J'lem-based Answers Corp. unfazed by shareholders’ revolt

Some investors disgruntled over buyout deal.

Australian elections mining stocks 311 AP (photo credit: Associated Press)
Australian elections mining stocks 311 AP
(photo credit: Associated Press)
Answers Corp., owner of the Jerusalem-based Q&A website operator www.answers.com, is not concerned that disgruntled shareholders might topple the proposed buyout by privateequity firm Summit Partners for $127 million in cash.
Since the announcement on Thursday, an unknown number of the company’s shareholders have over the weekend expressed dissatisfaction with the low price tag of the deal, which was unanimously approved by the board of directors.
“The management is very happy with the price of the deal,” said Caleb Chill, general council at Answers Corp. in an interview with The Jerusalem Post from the company’s Jerusalem office on Sunday.
“There is a lot of chatter and noise but no action. We are talking here about a few vocal shareholders but we haven’t seen an announcement of a group of shareholders forming against the deal.”
Chill said that on Monday the company will file a report to the US Securities and Exchange Commission detailing key terms of the merger agreement, date of closure and other terms and conditions. Over the next couple of weeks, the company is preparing the proxy statement, which will be sent to shareholders and include more information on the buyer and the background that led to the transactions.
Under the proposed buyout deal announced on Thursday, AFCV Holdings, LLC, a portfolio company of the private equity firm Summit Partners, will acquire all outstanding shares of Answers.com common stock, Series A convertible preferred stock and Series B convertible preferred stock.
Under the terms of the agreement, Answers.com common stock shareholders will receive $10.50 in cash for each outstanding share of common stock they own. The holders of Series A and Series B convertible preferred stock will also be entitled to receive cash consideration based on the number of the common stock into which those shares are convertible at the time of the merger.
“Based on prior share prices, and other factors, the firms believe that the acquisition price may not be fair for Answers Corp. shareholders, and we are investigating the merger to ensure that the shareholders obtain the maximum value for their shares in this private-equity buyout,” said shareholder rights attorney Willie Briscoe in a statement over the weekend.
The investigation relates to the “fairness” of the proposed transaction to Answers Corp.
shareholders, possible breaches of fiduciary duty and other violations by the board of directors of Answers Corp.
done while approving this transaction. Shareholders are questioning whether Answers Corp.’s board of directors shopped around adequately to get the best possible price and thus acted in their best interests.
In particular, the acquisition price, shareholders complain, is only an approximate 18% premium over Answers Corp.’s closing price the day before the announcement was made on Thursday, while the company’s stock price has increased nearly 50% over the past few months.
“This is a great outcome for our shareholders,” said Bob Rosenschein, founder, chairman and CEO of Answers Corp.
on Thursday. “After an exciting six years as a public company, we are very pleased to achieve considerable value for our investors. The acquisition price of $10.50 per share represents a significant cash premium of approximately 33% over our 90-day volume-weighted average closing stock price.”
Rosenschein added that the agreement is also a positive for community members.
“The integrity and commitment of our company to our products remain unchanged, as we continue our mission of creating the ultimate destination for answers,” he said.
Answers Corp. expects the deal to close in the second quarter of 2011, subject to the satisfaction of customary closing conditions, including the approval of Answers.com shareholders and receipt of regulatory clearance.
Developed in Israel, www.answers.com is a community- generated social knowledge Q&A platform that leverages wiki-based technologies and employs 92 workers worldwide, of whom around 70 are based in Israel. Chill could not comment at this point on whether the company’s development center will remain in Israel.
The company, which was founded in 1998, went public on the Nasdaq in 2004 at a price of $5. Answers.com is integrated with social sites like Facebook and Twitter so members can easily share interesting questions and answers with their personal network online.
In November, Answers.com announced that its user-generated database has reached more than 10 million answers to date. The site currently has more than 5.5 million registered members, up from 5 million registered members in June 2010.
Globally, Answers.com ranked at number 35, with 78.5 million unique visitors worldwide.
On Deloitte’s ranking of the 500 fastest-growing technology, media, telecommunications, life sciences and clean technology companies in North America, the site also came in as the 10th-fastest growing company in the Internet industry on the list. Rankings are based on percentage of fiscal year revenue growth during the period from 2005 to 2009. The site grew its revenues 910% during this period.
UBS Investment Bank is acting as exclusive financial advisor and Kramer, Levin, Naftalis & Frankel, LLC as legal advisor to Answers.com. Jefferies & Company, Inc. is serving as financial advisor and Wilson Sonsini Goodrich & Rosati, Professional Corporation as legal advisor to AFCV Holdings.