Investor advisory firm opposes sale of Instructure

An influential investor advisory firm recommended that Structure shareholders vote against a proposal to take the publicly traded learning management system provider private for about $2 billion, according to an article from Reuters.

Institutional Shareholder Servicesalso known as ISS, reportedly said in a memo to clients that “the conduct of the process, a seemingly unconvincing assessment and a strong, stand-alone case” warrant a vote against the deal.

On Monday, Salt Lake City-based Instructure, best known for its market-dominating Canvas LMS for colleges, pushed back in a statement and encouraged shareholders to vote on Feb. 13 to approve the deal to sell to the equity firm. Thomas Bravo investment.

Instructure “conducted a comprehensive, conflict-free and well-publicized strategic review process, allowing any party to make their interest known to the board,” said the statement. “Despite these efforts and a post-signing ‘go-shop’ period, no other parties have expressed serious interest in pursuing buy talks at a price above $47.60 per share.”

“Instructure’s Board of Directors believes that the cash transaction of $47.60 per Thoma Bravo share represents the best possible path to maximizing shareholder value because it offers certain and compelling value,” continued the communicated. “The board of directors recommends that shareholders vote in favor of the transaction.”

Rishi Jaluria, senior research analyst at DA Davidson & Co., said in an email that ISS’ concerns were not surprising given some shareholders’ reaction to the deal.

Instructure shareholders Praesidium Investment Management, Rivulet Capital, Lateef Investment Management and Oberndorf Enterprises also publicly opposed the deal. They leveled charges against Instructure, including a lack of transparency in how Instructure executives found a buyer and secured a deal that undervalues ​​the company.

“I think that’s a big deal because a lot of INST’s ownership is with passive investors (Vanguard, Blackrock, etc.) who often listen to advisory firms like ISS and Glass Lewis,” Jaluria said. in an email. “In my mind, that creates even more uncertainty ahead of the vote, because there’s a chance it won’t pass now.”

Some academics also responded negatively to the deal, raising concerns about student data. The deal also recalls the case of Blackboard, which transitioned from a publicly traded LMS provider to a private equity firm in 2011. Blackboard has consistently lost market share to Instructure.

Instructure argued the deal is fair — and a possible necessity — because Canvas faces growth headwinds while Instructure’s enterprise LMS product, Bridge, has disappointed in terms of performance.

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