Sphere 3D (ANY-V) to acquire Overland for $81.13-million (U.S.) and arranges $10-million bought-deal offering respectively.
May 15, 2014 - News Release
Sphere 3D Corp. and Overland Storage Inc.'s boards of directors have unanimously approved a definitive merger agreement, under which the companies would combine to create a leading global virtualization and data management software solutions company. The name of the combined company will be Sphere 3D. Under the terms of the merger agreement, each outstanding share of Overland common stock will be exchanged for 0.510594 common shares of Sphere 3D, subject to certain potential adjustments as set forth in the agreement. After completion of the transaction, it is expected that current holders of Overland shares will own approximately 28.8 per cent of Sphere 3D on a fully diluted basis as a result of their exchange of shares in the merger. Based on the closing sales price of Sphere 3D common shares on May 14, 2014, the last trading day prior to the announcement of the transaction on the TSX Venture Exchange, the total consideration payable to holders of Overland equity in the transaction has an implied value of approximately $81.13-million (U.S.), or approximately $4.43 (U.S.) per Overland share.
On May 14, 2014, the last trading day prior to the announcement of the transaction, the closing price of the Overland shares on the Nasdaq was $2.90 (U.S.) and the closing price of the Sphere 3D shares on the TSX-V was $9.46 (or $8.68 (U.S.)). The acquisition price represents a premium of approximately 53 per cent over the closing price of the Overland shares on the Nasdaq on the last trading day immediately preceding the announcement of the transaction and a premium of approximately 27 per cent over the weighted average trading price of the Overland shares on the Nasdaq and Sphere 3D on the TSX-V for the 30 trading days immediately preceding the announcement of the transaction.
Sphere 3D and Overland have been working in tandem to develop an integrated application virtualization and data storage platform, as well as a virtual desktop infrastructure (VDI) solutions, which are already installed at select strategic customers and partners. The application virtualization platform allows native third party applications to be delivered in the cloud or on premise on a multitude of end-point devices independent of their operating system. The VDI market, a key segment of the virtualization market, is estimated to be over $5-billion and growing 20 per cent annually, according to Frost & Sullivan. Through the combination, Sphere 3D will have greater financial and operational scale, and a large and well-established worldwide distribution network and tier one OEM partnerships.
The combination of Sphere 3D's Glassware 2.0 virtualization solution and Overland's data storage solutions will enable mobile device users the full functionality of any software program or application on any device, anywhere, eliminating the application limitations, data management and security problems for enterprises created by the BYOD (bring your own device) phenomenon. Mobile users that need productivity applications such as word processing, spreadsheets, presentations and collaborations, specialized software for computer-aided design (CAD), magnetic resonance imaging (MRI), software development, video production, or customized legacy applications can now experience full application functionality via the cloud or in the data centre.
Management comments
Commenting on behalf of Sphere 3D, Peter Tassiopoulos, chief executive officer, stated: "This transformational deal allows us to immediately gain the scale, infrastructure and resources required to become a leading global virtualization company, and strengthens Sphere's ability to service and support partners and customers globally. In addition, this transaction provides greater certainty in leveraging Overland's existing global distribution network as well as their significant tier one OEM relationships."
Eric Kelly, president and CEO of Overland Storage, said: "This merger brings together next-generation technologies for virtualization and cloud coupled with end-to-end scalable storage offerings enabling us to address the larger and growing virtualization and cloud markets. This along with Overland's global network of services and reseller partners, and our worldwide manufacturing capabilities supports our path for growth and profitability to create significant value for shareholders of both companies."
Approvals
The transaction requires customary closing conditions, shareholder approval of Overland and receipt of all necessary regulatory approvals. The transaction is expected to close in the third calendar quarter of 2014. Upon the completion of the transaction, Overland's common stock will cease trading on the Nasdaq and Sphere 3D shares are expected to trade on the Toronto Stock Exchange and Nasdaq markets.
Pursuant to the agreement, Overland is subject to customary non-solicitation covenants. In the event a superior proposal is made and if in response, Overland's board of directors changes its recommendation of the transaction to the Overland shareholders or terminates the transaction under certain circumstances, Overland has agreed to pay Sphere 3D a termination fee of $3.5-million (U.S.).
The transaction has received the unanimous support of the boards of directors and management of both Sphere 3D and Overland. Certain significant shareholders of Overland, including Cyrus Capital Partners and its affiliates, have entered into voting agreements with Sphere 3D pursuant to which they have agreed to vote the Overland shares beneficially owned by them (collectively representing approximately 64 per cent of the outstanding Overland shares) in favour of the transaction, subject to the terms and conditions set forth in the voting agreements.
Eric Kelly, the chief executive officer, president and board member of Overland, is also the chairman of the board of Sphere 3D, and accordingly declared his conflict and recused himself from casting any vote with respect to the transaction. Mr. Kelly has non-material share ownership in both Overland and Sphere 3D. No collateral benefit has been paid to Mr. Kelly in connection with the consummation of the transaction. The Overland board of directors formed a special committee of independent directors to review and evaluate the proposed transaction. Sphere 3D appointed Glenn Bowman, the chairman of the audit committee, as its lead director with respect to the evaluation of this transaction.
Advisers
Roth Capital Partners was retained to provide a customary fairness opinion to the special committee of the board of directors of Overland. Cormark Securities Inc. has provided a fairness opinion to the board of directors of Sphere 3D. Both Roth and Cormark shall be entitled to fees customary for such advisory and transaction services.
Investor conference call
Sphere 3D and Overland Storage will host an investor conference call today, Thursday, May 15, at 5 p.m. ET (2 p.m. PT). To access the call dial 888-846-5003 (1-480-629-9856 outside the United States) and when prompted provide the passcode Overland Storage to the operator. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, a live and archived webcast of the conference call will be available at the Overland and Sphere 3D websites in the investor relations section. A replay of the conference call will also be available via telephone by dialling 800-406-7325 (1-303-590-3030 outside the United States) and entering access code 4682043 followed by the pound key beginning at 8 p.m. ET on May 15, 2014, through 11:59 p.m. ET on May 22, 2014.
May 15, '14 - NR
Sphere 3D Corp. has entered into an agreement with a syndicate of investment dealers led by Cormark Securities Inc. and including Jacob Securities Inc. and Paradigm Capital Inc. pursuant to which the underwriters have agreed to purchase, on a bought-deal basis, 1,176,500 special warrants of the company at a price of $8.50 per special warrant, resulting in gross proceeds of $10,000,250 to the company. Each special warrant is exercisable into one unit of the company, with each unit being composed of one common share of the company and one-half of a common share purchase warrant of the company. Each whole warrant is exercisable at an exercise price of $11.50 for a period of two years from the closing date.
The underwriters will have the option to arrange for the purchase of up to an additional 15 per cent of special warrants (being up to 176,475 special warrants) sold under the offering at the issue price. The underwriters' option shall be exercisable, in whole or in part, until the time of closing. The underwriters shall be entitled to the same commission provided for herein in respect of any special warrants issued and sold upon exercise of the underwriters' option.
The underwriters are entitled to receive a cash commission equal to 6 per cent of the gross proceeds of the offering. The company will also reimburse the underwriters for reasonable fees and expenses incurred in connection with the offering.
The offering is scheduled to close on or before June 3, 2014. All securities issued in connection with the offering are subject to a four-month hold period from the issuance date in accordance with the policies of the TSX Venture Exchange and applicable Canadian securities laws. The offering is subject to all required regulatory approvals, including the approval of the TSX-V.
Sphere 3D intends to file a short-form prospectus in each of the provinces of British Columbia, Alberta and Ontario (and such other provinces and territories of Canada as may be agreed to by Cormark Securities and the corporation) qualifying the units issuable upon exercise or deemed exercise of the special warrants by July 31, 2014, failing which the holder would be entitled to receive 1.05 units upon exercise or deemed exercise of the special warrants.
It is expected that $5-million of the offering will be advanced to Overland Storage Inc. by way of an interim financing loan, as required pursuant to the agreement and plan of merger agreement entered into today among the company, its wholly owned acquisition company, S3D Acquisition Company, and Overland, and the balance will be used for working capital purposes. |
