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Delaware
(State or other jurisdiction
of incorporation)
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1-32255
(Commission File Number)
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98-0202855
(IRS Employer Identification No.)
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237 West 35th Street, Suite 1101
New York, NY
(Address of principal executive offices)
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10001
(Zip code)
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Common stockholders would be paid a price per share of $13.50 in cash.
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Stockholders would have the option to continue to hold some or all of their shares and receive cash for the balance. The proposal contemplates that approximately 10% of the post-transaction company shares would be held by existing investors.
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All stockholders would receive two stock warrants, an A Warrant and a B Warrant, exercisable “over the next 24 months.” The A Warrant would be exercisable at $23.50 per share, and the B Warrant would be exercisable at $46.50 per share. No other terms of the proposed warrants were described.
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The stock position held by funds affiliated with Redpoint Ventures would be acquired by Mr. Greenspan’s unspecified “equity backers” directly from Redpoint on the same terms as AFCV ($10.50 per share on a common stock equivalent basis) plus a 1% premium, plus any reasonable legal costs for review of any new purchase agreements with Redpoint, plus any penalties Redpoint is obligated to pay for terminating its sale or voting agreement with AFCV. The purchase would be consummated within 30 days, at which time the two representatives of Redpoint on the Answers.com Board would resign and would be replaced.
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With respect to financing, Mr. Greenspan purports “to have obtained verbal indications of interest for capital commitments more then sufficient to conclude our offer, thru [sic] our discussions with several private equity investment firms and certain institutional investors both in Singapore and the United States (who are not currently stockholders).”
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Mr. Greenspan also “intend[s] to use a $55 million dollar bank loan from a major U.S. bank as part of the overall funding mix that will be used to consummate” the transaction, including the acquisition of the Redpoint equity interest.
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The proposal contemplated “an expedited due diligence review” and “would anticipate relying generally on the representations, warranties, conditions and covenants previously negotiated with AFCV.”
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Mr. Greenspan “expect[s] the merger agreement can be signed within 30 days and a transaction closed within 90 days from” the date of the letter.
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Answers.com would be led by Mr. Greenspan; however, no information as to the remainder of the management team was provided.
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Answers.com would be offered the opportunity in the future to acquire from eJuggernaut, Social Slingshot or certain investor parties certain internet properties in exchange for restricted stock or publicly traded stock of Answers.com.
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Financing. The Board had substantial doubt whether Mr. Greenspan would obtain the funding required to consummate his proposal, which could be in excess of $150 million. In this regard, among other things, the Board noted that:
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According to its website, socialslingshotfund.com, Social Slingshot is a S$5 million Singapore based incubator fund; Answers.com was unable to locate any publicly available information for eJuggernaut.
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The proposal was not accompanied by any written funding commitments, which would customarily be expected to be provided with a competing acquisition proposal delivered on the eve of a stockholder meeting to adopt a merger agreement previously recommended by the Board.
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The proposal letter stated that Mr. Greenspan had “obtained verbal indications of interest for capital commitments more then sufficient to conclude our offer, thru [sic] our discussions with several private equity investment firms and certain institutional investors,” but did not identify who provided those commitments or the amounts, terms or conditions of such commitments.
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The proposal letter states that Mr. Greenspan “intend[s] to use a $55 million dollar bank loan from a major U.S. bank as part of the overall funding mix that will be used to consummate” the transaction. The proposal does not indentify this bank. Also, in consultation with its financial advisors, the Board determined that it was unlikely that Answers.com’s existing cash flow could support such debt load. The proposal letter fails to explain how Answers.com could in fact service the proposed bank loan or whether there were other sources of support proposed to be utilized for debt service.
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Timing. Even if funds were theoretically available in sufficient amount to consummate Mr. Greenspan’s proposal, there is substantial uncertainty as to the timing of its consummation. By contrast, subject to the few remaining customary conditions contained in the AFCV merger agreement, the merger with AFCV would likely be consummated promptly following the vote of stockholders to adopt the merger agreement, scheduled for this week. In this regard, among other things, the Board noted that:
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The proposal is subject to due diligence. While Mr. Greenspan purports to have resources for the purpose of conducting expedited due diligence, there is no certainty as to the outcome of the diligence exercise.
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Under Mr. Greenspan’s proposal, all stockholders would receive warrants to acquire common stock in the post-transaction company. In the absence of an available exemption, these warrants must be registered under the Securities Act of 1933. There is no assurance as to the time that would be required to complete the registration process.
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Mr. Greenspan’s letter suggests that the transaction could be completed within 90 days. However, the letter offers no basis for this assessment.
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Even if the transaction under Mr. Greenspan’s proposal letter could be accomplished in 90 days as Mr. Greenspan’s letter suggests, the transaction would be subject to financial and business risks during that period, particularly in respect of the operational challenges faced by Answers.com and discussed on pages 32-33 of the definitive proxy statement.
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Treatment of Redpoint Preferred Stock. Under Mr. Greenspan’s proposal, the Redpoint affiliated funds, which own the Answers.com Series A and Series B convertible preferred stock and warrants, would receive a lower cash consideration than the holders of common stock, on a common stock equivalent basis. Mr. Greenspan fails to explain why these funds would likely agree to receive less than all other stockholders, and the Board had no reason to believe that Redpoint would agree to do so. The holders of the Answers.com preferred stock hold approximately 25% of the outstanding vote required to approve any merger transaction, which could increase to in excess of 30% if the Redpoint affiliated funds determined to exercise their warrants. There is substantial uncertainty whether any transaction could be approved without the voting support of the Redpoint affiliated funds.
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Concerns Regarding Mr. Greenspan. The Board expressed concerns regarding Mr. Greenspan and significant uncertainty regarding his ability to conclude the proposal reflected in his letter:
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Mr. Greenspan delivered his proposal to Mr. Rosenschein by e-mail over a weekend less than three business days before the meeting scheduled to vote on the merger transaction with AFCV. The merger agreement with AFCV was announced on February 3, 2011, more than two months prior to the delivery of the proposal.
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Based upon publicly available information, it appears that Mr. Greenspan has never concluded an acquisition of a public company. In fact, based upon publicly available information, it appears that on at least two occasions, Mr. Greenspan made offers to acquire a public company but was unable to complete or consummate those offers.
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Despite the complexity of his proposal, Mr. Greenspan has not identified any investment banking firm or other financial advisor assisting with respect to the proposal.
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Other Considerations. The Board also considered certain other issues.
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Because all stockholders would be retaining an equity interest in the post-transaction company, the plans for Answers.com following the transaction would be relevant to the voting and investment decisions of the stockholders. The proposal letter indicates that Mr. Greenspan would seek to combine Answers.com with other internet properties, but provides no clear description of those properties or a business plan for the combined entity. Even if Mr. Greenspan were to provide such information, there is no assurance that the Board would agree with his business plan and or be able to recommend the proposed transaction to stockholders based on that plan.
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While the proposal letter purports to indicate that Mr. Greenspan would model the transaction documentation on the AFCV merger agreement, there is no assurance that Answers.com could reach agreement with Mr. Greenspan on documentation for the proposed transaction.
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The proposal letter contains numerous inconsistencies, ambiguities, and typographical and grammatical errors, casting further doubt on its credibility.
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Under the terms of the AFCV merger agreement, even if the Board determines that Mr. Greenspan’s proposal constitutes a Superior Proposal, Answers.com may only terminate the merger agreement to enter into a definitive agreement with respect to the proposal. There is no assurance that Answers.com would be in a position to enter into a definitive agreement with Mr. Greenspan, on a timely basis or at all. Even if Answers.com were able to enter into a definitive agreement, it would be required under the terms of the AFCV merger agreement to pay a break up fee and to reimburse AFCV for certain expenses at that time, without assurance that a transaction under Mr. Greenspan’s proposal would ultimately be consummated.
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Exhibit No.
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Description
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99.1
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Letter from Brad D. Greenspan, dated April 8, 2011
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99.2
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Press Release, dated April 11, 2011, issued by Answers Corporation
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Answers Corporation
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Date:
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April 11, 2011
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By:
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/s/ Caleb A. Chill
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Name:
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Caleb A. Chill
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Title:
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VP General Counsel & Corporate Secretary
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Exhibit No.
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Description
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99.1
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Letter from Brad D. Greenspan, dated April 8, 2011
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99.2
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Press Release, dated April 11, 2011, issued by Answers Corporation
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