Broadcast graphics specialist ChyronHego announced that it has entered into a definitive agreement with Vector Capital, under which an affiliate of Vector will acquire all of the outstanding shares of ChyronHego common stock for $2.82 per share in cash.
San Francisco-based Vector Capital is a private equity firm with experience in the digital media sector. Recent portfolio investments include Corel and Technicolor. To fund the ChyronHego deal, Vector has secured committed financing consisting of a combination of equity and debt.
This is the second recent take-private transaction of a broadcast graphics provider. Earlier this month. Vizrt announced that it will be taken private by Nordic Capital in a $374m all-cash deal.
The $2.82 per share purchase price represents a premium of approximately 18% over the company’s average closing share price for the six months ending on November 14, 2014, and a 4% premium over the company’s closing share price on November 14, 2014, the last day of trading before the announcement.
Based on the total number of shares outstanding in ChyronHego, the deal equates to an equity value of approximately $114m. After backing out the cash on the company’s most recently published financial statements, this represents an enterprise value of approximately $108m. On a valuation multiple basis, this is approximately 1.8x trailing 12 month’s revenue.
According to a shareholder FAQ, ChyronHego’s management team will stay the same after the transaction closes. Johan Apel will continue as CEO, and Soren Kjellin will continue as CTO.
The contractual details of the ChyronHego – Vector Capital agreement are complex and worth a longer discussion. We are preparing an analysis of the deal, and we will post this later this week.
A very brief synopsis of certain deal points follow:
- Technically, the deal is a merger rather than an acquisition. ChyronHego is being merged into an entity controlled by Vector Capital, in order to create a new corporate entity, which will also be owned and controlled by Vector Capital.
- All major shareholders on the ChyronHego management team have agreed to re-invest approximately 50% of their holdings in ChyronHego into the new corporate entity, for which they will receive approximately 31% of the equity in the new entity
- Interestingly the merger agreement includes a “go shop” provision whereby ChyronHego has seven weeks to find a buyer who will offer a higher price than Vector Capital’s offer of $2.82 per share. Given Vizrt’s valuation in the Nordic Capital deal, and the fact that shares of ChyronHego have traded above $3.00 several times during the past year, it is possible that ChyronHego will be able to find a better offer. However, the “go shop” provision includes termination fees that will triggered under specified circumstances such as the acceptance of a superior offer. The company says it does not intend to disclose developments with respect to the solicitation process unless and until a decision has been made in respect to any potential superior proposal.
The transaction is subject to customary closing conditions and most notably the approval by holders of two-thirds of ChyronHego’s outstanding shares and the approval by holders of a majority of shares held by current ChyronHego’s stockholders who will not become stockholders in the going-forward entity. The Company expects the transaction to close in the first quarter of fiscal 2015.
The company said that its board of directors and a special committee of the board composed entirely of independent directors have unanimously approved the deal, and have recommend that ChyronHego’s stockholders approve the transaction
“We are very happy to announce this partnership with Vector Capital, an established global technology oriented private equity firm that is focused on building long-term value. Our management is convinced that this is the right opportunity at the right time for ChyronHego’s customers, employees and stockholders,” said Apel.
In the third quarter of 2014, ChyronHego posted a net loss of $2.6m on revenue of $14. During the first nine months of 2014, ChryronHego posted a net loss of $2.8m on revenue of $43.3m.
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