Sphere 3D Selling Data Protection and Archive Business (Overland/Tandberg) for $45 Million

Sphere 3D Corp., a containerization, virtualization, and data management solutions provider, entered into a definitive agreement to sell its Data Protection and Archive business (DP&A Business) to Silicon Valley Technology Partners LLC, an entity established and controlled by Eric Kelly, chairman and CEO of Sphere 3D, which intends to finance such purchase through raising capital from a coalition of private entities.

The board of directors of Sphere 3D has unanimously (with Kelly recused from the deliberations and voting) approved the transaction upon the unanimous recommendation of a special committee of the board of directors of Sphere 3D, consisting entirely of independent directors).

“I believe the separation of the DP&A business from Sphere 3D is excellent news for all our respective stakeholders. I am excited that the strategy we initiated last year is materializing into positive outcomes for our investors, customers, employees and suppliers,” said Kelly. “The Virtualization and DP&A businesses will become more precise through dedicated tactics that will continue to fortify the continuum of our efforts over the past year and beyond.”

“We are pleased to have reached this agreement to sell the DP&A business,” said Peter Tassiopoulos, president, Sphere 3D. “The sale of this business is consistent with the results of our strategic review and completing a transaction to render the company debt free and allows us to better focus on our converged and hyperconverged product offerings.“

Background
Sphere 3D first announced on March 13, 2017 that it was assessing all opportunities and strategic alternatives that could help increase shareholder value. Then on August 11, 2017, the firm’s board of directors established a special committee comprising of its independent directors to consider its strategic options. On October 2017, the company provided a further update, on its progress and noted that it had completed an analysis of its DP&A portfolio (which includes RDX, tape, media products and related services) as a pro-forma business unit within the Overland-Tandberg storage business group, and that the company was continuing to review the overall business with an eye towards unlocking potential value for shareholders.

Transaction Details
The closing of the transaction is subject to a number of conditions, including approval of the transaction by Sphere 3D’s shareholders and Silicon Valley Technology Partners’ completion of its financing process. Until such financing is committed and accepted by Sphere 3D, Sphere 3D is free to solicit and negotiate other offers to purchase Sphere 3D, Overland Storage, Inc., or any or all of their assets and has the right to terminate the definitive agreement for any or no reason without penalty (subject to an obligation to reimburse certain of the purchaser’s expenses).

At the closing of the transaction, Sphere 3D will receive $45 million, subject to a working capital adjustment. The proceeds from the transaction will be used by the company to pay off existing debt obligations.

The transaction is expected to close in the first or second calendar quarter of 2018, subject to the approval of Sphere 3D shareholders.

In connection with the transaction, the special committee retained Roth Capital Partners, LLC to, among other things, provide an opinion to the fairness of the transaction from a financial point of view to Sphere 3D.