• Calls $44.00 per Share Merger Consideration Offered by Permira Inadequate

• Considers Industry Standard Methodologies of Transaction Valuation Analysis to Have Been Omitted from Fairness Opinion, Resulting in Significant Undervaluation

• Believes Flawed, Self-Serving Process Was Designed to Benefit Controlling Shareholders and Permira, to the Detriment of Minority Shareholders

• Highlights That the Two "Selected Comps" Singled Out by Special Committee's Financial Advisor Have Appreciated More than Premium Offered by Permira

• Intends to Vote AGAINST the Acquisition at the Upcoming Squarespace Special Meeting

NEW YORK , Aug. 14, 2024 /PRNewswire/ -- Glazer Capital, LLC, a manager of investment funds and separate accounts that collectively beneficially own 2,500,000 shares of Squarespace, Inc. (NYSE: SQSP) common stock, or approximately 5.4% of the shares owned by minority shareholders, today issued an open letter to the Squarespace Board detailing its opposition to the proposed acquisition of Squarespace by Permira Advisers and disclosing its intent to vote against the transaction at the upcoming special meeting of Squarespace shareholders.

The full text of the letter follows below:

August 14, 2024

Squarespace, Inc.
225 Varick Street
12^th Floor
New York, New York 10014
Attention:  Board of Directors

Dear Members of the Board of Directors of Squarespace (the "Board"):

On May 13, 2024, Squarespace, Inc. ("Squarespace" or the "Company") announced that it had entered into a definitive agreement to be acquired by affiliates of Permira Advisers LLC ("Permira"). The Company's founder and CEO, Anthony Casalena, General Atlantic and Accel (collectively, the "Controlling Shareholders" and together with Permira, the "Purchasers") will participate in the transaction by rolling over and/or reinvesting equity. The agreement calls for Squarespace's minority shareholders to receive $44.00 cash (the "Merger Consideration") in exchange for each share of the Company (the "Acquisition"), representing an unaffected premium of approximately 15%—consideration which materially undervalues Squarespace.

Glazer Capital, LLC ("Glazer Capital", "us" or "we") strongly believes that the Merger Consideration is demonstrably inadequate and is the product of a self-serving go-private process engineered by a founder-CEO that presently controls, and desires to retain control over, Squarespace's destiny.  It is also our view that the Acquisition was orchestrated to deliver the Company into the arms of a handpicked private equity consortium. Accordingly, we intend to vote all of our shares against this transaction at the upcoming meeting of Squarespace shareholders.

Glazer Capital contends that, among other things: 1) two key valuation analyses often found in M&A fairness opinions, and which are supportive of a price per share for the Company far greater than $44.00, appear to have been conveniently omitted from Centerview Partners' ("Centerview") fairness opinion (the "Fairness Opinion"), which the special committee of the Board (the "Special Committee") apparently relied upon in determining to recommend the Acquisition to the full Board; 2) the Acquisition was the result of a flawed process designed to benefit the Purchasers – in particular Anthony Casalena – to the detriment of Squarespace's minority shareholders; and 3) Centerview discussed the proposed sale of Tock LLC, a key Squarespace subsidiary, with Permira four days after the final bid deadline, at which point no other bidders remained in the process.

The Special Committee Relied on a Deficient Fairness Opinion

We believe that the Fairness Opinion excluded two key analyses that are most relevant to valuation in a go-private transaction such as the Acquisition. Specifically, the Fairness Opinion failed to include either a premiums paid analysis or a precedent transaction analysis. However, Goldman Sachs, advisor to Permira, did conduct both such analyses, and we believe that they each support a value per share of Squarespace materially higher than $44.00.

Premiums Paid Analysis
Centerview failed to include an analysis of premiums paid in comparable precedent transactions in its Farness Opinion. Goldman Sachs, however, prepared an analysis titled US Related Party Transaction Premia, a portion of which is replicated below.

Glazer Capital believes that Goldman Sachs's broad sample of precedent 13E-3 transactions over a 16-year period supports a price range of $49.30 - $50.87 per share of Squarespace, and that the two recent precedent transactions cited specifically by Goldman Sachs support a price range of $46.97 - $59.19 per share for Squarespace.  In other words, the proposed Merger Consideration is substantially inadequate.

Precedent Transactions Analysis
Centerview also failed to include an analysis of valuation multiples of comparable precedent transactions in its Farness Opinion. Goldman Sachs, however, prepared an analysis titled Selected Public Software Transactions, with an emphasis on what it termed "Sponsor Deals", a portion of which is replicated below.

Glazer Capital believes that Goldman Sachs's sample of selected public software transactions, particularly its sponsor deals subset, supports a price range of $40.43 – $105.48 per share for Squarespace. The Merger Consideration falls below the 25^th percentile of such precedents. Once again, the Merger Consideration is substantially inadequate.

We question whether Centerview omitted the premiums paid and precedent transactions analyses from its Fairness Opinion because they highlight how inadequate the Merger Consideration is to Squarespace's minority shareholders.

Discounted Cash Flow ("DCF") Analysis

In providing its opinion to the Special Committee, Centerview calculated a range of implied enterprise values for the Company using discount rates ranging from 12.5% to 14.5% to derive a range of implied values per share of Squarespace common stock of approximately $41.65 to $53.10.⁴ Yet, the Company itself determined, during a goodwill impairment test conducted in the fourth quarter of 2022, that the appropriate WACC to use in valuing itself was 11%.⁵ It appears to Glazer Capital from Centerview's own presentation that an 11% WACC would have implied a value per share of Squarespace substantially greater than $44.00.⁶

Deficient Process Favored Controlling Shareholder and Permira

Glazer Capital believes that the process that led to the Acquisition was designed to unfairly benefit the Purchasers, particularly Anthony Casalena, Squarespace's founder and CEO.  We summarize below our key takeaways and observations with respect to the background section of the Squarespace Proxy Statement (the "Background") and why it suggests to us that Squarespace's sale process was flawed.

Sale of Tock

On June 21, 2024, approximately one month following the announcement of the Acquisition, Squarespace announced an agreement to sell Tock LLC, a platform serving the hospitality industry, to American Express for a price of $400 million (the "Tock Sale").

Squarespace's FY 2023 Form 10-K reports that:

• Squarespace acquired Tock in 2021 for total consideration of $425.7 million;
• Squarespace recognized a $225.2 million impairment charge for its Tock reporting unit in Q4 2022.⁸

These figures imply that Tock was sold at a 99.5% premium to its most recent publicly disclosed carrying value. Critically, however, Permira appears to have been the only prospective bidder for Squarespace to which material details regarding the Tock Sale were disclosed.

The $400 million purchase price for Tock amounts to approximately $2.65 per fully diluted share of Squarespace on a pre-tax basis (based on 150.6 million fully diluted shares).¹⁰  This represents approximately 6% of the Merger Consideration. Yet it appears that none of the bidders aside from Permira were provided sufficient disclosure regarding Tock during their due diligence.

We Intend to Vote AGAINST the Acquisition

Glazer Capital believes that the Merger Consideration is inadequate and shortchanges Squarespace's minority shareholders. From where we stand: 1) the Special Committee recommended the Acquisition based on an opinion from Centerview which strangely omitted crucial analyses and inputs supportive of a higher price per share of Squarespace and 2) the terms and price of the Acquisition were arrived at through a flawed process designed to favor the interests of the Controlling Shareholders, in particular Mr. Casalena, as well as Permira.

Finally, since the close of trading on May 13, 2024, following the announcement of the Acquisition, Wix.com Ltd. and GoDaddy, Inc., the two "selected competitors" of Squarespace singled out by Centerview in multiple presentations to the Special Committee¹¹ have seen their stock prices appreciate 25% and 20%, respectively.¹²Glazer Capital has become increasingly convinced that the approximately 15% unaffected premium offered by the Purchasers for Squarespace is inadequate when viewed in this context.

Our serious concerns about the fairness and integrity of the sales process, in addition to the insufficient Merger Consideration, lead us to believe that the Acquisition is not in the best interest of Squarespace's minority shareholders.  Accordingly, Glazer Capital intends to vote against the Acquisition and asks the Board to immediately reconsider its recommendation thereof.

Sincerely,

Paul J. Glazer
Chief Executive Officer and Chief Investment Officer
Glazer Capital, LLC

Mark Ort
Portfolio Manager
Glazer Capital, LLC

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About Glazer Capital, LLC

Glazer Capital, LLC is a New York City-based, global investment management firm founded by Paul J. Glazer. The firm began investing in 1999, specializing in investment strategies that are intended to be non-directional, market neutral, and liquid. Glazer Capital aims to achieve uncorrelated absolute returns in all market environments through its disciplined investment approach, research-driven methodology, and focus on risk management. The firm had assets under management of approximately $2 billion as of June 30, 2024.

Company Contact
Glazer Capital, LLC
info@glazercapital.com

Media Contacts
Shaina Lamb / Jeff Siegel
Dukas Linden Public Relations
glazercapital@dlpr.com

Disclaimer

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein in any state to any person. This press release does not recommend the purchase or sale of a security. There is no assurance or guarantee with respect to the prices at which any securities of Squarespace, Inc. ("Squarespace" or the "Company") will trade, and such securities may not trade at prices that may be implied herein. In addition, this press release and the discussions and opinions herein are for general information only, and are not intended to provide investment advice.

This press release contains forward-looking statements. Forward-looking statements are statements that are not historical facts and may include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future financial results, events, operations, services, product development and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates", "plans", "will be" and similar expressions. Although Glazer Capital, LLC ("Glazer Capital") believes that the expectations reflected in forward-looking statements contained herein are reasonable, investors are cautioned that forward-looking information and statements are subject to various risks and uncertainties—many of which are difficult to predict and are generally beyond the control of Glazer Capital or Squarespace—that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. In addition, the foregoing considerations and any other publicly stated risks and uncertainties should be read in conjunction with the risks and cautionary statements discussed or identified in the Company's public filings with the U.S. Securities and Exchange Commission, including those listed under "Risk Factors" in Squarespace's annual reports on Form 10-K and quarterly reports on Form 10-Q and those related to the Pending Transaction (as defined below). The forward-looking statements speak only as of the date hereof and, other than as required by applicable law, Glazer Capital does not undertake any obligation to update or revise any forward-looking information or statements. Certain information included in this material is based on data obtained from sources considered to be reliable. Any analyses provided to assist the recipient of this material in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. Accordingly, any analyses should not be viewed as factual and should not be relied upon as an accurate prediction of future results.  All figures are unaudited estimates and, unless required by law, are subject to revision without notice.

Glazer Capital's funds and separate accounts currently beneficially own shares of the Company.  These funds and investment vehicles are in the business of trading (i.e., buying and selling) securities and intend to continue trading in the securities of the Company. You should assume such funds and investment vehicles will from time to time sell all or a portion of their holdings of the Company in open market transactions or otherwise, buy additional shares (in open market or privately negotiated transactions or otherwise), or trade in options, puts, calls, swaps or other derivative instruments relating to such shares. Consequently, Glazer Capital's beneficial ownership of shares of, and/or economic interest in, the Company may vary over time depending on various factors, with or without regard to Glazer Capital's views of the pending transaction involving the Company and Permira Advisers LLC (the "Pending Transaction") or the Company's business, prospects, or valuation (including the market price of the Company's shares), including, without limitation, other investment opportunities available to Glazer Capital, concentration of positions in the portfolios managed by Glazer Capital, conditions in the securities markets, and general economic and industry conditions. Without limiting the generality of the foregoing, in the event of a change in the Company's share price on or following the date hereof, Glazer Capital's funds and separate accounts may buy additional shares or sell all or a portion of their holdings of the Company (including, in each case, by trading in options, puts, calls, swaps, or other derivative instruments relating to Squarespace shares). Glazer Capital also reserves the right to change the opinions expressed herein and its intentions with respect to its investment in the Company, and to take any actions with respect to its investment in the Company as it may deem appropriate, and disclaims any obligation to notify the market or any other party of any such changes or actions, except as required by law. 

 

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SOURCE Glazer Capital, LLC