Carbonite Board Rejects Unsolicited Tender Offer From j2 Global at $15/Share in Cash

Carbonite, Inc. announced that its board of directors has unanimously rejected the unsolicited tender offer from j2 Global, Inc. to acquire all of its outstanding shares for $15.00 per share in cash.

The board, in consultation with its legal and financial advisors, determined that j2’s unsolicited tender offer substantially undervalues the company and is not in the best interests of stockholders. Accordingly, the board strongly recommends that stockholders not tender any of their shares into the j2 offer.

The company filed a Schedule 14D-9 with the SEC detailing the board’s rejection of the offer.

The board also announced that it has authorized the exploration of strategic alternatives, including a potential sale of the company and/or potential material acquisitions, in order to maximize stockholder value. The board has not made a determination to enter into any transaction at this time or in the future, and there can be no assurances that any such transaction can or will be completed. The company does not intend to provide updates unless and until the board approves a specific transaction or otherwise determines that disclosure is appropriate or necessary.

Mohamad Ali, Carbonite’s president and CEO, said: “It is the board’s unanimous belief that j2’s unsolicited and opportunistic offer substantially undervalues Carbonite and is not in the best interests of Carbonite stockholders. Moreover, the Board believes that the execution of the company’s strategic plan will deliver far greater value to stockholders.“

Ali continued: “The board is committed to maximizing value for all stockholders, and therefore has decided to explore all strategic alternatives for the company. Throughout this process, we will remain as focused as ever on continuing to meet the needs of customers and partners, and providing the leading cloud and hybrid backup and archiving solutions they expect from us.”

Reasons for the Recommendation
In making its determination, the board considered a number of factors, including, among others, the following:

The offer fails to deliver a compelling valuation.
The board believes that the Offer substantially undervalues the company based upon various factors considered, including presentations by its financial advisor. Furthermore, the offer represents a premium of only 27.6% compared to the unaffected market price as of December 2, 2014, which is substantially below the mean and median premia paid in U.S. technology transactions from 2011 through 2014.
The board firmly believes that the ideas of the company’s new president and CEO and the execution of the company’s strategic plan will deliver far greater value for the company’s stockholders than that reflected in the Offer.
The new president and CEO has strategies with respect to improved operating and margin performance, scalability of the business and other areas of operational and strategic focus, including expanding the market for the company’s products through broader distribution capabilities, as well as enhanced features and functionality in the product portfolio.
The board has authorized the exploration of all strategic alternatives.
The board is willing to explore all potential strategic alternatives, including a potential sale of the company (to j2 or otherwise) and/or potential material acquisitions, in order to maximize stockholder value. The company has been approached by parties, expressing interest in exploring transactions that could include a potential sale of the company and/or potential material acquisitions. The board has authorized company management to explore these potential transactions as well as to engage in discussions with other parties that could lead to other potential transactions. The board has not made a determination to enter into any transaction at this time or in the future, and there can be no assurances that any such transaction can or will be completed. The company does not intend to provide updates unless and until the Board approves a specific transaction or otherwise determines that disclosure is appropriate or necessary.
The offer is opportunistically timed.
The board believes that the pffer represents an opportunistic attempt by j2 to purchase the Sshares at a low share price and, as a result, deprive any company stockholders who tender their shares of the potential opportunity to realize the long-term value of their investment in the company.
The company has demonstrated consistent non-GAAP net income improvement since 2010, with ($25 million) for the year ended December 31, 2010, ($21 million) for the year ended December 31, 2011, ($12 million) for the year ended December 31, 2012, ($3 million) for the year ended December 31, 2013, ($5 million) for the nine months ended September 30, 2013 and $1 million for the nine months ended September 30, 2014, propelled by the SMB pivot the company started in 2013. Non-GAAP net income (loss) is a financial measure that has not been calculated in accordance with U.S. GAAP. The most directly comparable GAAP financial measure is net income (loss). The company believes j2 recognizes that the company has moved into a new era of profit growth in 2014 and is moving to capture the value expected in this profit trajectory by acquiring the company at the offer price, before the company’s stockholders are able to realize additional value.
The conditions to the offer create significant uncertainty and risk.

Stockholder Rights Plan
Carbonite also announced that its board has adopted a stockholder rights plan in response to the unsolicited tender offer launched by j2. The plan is intended to provide the board with sufficient time to consider any and all strategic alternatives, including a potential sale of the company (to j2 or otherwise) and/or potential material acquisitions, and does not prevent the board from considering or accepting the offer, if the board believes such action is fair, advisable and in the best interests of its stockholders

Under the plan, the board authorized and declared a dividend of one preferred share purchase right for each share of Carbonite common stock. If any party acquires 10% (or 20% in the case of a passive investor) or more of the outstanding shares without first obtaining board’s approval, the rights held by the company’s stockholders other than the acquiror would become exercisable for shares or common stock of the acquiror at a discounted price. If, as of the time of this press release, a stockholder’s beneficial ownership is at or above 10% (or 20% in the case of a passive investor), that stockholder’s existing ownership percentage is grandfathered, but, with certain exceptions, the rights would become exercisable if at any time after the time of this release, the stockholder increases its ownership%age by 0.001% or more. The plan will expire on January 7, 2016.

This description of the plan and the rights is qualified in its entirety by the plan, which has been filed with the SEC.

Deutsche Bank Securities Inc. is acting as financial advisor to Carbonite and Sidley Austin LLP is acting as legal advisor.

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