Another ‘Best and Final Offer’ Emerges as Vote on Instructure Sale Is...


Another ‘Best and Final Offer’ Emerges as Vote on Instructure Sale Is Postponed—Again

By Tony Wan and Wade Tyler Millward     Feb 14, 2020

Another ‘Best and Final Offer’ Emerges as Vote on Instructure Sale Is Postponed—Again

The waiting game continues for Instructure, which has pushed back—again—a shareholders’ vote on an offer from private equity firm Thoma Bravo to acquire the publicly traded company.

The vote, originally set for Feb. 13, was rescheduled for today. But this morning, the company best known for its Canvas learning management system postponed it to Feb. 25.

Along with that announcement came news that Thoma Bravo has increased its purchase offer, from $47.60 (approximately $2 billion total) to $49 a share. There was an earlier offer, at $48.50, that the company board rejected yesterday because the structure of the deal would allow Thoma Bravo to buy shares directly from holders, which could have delayed the acquisition for weeks.

A statement from Instructure said the $49 offer “represents a best and final offer.” It’s worth noting that this phrase was previously used to describe the original one, at $47.60.

“The Board believes this is a compelling offer and will have a high likelihood of passing the shareholder vote,” Instructure CEO Dan Goldsmith wrote to employees, according to a filing with the U.S. Securities and Exchange Commission.

Whether this offer will satisfy Instructure shareholders that have publicly opposed the deal remains to be seen. A growing number of investors and investment advisory firms have lodged complaints about how the company conducted and communicated the sales process, and how the offer from Thoma Bravo undervalues Instructure.

In a note sent today, investment bank Raymond James said:

The best and final offer of $49 from Thoma Bravo represents a 3% increase to the prior bid, which based on our investor conversations may not be enough to approve the deal. We had previously expected that a $50+ bid would be needed for shareholder approval, and that clearly did not materialize. While shares are up in pre-market trading on the higher bid, we think this points to an increasing likelihood that Instructure will remain a public company going forward.

Trace Urdan, a managing director at Tyton Partners, a strategy consulting firm and investment bank, says a no-vote on the deal may not adversely impact Instructure’s operations. “But the consequences of the failure of this deal will be pretty dramatic. What you’ll be left with will be a broken stock,” he says. For shareholders, he adds, “there could be a long slog before getting the stock price back up to the offer price.”

If Instructure calls off the deal, the company is liable for a termination fee of either $29 million or $64 million, depending on the circumstances of the cancellation.

According to education market research firm MindWires, Instructure’s Canvas has a leading market share of learning management systems used in North American higher-ed institutions. But that also means that the company is approaching the ceiling as far as how many other higher-ed institutions will buy Canvas. Instructure executives have previously warned shareholders that growth in this market will slow in the coming years.

That has led the company to branch out into the K-12 and corporate learning markets, the latter of which has proven disappointing so far to Instructure officials and shareholders alike.

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