committee’s assessment highlights Thoughtworks’ efforts to meet standards of fairness and transparency, particularly for minority shareholders.
Stockholder Approval and Acquisition Close
Apax Partners’ Turing EquityCo II L.P. controls approximately 61.2% of Thoughtworks’ voting power, meeting the majority threshold required to approve the merger without a general stockholder vote. This written consent method, authorized by Delaware’s General Corporation Law, bypassed the need for a formal stockholder meeting, with stockholders instead being formally notified of the consent-based approval.
With the stockholder vote complete, the acquisition is confirmed to close on November 12th, with trading of Thoughtworks stock on the Nasdaq to cease after the close of extended hours trading on that date.
Appraisal Rights for Dissenting Stockholders
Under Delaware law, dissenting stockholders who did not vote for or consent to the merger have the right to demand an appraisal. By adhering to the procedural requirements in Section 262 of Delaware’s General Corporation Law, dissenting stockholders may seek a court-determined fair value for their shares instead of the $4.40 offer.
For stockholders interested in this option, time is essential: a formal written demand for appraisal must be submitted within 20 days of receiving the merger notification.
Benefits of the Merger
The merger offers both strategic and financial benefits for Thoughtworks:
Enhanced Resource Access: With Apax Partners’ support, Thoughtworks may gain access to expanded resources and infrastructure to support growth.
Strategic Flexibility: As a private company, Thoughtworks can focus on long-term strategic goals under Apax’s vision, without the volatility or scrutiny of the public market.
Defined Cash Payout: Stockholders are assured of a fixed buyout price, which may offer security during market fluctuations.
Potential Risks and Considerations
Stockholders should also be mindful of certain risks and considerations:
Reduced Control and Transparency: As a private subsidiary, Thoughtworks will operate without stockholder input on future business decisions, and former stockholders will not receive the same level of business insight.
Appraisal Rights Complexity: Dissenting stockholders seeking appraisal rights may encounter costs and legal risks. The court’s fair value determination might differ from the $4.40 offer, introducing potential financial uncertainty.
Final Thoughts
The Thoughtworks merger marks a pivotal moment, with the company transitioning to a private entity backed by Apax Partners. With the acquisition closing on November 12th and the Nasdaq delisting set for after the close of extended hours trading on the same day, stockholders face important decisions. For those who are considering appraisal rights, consulting with a financial advisor can help navigate the complexities of this option.
As Thoughtworks enters this new phase, it has an opportunity to pursue a long-term strategic vision while offering stockholders a clear exit path. Whether opting for the cash payout or pursuing appraisal rights, each stockholder will need to weigh the options carefully.
FAQs
What is the per-share price in the Thoughtworks merger?
The agreed per-share price is $4.40, payable in cash to Thoughtworks common stockholders.
Can I retain my shares instead of accepting the cash offer?
No, due to the structure of the merger, all shares will be acquired by the parent company. However, dissenting stockholders can seek appraisal rights.
How do I exercise my appraisal rights?
A formal written demand must be submitted within 20 days of the merger notice, following Delaware’s procedures for appraisal rights.
When will Thoughtworks stock be delisted?
Thoughtworks stock will be delisted from the Nasdaq after the close of extended hours trading on November 12th.
What are the next steps for stockholders?
Stockholders can either accept the payout or exercise appraisal rights if they wish to seek an alternative valuation.
TWKS Merger
TWKS Merger
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