INNERWORKINGS, INC. Item 8.01. Other Events.
Litigation Related to the Merger.
As previously disclosed, onJuly 15, 2020 ,InnerWorkings, Inc. , aDelaware corporation (the "Company"), entered into an Agreement and Plan of Merger, by and amongHH Global Group Limited , a company registered inEngland andWales ("Parent"),HH Global Finance Limited , a company registered inEngland andWales ("HH Finance") andProject Idaho Merger Sub, Inc. , aDelaware corporation and wholly owned subsidiary of Parent ("Sub"), and the Company (as amended from time to time, the "Merger Agreement"). The Merger Agreement provides for, among other things, Sub to merge with and into the Company, causing the Company to become a wholly owned subsidiary of Parent (the "Merger"). Lawsuits relating to the merger were filed onAugust 14, 2020 in theUnited States District Court for the Southern District of New York ,August 17, 2020 in theSupreme Court of the State of New York ,August 20, 2020 in theUnited States District Court for the Eastern District of New York and in theUnited States District Court for the District of Delaware ,August 25, 2020 in theUnited States District Court for the District of Delaware ,August 26, 2020 in theUnited States District Court for the Southern District of New York and September 4, 2020 in theUnited States District Court for the Southern District of New York . The lawsuits, filed by purported stockholders of the Company, are captioned Bollur v.InnerWorkings, Inc. , et. al., No. 1:20-cv-06452, filed as an individual action (the "Bollur Lawsuit"), Khan v.InnerWorkings, Inc. , et. al., No. 653867/2020, filed as a putative class action on behalf of the stockholders of the Company (the "Khan Lawsuit"), Lee v.InnerWorkings, Inc. , et. al., No. 1:20-cv-03812, filed as an individual action (the "Lee Lawsuit"), Stein v.InnerWorkings, Inc. , et. al., No. 1:20-cv-01095-UNA, filed as an individual action (the "Stein Lawsuit"),Franchi v.InnerWorkings, Inc. , et. al., No. 1:20-cv-01114-UNA, filed as a putative class action on behalf of the stockholders of the Company (the "Franchi Lawsuit"), Hinden v.InnerWorkings, Inc. , et. al., No. 1:20-cv-06892, filed as an individual action (the "Hinden Lawsuit") and Altamirano v.InnerWorkings, Inc. , et. al., No. 1:20-cv-07268, filed as an individual action (the "Altamirano Lawsuit"). The Bollur, Lee, Stein,Franchi , Hinden and Altamirano Lawsuits allege that the preliminary proxy statement filed onAugust 10, 2020 (or, in the case of theFranchi , Hinden and Altamirano Lawsuits, the definitive proxy statement filed onAugust 21, 2020 ), relating to the transactions contemplated by the merger agreement, omitted material information in violation of Sections 14(a) and 20(a) of the Exchange Act and certain rules promulgated thereunder. The Khan Lawsuit alleges, among other things, that the Company's directors breached their fiduciary duties in connection with the merger. The lawsuits name as defendants the Company and its directors and seek, among other relief, injunctive relief. There can be no assurance regarding the ultimate outcome of these lawsuits. The Company believes that the claims asserted by the plaintiffs are without merit. However, in order to moot the plaintiffs' unmeritorious disclosure claims, alleviate the costs, risks and uncertainties inherent in litigation and provide additional information to its stockholders, the Company has determined to voluntarily supplement the definitive proxy statement filed onAugust 21, 2020 (the "Definitive Proxy Statement") as described in this Current Report on Form 8-K; plaintiffs agree that the supplemental disclosures moot their claims and have agreed to withdraw their complaints and demands, respectively, upon the filing of this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, the Company specifically denies all allegations by the plaintiffs that any additional disclosure was or is required.
Supplemental Disclosures.
The following disclosures supplement the disclosures contained in the Definitive Proxy Statement and should be read in conjunction with the disclosures contained in the Definitive Proxy Statement, which should be read in its entirety. To the extent the information set forth herein differs from or updates information contained in the Definitive Proxy Statement, the information set forth herein shall supersede or supplement the information in the Definitive Proxy Statement. All page references are to pages in the Definitive Proxy Statement, and terms used below, unless otherwise defined, have the meanings set forth in the Definitive Proxy Statement. -------------------------------------------------------------------------------- The fourth and fifth sentences of the fourth full paragraph on page 37 under the header "Background of the Merger" of the Definitive Proxy Statement are hereby amended and restated as follows: In addition, each of the confidentiality agreements (other than the agreement with Party C) prohibited the counterparty from requesting that the Company (or the Board or the Company's representatives) amend, waive, grant any consent or otherwise not enforce any provision of the standstill provision. However, each confidentiality agreement (including the confidentiality agreement with Party C) permitted the counterparty to make unsolicited private proposals to the Board from and after the time the Company entered into a definitive agreement to engage in a change of control transaction.
The third and fourth sentences of the paragraph under the subheader "Discounted Cash Flow Analysis" on page 57 of the Definitive Proxy Statement are hereby amended and restated as follows:
Citi calculated implied terminal values for the Company by applying to the Company's terminal year unlevered, after-tax free cash flow a selected range of perpetuity growth rates of 3.0% to 4.0%, which range was selected based on Citi's professional judgment and taking into account, among other things, Company management forecasts and the long-term expected growth potential for the geographic markets in which the Company operates. The present values (as ofJune 30, 2020 ) of the cash flows and terminal values were then calculated using both a selected range of discount rates of 13.0% to 15.2% derived from a weighted average cost of capital calculation taking into account, among other things, the Company's pre-global COVID-19 pandemic market capitalization (approximately$200 million as ofFebruary 19, 2020 ) and, as a sensitivity reflective of the potential for a higher cost of capital for the Company given taking into account the Company's lower market capitalization (approximately$70 million as ofJuly 14, 2020 ) following the onset of the global COVID-19 pandemic, a selected range of discount rates of 15.7% to 18.8%.
The first sentence of the third paragraph under the subheader "Selected Precedent Transactions Analysis" on page 57 of the Definitive Proxy Statement is hereby amended and restated as follows:
The low and high LTM adjusted EBITDA multiples observed for the selected precedent transactions were 4.6x and 5.4x. Citi applied the range of LTM adjusted EBITDA multiples derived from the selected precedent transactions of 4.6x to 5.4x both to the Company's LTM estimated adjusted EBITDA (as ofJune 30, 2020 ) and, as a sensitivity given, based on Company management forecasts, the continued impact on the Company of the global COVID-19 pandemic, to the Company's next 12 months estimated adjusted EBITDA (for the period endingJune 30, 2021 ).
The third bullet point under the header "Certain Additional Information" on page 58 of the Definitive Proxy Statement is hereby amended and restated as follows:
• enterprise values as a multiple of calendar year 2021 estimated adjusted
EBITDA, and closing stock prices (as of
the extent meaningful, of calendar year 2021 estimated earnings as
adjusted for certain non-recurring items, as applicable (referred to asadjusted earnings), of six selected companies in the print and business
process outsourcing industry consisting of Avery Dennison Corporation,
CCL Industries Inc., Cimpress plc, Deluxe Corporation, Matthews
as the selected print/BPO companies) and four selected companies in the
marketing services industry consisting of The Interpublic Group of
Companies, Inc., Omnicom Group Inc., Publicis Groupe and WPP plc
(referred to as the selected marketing services companies), based onpublicly available research analysts' estimates; applying the overall low
to high selected range of calendar year 2021 estimated adjusted EBITDA
multiples derived from the selected print/BPO companies and selected
marketing services companies of 4.7x to 11.8x and 4.4x to 7.5x,
respectively, to corresponding data of the Company based on Company
management forecasts indicated approximate implied equity value reference
ranges for the Company of
per share, respectively, and applying the overall low to high selected
range of calendar year 2021 estimated adjusted earnings multiples derived
from the selected print/BPO companies and selected marketing services
companies of 4.4x to 17.6x and 6.3x to 10.5x, respectively, to
corresponding data of the Company based on Company management forecasts
indicated approximate implied equity value reference ranges for the
Company of $0.70 to $2.80 per share and $1.00 to $1.70 per share,
respectively.
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The first sentence of the second paragraph under the header "Miscellaneous" on page 58 of the Definitive Proxy Statement is hereby amended and restated as follows:
As the Board was aware, Citi and its affiliates in the past have provided and in the future may provide investment banking, commercial banking and other similar financial services to the Company unrelated to the proposed merger, including, during the approximately two-year period prior to the date of Citi's opinion, having provided financial advisory services in respect of certain potential transactions that were not consummated (and, accordingly, for which fees were not received).
The table titled "Financial Projections Summary(1)" on page 61 within the "Financial Projections" section of the Definitive Proxy Statement is hereby supplemented by adding the following disclosure as the final rows:
Non-GAAP income before taxes(3)$ (4,649 ) $ 13,965 $
40,940
(3) Excludes non-cash non-recurring items, including goodwill impairment
expense.
(4) Excludes non-cash non-recurring items, including goodwill impairment
expense, and reflects taxes projected to be payable in cash for the
period.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy the securities of the Company or the solicitation of any vote or approval. This communication is being made in respect of the proposed Merger, among other things. The proposed Merger is being submitted to the stockholders of the Company for their consideration. In connection therewith, the Company has filed relevant materials with theSEC , including the Definitive Proxy Statement, regarding the proposed Merger, which has been mailed to the stockholders of the Company. BEFORE MAKING ANY VOTING OR ANY INVESTMENT DECISION, INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY, BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain free copies of the Definitive Proxy Statement regarding the proposed Merger, any amendments or supplements thereto and other documents containing important information about the Company through the website maintained by theSEC at www.sec.gov. Copies of the documents filed with theSEC by the Company are available free of charge on the Company's website at www.inwk.com under the heading "SEC Filings" in the "Investor Relations" portion of the Company's website.
Participants in the Solicitation
The Company and its directors, executive officers and certain other members of Company management and Company employees may, under the rules of theSEC , be deemed to be participants in the solicitation of proxies in connection with the proposed Merger. Information about the directors and executive officers of the Company is set forth in the Company's proxy statement for its 2020 annual meeting of stockholders, which was filed with theSEC onApril 28, 2020 , its annual report on Form 10-K for the fiscal year endedDecember 31, 2019 , which was filed with theSEC onMarch 17, 2020 , and in subsequent documents filed with theSEC , each of which can be obtained free of charge from the sources indicated above. Other information regarding the participants in the proxy solicitation of the stockholders of the Company and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Definitive Proxy Statement regarding the proposed Merger and may be contained in other relevant materials filed with theSEC .
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