On Monday, Squarespace, Inc. (NYSE: SQSP) and the global investment firm Permira announced an amendment to their previous acquisition agreement. In the updated terms, Squarespace shareholders are set to receive $46.50 per share in cash, valuing the transaction at approximately $7.2 billion. This offer is a 5.7% increase from the earlier agreed price of $44.00 per share. The new offer also carries a 36.4% premium over the 90-day volume weighted average trading price and a 21.8% premium over the 52-week high as of May 10, 2024.
The revised offer reflects over 20 times the enterprise value to the projected 2025 unlevered free cash flow, indicating a substantial premium compared to industry peers. The transaction, now structured as a tender offer, hinges on the condition that a majority of the shares held by unaffiliated stockholders are tendered. The Squarespace Board of Directors, with the endorsement of a Special Committee of independent directors, has unanimously approved and recommended the amended agreement.
Michael Fleisher, Chairman of the Special Committee, expressed satisfaction with the updated terms, emphasizing the committee's commitment to securing maximum value and certainty for unaffiliated shareholders. He stated that this outcome is in the best interest of Squarespace and all of its shareholders. Echoing this sentiment, David Erlong, Partner at Permira, highlighted the unanimous approval by Squarespace's Special Committee and Board of Directors and encouraged shareholders to tender their shares to realize the offer's full value.
Details of the tender offer will be disclosed in documents that Permira will file with the Securities and Exchange Commission. Following the merger's completion, Squarespace will transition to a privately-held company, and its common stock will be delisted. The special meeting of Squarespace stockholders, initially set for September 20, 2024, has been canceled. Shareholders seeking information about the tender offer may reach out to Okapi Partners, the appointed Information Agent.
J.P. Morgan is serving as Squarespace's financial advisor, with Skadden, Arps, Slate, Meagher & Flom LLP providing legal counsel. The Special Committee of the Squarespace Board of Directors has engaged Centerview Partners LLC as its financial advisor and Richards, Layton & Finger as legal counsel.
Permira is advised by Goldman Sachs (NYSE:GS) & Co LLC, with Latham & Watkins LLP and Fried, Frank, Harris, Shriver & Jacobson LLP as legal counsel and special tax counsel, respectively. Debt financing is arranged by Blackstone (NYSE:BX) Credit & Insurance, Blue Owl Capital, and Ares Capital Corp.
In other recent news, Squarespace has been the subject of several important developments. The company's Q1 2024 financial results exceeded expectations, with revenue and unlevered free cash flow surpassing the high end of guidance, following the acquisition of Google (NASDAQ:GOOGL) Domains which drove subscription growth for the fourth consecutive quarter.
In another significant move, Squarespace sold its subsidiary, Tock LLC, to American Express (NYSE:AXP) Travel Related Services Company, Inc. for $400 million, marking a substantial cash infusion for the company.
Meanwhile, the proposed acquisition of Squarespace by Permira, a private equity firm, remains a hot topic. Piper Sandler has maintained a neutral stance on Squarespace stock, addressing investor concerns and evaluating the fairness of the offer price in light of Squarespace's projected value. Notably, the company has cleared a significant regulatory hurdle in its transaction with Permira, moving one step closer to the completion of the merger.
In response to these developments, analyst feedback has varied. B.Riley downgraded Squarespace's stock from Buy to Neutral following the announcement of the all-cash acquisition proposal from Permira, while Mizuho upgraded Squarespace from Neutral to Buy, citing key growth drivers that are currently undervalued by the market.
InvestingPro Insights
The recent acquisition offer for Squarespace, Inc. (NYSE: SQSP) by Permira reflects a strategic valuation of the company amidst a dynamic market environment. To provide a clearer picture of Squarespace's financial standing, InvestingPro data indicates a market capitalization of $6.27 billion, with a revenue growth over the last twelve months as of Q2 2024 at 18.76%. This growth is further exemplified by a quarterly revenue increase of 19.89% in Q2 2024. Despite not being profitable over the last twelve months, analysts are predicting profitability for the company this year, as per InvestingPro Tips.
InvestingPro Tips also highlight that Squarespace operates with a moderate level of debt and has experienced a significant price increase over the last six months, with a 43.86% total return in that period. The company's stock is currently trading near its 52-week high, at 99.49% of that value, which aligns with the premium offer presented by Permira. However, it is important to note that Squarespace's short-term obligations exceed its liquid assets, indicating potential liquidity risks.
For investors and shareholders evaluating the tender offer, these metrics and insights can be pivotal. Additional InvestingPro Tips, which number over 10 for Squarespace, can be accessed for a more comprehensive analysis, providing a deeper dive into the company's financials and market position.
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