December 13, 2019 / 12:07 AM / 2 months ago

Hedge fund Praesidium to oppose Instructure sale to Thoma Bravo: filing

NEW YORK (Reuters) - Praesidium Investment Management said on Thursday it will vote against Instructure Inc’s (INST.N) plan to sell itself to private equity firm Thoma Bravo, becoming the second big investor to speak out against the proposed $2 billion deal.

“Due to our growing concerns over the potentially flawed and conflicted process and the resulting bid that we feel undervalues the Company, Praesidium 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 on Thursday.

The letter was made public in a regulatory filing. Instructure did not immediately respond to a request for comment.

The New York-based hedge fund owns roughly 2.9 million shares of the U.S. educational software company’s stock, or 7.5% of the outstanding shares.

The partners said the proposed sale offer represents a 10% discount to Instructure’s closing share price before the deal was announced and criticized the way it was reached. “We believe the process was rushed, lacks transparency and is potentially riddled with conflicts of interest,” the letter said.

Praesidium’s criticism echoes complaints from Rivulet Capital, which said it opposed the deal last week. Rivulet, which owns 5.23% of Instructure, said in a regulatory filing it plans to vote against the transaction.

Praesidium has been talking privately with Instructure for months, but its letter said it was often kept in the dark.

Even after signing a confidentiality agreement, the “board denied Praesidium any concrete financial information or plan,” the letter said. The hedge fund thought management spent only two weeks conducting a full strategic review, but Instructure later said in a filing that it had been looking for a buyer for months.

Praesidium also voiced concern over potential conflicts of interest involving Instructure’s chief executive, and said board member Kevin Thompson had “significant dealings with Thoma Bravo” in his role as president and CEO of SolarWinds Inc.

“We have heard deeply concerning reports that CEO Dan Goldsmith has expressed to shareholders his unwillingness to work for certain potential acquirers, which means he may have put his own interest ahead of Instructure shareholders.”

Representatives for Goldsmith and Thompson could not be reached for immediate comment.

Instructure’s share price had climbed to $53 a share by late November after Praesidium and Sachem Head Capital Management publicly pushed management to sell. Shares closed at $48 on Thursday.

Reporting by Svea Herbst-Bayliss; Editing by Tom Brown

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