Magnet Forensics Announces Closing of Plan of Arrangement with Thoma Bravo

WATERLOO, Ontario–(BUSINESS WIRE)–
Magnet Forensics Inc. (the “Company” or “Magnet JSON FILE”) (TSX: MAGT), a developer of digital investigation solutions for enterprises and public safety organizations, is pleased to announce the closing of the previously announced plan of arrangement (the “Arrangement”) with Morpheus Purchaser Inc. (the “Purchaser”), a newly created corporation controlled by Thoma Bravo, a leading software investment firm, whereby the Purchaser acquired all of the issued and outstanding subordinate voting shares (“SV Shares”) and multiple voting shares (“MV Shares”, and together with the SV Shares, the “Shares”) of the Company, subject to the terms and conditions of the definitive arrangement agreement entered into on January 20, 2023 (the “Arrangement Agreement”).

“On behalf of the whole team at Magnet Forensics, I would like to thank our shareholders for joining our mission, to seek justice and protect the innocent and helping accelerate our growth,” said Adam Belsher, CEO of Magnet. “As we enter this new chapter for Magnet and Grayshift, we are extremely grateful to all of our stakeholders and Thoma Bravo, who have enabled this opportunity to help our global public safety and enterprise customers transform their digital investigations to help turn the tide on cybercrime and crimes with digital evidence such as human trafficking and child sexual exploitation,” continued Mr. Belsher.

“Grayshift partnered with Thoma Bravo in 2022 in large part because of their reputation and drive to do transformative M&A. This has been central to our strategy as we have planned for rapid growth, and here we are!” said David Miles, Co-Founder and Chief Executive Officer of Grayshift. “We are incredibly excited to bring together Magnet Forensics and Grayshift to create a leader in digital forensics and cyber security. Magnet has long been a trusted and strategic partner and we are confident that together we will accelerate innovation and transformation of digital investigations,” continued Mr. Miles.

Pursuant to the Arrangement Agreement, the Purchaser acquired (i) all of the SV Shares for a cash payment of CA$44.25 per SV Share, other than those held by the Rolling Shareholders¹, (ii) all the Shares (other than the Rollover Shares²) held by the Rolling Shareholders for a cash payment of CA$39.00 per Share and (iii) the Rollover Shares, which were exchanged for shares of the Purchaser at an implied value of CA$39.00 per Rollover Share. The independent directors of the Company (other than Mr. Jim Balsillie) resigned from the board of directors of the Company and have been replaced with persons appointed by the Purchaser.

The SV Shares of Magnet are expected to be delisted from the Toronto Stock Exchange and the Company intends to apply to cease to be a reporting issuer under applicable Canadian securities laws.

Registered shareholders of Magnet are reminded to submit a duly completed Letter of Transmittal and the share certificate(s) representing their Shares, as applicable, to Computershare Investor Services Inc. (“Computershare”), the Company’s depositary, in order to receive the cash consideration under the Arrangement. If you have any questions or require further information about the procedures to complete your Letter of Transmittal, please contact Computershare at 1‑800‑564-6253 (toll-free within North America) or by email at corporateactions@computershare.com.

Non-registered shareholders of Magnet are not required to submit a Letter of Transmittal. Non-registered shareholders will receive the consideration they are entitled to under the Arrangement through the intermediary in whose name their Shares are held. Non-registered shareholders should consult with their broker or intermediary to confirm what, if anything, they must do to receive such consideration.

Early Warning Reporting

Further to the requirements of National Instrument 62-104 Take-Over Bids and Issuer Bids and National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, Graynet GP, LLC (“Graynet GP”), which controls the Purchaser, and the Rolling Shareholders will each file an early warning report in accordance with applicable securities laws. A copy of each of the early warning reports will be made available on SEDAR at www.sedar.com. Further information and a copy of the early warning reports may be obtained by contacting Neil Desai at pr@magnetforensics.com.

Immediately prior to closing of the Arrangement, Graynet GP did not own, or exercise control or direction over, directly or indirectly, any Shares of the Company. Upon the completion of the Arrangement, Graynet GP currently controls 22,572,665 SV Shares and 18,686,389 MV Shares of the Company representing 100% of the issued and outstanding Shares of the Company. The aggregate consideration paid by the Purchaser for the Shares (excluding any Rollover Shares) was approximately CA$1,044,155,363. The Rollover Shares were exchanged for shares of the Purchaser at an aggregate implied value of CA$627,880,695. Following the completion of the Arrangement, the Company became a wholly-owned subsidiary of the Purchaser.

The office address of Graynet GP is c/o Thoma Bravo, L.P., 2916 North Miami Avenue, Suite 9C, Miami, FL 33127.

On April 5, 2023, immediately prior to closing of the Arrangement, the Shares held by Mr. Saliba and certain entities controlled by Mr. Saliba were reorganized (the “Saliba Group Reorganization”), resulting in (i) Candestra Holdings Inc. holding 5,314,805 SV Shares and 3,612,237 MV Shares; (ii) The Saliba 2014 Family Trust holding 2,649,024 MV Shares; and (iii) Mr. Saliba directly holding 101,344 SV Shares and 133,269 MV Shares.

Also immediately prior to closing of the Arrangement, the Shares held by Mr. Belsher and certain entities controlled by Mr. Belsher were reorganized (the “Belsher Group Reorganization”, and together with the Saliba Group Reorganization, the “Pre-Closing Reorganizations”), resulting in (i) Fortis Investments Inc. holding 5,067,943 SV Shares and 3,681,847 MV Shares; (ii) The Belsher 2014 Family Trust holding 2,376,589 MV Shares; and (iii) Mr. Belsher directly holding 101,344 SV Shares and 34,373 MV Shares.

Prior to the completion of the Pre-Closing Reorganizations and the closing of the Arrangement, Mr. Saliba beneficially owned, or exercised control or direction over, an aggregate of 184,261 SV Shares representing approximately 1.5% of the Company’s issued and outstanding SV Shares and 11,626,418 MV Shares representing approximately 40.2% of the Company’s issued and outstanding MV Shares, which, collectively represent approximately 28.6% of all issued and outstanding Shares. The aggregate consideration received by Mr. Saliba for his Shares (excluding any Rollover Shares) was approximately CA$207,277,395. The Rollover Shares held by Mr. Saliba were exchanged for shares of the Purchaser at an aggregate implied value of CA$253,339,086. Upon completion of the Arrangement, Mr. Saliba became a minority shareholder of the Purchaser and no longer directly held any Shares of the Company.

Prior to the completion of the Pre-Closing Reorganizations and the closing of the Arrangement, Mr. Belsher beneficially owned, or exercised control or direction over, an aggregate of 184,261 SV Shares representing approximately 1.5% of the Company’s issued and outstanding SV Shares and 11,077,835 MV Shares representing approximately 38.3% of the Company’s issued and outstanding MV Shares, which, collectively represent approximately 27.3% of all issued and outstanding Shares. The aggregate consideration received by Mr. Belsher for his Shares (excluding any Rollover Shares) was approximately CA$197,649,777. The Rollover Shares held by Mr. Belsher were exchanged for shares of the Purchaser at an aggregate implied value of CA$241,571,967. Upon completion of the Arrangement, Mr. Belsher became a minority shareholder of the Purchaser and no longer directly held any Shares of the Company.

Prior to the completion of the Pre-Closing Reorganizations and the closing of the Arrangement, Mr. Balsillie beneficially owned, or exercised control or direction over, an aggregate of 6,199,050 MV Shares representing approximately 21.4% of the Company’s issued and outstanding MV Shares. The aggregate consideration received by Mr. Balsillie for his Shares (excluding any Rollover Shares) was approximately CA$108,793,308. The Rollover Shares held by Mr. Balsillie were exchanged for shares of the Purchaser at an aggregate implied value of CA$132,969,642. Upon completion of the Arrangement, Mr. Balsillie became a minority shareholder of the Purchaser and no longer directly held any Shares of the Company.

The office address for the Rolling Shareholders is 2220 University Avenue East, Suite 300, Waterloo Ontario N2K 0A8.

All dollar amounts set forth in this press release are in Canadian dollars unless stated otherwise.

Unless otherwise indicated or the context otherwise requires, the references to numbers and percentages of Shares owned or controlled, directly or indirectly, in this press release are calculated on the basis of 12,355,751 SV Shares and 28,903,303 MV Shares issued and outstanding as of April 4, 2023.

About Magnet Forensics

Founded in 2010, Magnet Forensics is a developer of digital investigation software that acquires, analyzes, reports on, and manages evidence from digital sources, including computers, mobile devices, IoT devices and cloud services. Magnet Forensics’ software is used by more than 4,000 public and private sector customers in over 100 countries and helps investigators fight crime, protect assets and guard national security.

About Thoma Bravo

Thoma Bravo is one of the largest software investors in the world, with more than US$120 billion in assets under management as of December 31, 2022. Through its private equity, growth equity and credit strategies, the firm invests in growth-oriented, innovative companies operating in the software and technology sectors. Leveraging Thoma Bravo’s deep sector expertise and strategic and operational capabilities, the firm collaborates with its portfolio companies to implement operating best practices and drive growth initiatives. Over the past 20 years, the firm has acquired or invested in more than 435 companies representing over US$240 billion in enterprise value.¹ The firm has offices in Chicago, London, Miami, New York and San Francisco. For more information, visit Thoma Bravo’s website at thomabravo.com and Twitter @ThomaBravo.

¹ Includes control and non-control investments.

Cautionary Note Regarding Forward-Looking Information

This press release contains “forward-looking information” and “forward-looking statements” (collectively, “FLS”) within the meaning of applicable securities laws. Such FLS are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Any such FLS may be identified by words such as “proposed”, “expects”, “intends”, “may”, “will”, and similar expressions. FLS contained or referred to in this press release includes, but is not limited to, statements regarding the delisting of Magnet’s SV Shares from the Toronto Stock Exchange and the timing thereof, the application of the Company to cease to be a reporting issuer, and the combination of the Company with Grayshift.

FLS is based on a number of factors and assumptions which have been used to develop such statements and information, but which may prove to be incorrect. Although the Company believes that the expectations reflected in such FLS are reasonable, undue reliance should not be placed on FLS because the Company can give no assurance that such expectations will prove to be correct. Factors that could cause actual results to differ materially from those described in such FLS include, without limitation, the following factors, many of which are beyond the Company’s control and the effects of which can be difficult to predict: (a) the possibility of adverse reactions or changes in business relationship resulting from the completion of the Arrangement; (b) the possibility of litigation relating to the Arrangement; (c) risks related to the Company resulting from the Arrangement, and from the combination of the Company and Grayshift, in retaining existing customers and attracting new customers, retaining key personnel, executing on growth strategies, advancing its product line and protecting its intellectual property rights and proprietary information; (d) risks related to the Company’s ability to prevent unauthorized access to or disclosure, loss, destruction or modification of data, through cybersecurity breaches or computer viruses disrupting the functionality of the Company’s products; (e) the impact of competition; (f) changes and trends in the Company’s industry and the global economy; (g) the possibility that the Company’s application to cease to be a reporting issuer may not be accepted or be delayed; and (h) the identified risk factors included in the Company’s public disclosure, including the annual information form dated March 8, 2023, which is available on SEDAR at www.sedar.com and on the Company’s website at www.magnetforensics.com. If any of these risks or uncertainties materialize, or if the assumptions underlying the FLS prove incorrect, actual results or future events might vary materially from those anticipated in the FLS. Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in FLS, there may be other risk factors not presently known to the Company or that the Company presently believes are not material that could also cause actual results or future events to differ materially from those expressed in such FLS. The FLS in this press release reflect the current expectations, assumptions, judgements and/or beliefs of the Company based on information currently available to the Company, and are subject to change without notice.

Any FLS speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any FLS, whether as a result of new information, future events or results or otherwise, except as required under applicable securities laws. The FLS contained in this press release are expressly qualified by this cautionary statement. For more information on the Company, please review the Company’s continuous disclosure filings that are available at www.sedar.com.

No securities regulatory authority has either approved or disapproved of the contents of this news release. The TSX accepts no responsibility for the adequacy or accuracy of this release.

_________________________________

¹ “Rolling Shareholders” means Jad Saliba, Director, President and Chief Technology Officer of the Company, Adam Belsher, Director and Chief Executive Officer of the Company, and Jim Balsillie, Chair of the board of directors of the Company, and their respective associates and affiliates.

² “Rollover Shares” means 55% of the Shares held by the Rolling Shareholders.

Source: Magnet Forensics