Potential Bidding War
Clarke Street Value has recently highlighted a speculative yet interesting setup at MariaDB, a $31m market cap company that provides open-source (i.e. free) database management system with additional premium functionality for enterprises. MariaDB is a struggling, cash-burning business that, back in Oct’23, agreed to a $26m debt financing from its shareholder Runa Capital (8% equity stake) before eventually defaulting on this debt in Jan’24. Since then, the company received a couple of non-binding acquisition offers: (1) in mid-February a $0.55/share bid from K1 Investment Management, a SaaS-focused PE firm with over $13bn in AUM; and (2) in late March a $0.6/share bid from Progress Software, a publicly-listed $2bn+ market cap B2B software company.
The spread to these bids stands at 20% – 30%. The market’s skepticism seems to be explained primarily by the reluctance of insiders/large shareholders to sell the company. A shareholder consortium led by Runa (22% combined ownership, fully controls the board) stated that it will oppose both transactions. Given Runa Capital’s position as the sole senior lender, it might be interested in forcing MRDB into bankruptcy to pick up the assets cheaply during the restructuring. The recent hiring of a Chief Restructuring Officer points to this scenario as well. Runa’s debt agreement contains restrictive covenants that prevent MariaDB from pursuing any major corporate action, including a change of control transaction, without Runa’s consent. Nonetheless, the bids from reputable parties as well as MariaDB’s impressive shareholder roster (including Alibaba and Intel) suggest that there might be substantial value in MRDB’s assets and that a price bump from either party might be in the cards.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring the attention of SSI subscribers. I might not actively follow the developments of these ideas, so there might be limited updates or follow-ups in the comments section.
K1 has acquired 88.7% of shares and initiated the squeeze-out process (to be completed on August 25).
MRDB ($0.54) is currently trading at just 2% below the $0.55/share bid from K1 Investment Management.
2% for a one month wait, any risk?
Writeup price level was $0.49 as of April 1 (CSV Tweet).
July 26, 2024 /PRNewswire/ — Meridian BidCo LLC (“Bidco”), an affiliate of K1 Investment Management, LLC (“K1”), announced earlier this week that its tender offer to acquire the entire issued and to be issued share capital of MariaDB plc (“MariaDB”) for $0.55 per share (the “Offer”) had expired. The Offer was settled in accordance with its terms on July 25, 2024. Bidco now owns 61,263,283 MariaDB ordinary shares, representing 88.70% of the issued share capital of MariaDB as of July 22, 2024.
As previously announced, Bidco now intends to apply the provisions of Sections 456 to 460 of the Companies Act of 2014 of Ireland to acquire compulsorily, on the same terms as the Offer, any outstanding ordinary shares of MariaDB not acquired or agreed to be acquired pursuant to the Offer.
On July 26, 2024, Bidco sent compulsory acquisition notices (the “Notices”) to those MariaDB shareholders who did not accept the Offer (the “Non-Assenting Shareholders”). Following the expiration of 30 calendar days from the date of the Notices, which is expected to be August 25, 2024 (the “Expiration Time”), unless a Non-Assenting Shareholder has applied to the Irish High Court and the Irish High Court orders otherwise, the shares of MariaDB held by Non-Assenting Shareholders will be acquired compulsorily by Bidco (without any action on the part of such shareholders) on the same terms as the Offer, on or about August 26, 2024. The cash consideration payable will be settled no later than three business days after the Expiration Time. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless.