Item 1.01. Entry into a Material Definitive Agreement.
Share Purchase Agreement
On September 20, 2018, Adobe Systems Incorporated (“Adobe” or the “Company”) entered into a Share Purchase Agreement (the “Purchase Agreement”), by and among Adobe, Milestone Topco, Inc., a Delaware corporation (“Topco”) and indirect parent company of Marketo, Inc., a Delaware corporation (collectively with Topco and Topco’s other subsidiaries, “Marketo”), the stockholders of Topco (the “Sellers”) and Vista Equity Partners Management, LLC, a Delaware limited liability company (the “Sellers’ Representative”), solely in its capacity as the Sellers’ representative. Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions set forth therein, Adobe will acquire Marketo through the purchase of all the issued and outstanding shares of capital stock of Topco (the “Topco Shares”) and other equity interests in Marketo, for an aggregate purchase price of $4.75 billion in cash (the “Consideration”), subject to certain purchase price adjustments specified in the Purchase Agreement. $50.0 million of the Consideration will be held in escrow as security for any purchase price adjustment after the closing of the transaction (the “Closing”) that is determined to be owed to Adobe and certain indemnification claims.
Under the terms of the Purchase Agreement, the parties’ obligations to consummate the transactions contemplated by the Purchase Agreement are subject to customary closing conditions, including, among other things, the receipt of certain regulatory approvals, including the expiration or termination of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. In addition, Adobe’s obligation to consummate the transactions contemplated by the Purchase Agreement is subject to there not having occurred, since the date of the Purchase Agreement, a Company Material Adverse Effect (as defined in the Purchase Agreement). The transaction is expected to close during the fourth quarter of Adobe’s 2018 fiscal year.
The Purchase Agreement also contains customary termination rights for Adobe and the Sellers’ Representative. Upon any termination of the Purchase Agreement, the Purchase Agreement will become void, except that certain specified obligations of the parties will survive, including obligations concerning confidentiality.
The cash consideration payable at the Closing is expected to be financed with a combination of new debt and cash on Adobe’s balance sheet. The parties’ obligations to consummate the transaction are not subject to any condition related to the availability of financing.
The Purchase Agreement contains representations, warranties and covenants of Adobe, the Sellers and Topco that are customary for a transaction of this nature, including among others, covenants by Topco regarding the conduct of its business and by the parties regarding public disclosures during the period between signing of the Purchase Agreement and the Closing. The representations and warranties of Topco and Adobe in the Purchase Agreement, as well as the representations and warranties of the Sellers in the Purchase Agreement that are not described in the following sentence, will terminate as of the Closing. Certain fundamental representations and warranties of the Sellers will survive for two years following the date of the Closing. The Purchase Agreement includes indemnification obligations of the Sellers in favor of Adobe for, among other things, breaches of such fundamental representations and warranties made by the Sellers in the Purchase Agreement.
The Purchase Agreement and the consummation of the transactions contemplated thereby have been unanimously approved by Adobe’s board of directors.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by the full text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated by reference herein. The Purchase Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about Adobe, Marketo, or the Sellers. In particular, the assertions embodied in the representations and warranties contained in the Purchase Agreement are qualified by information in confidential disclosure schedules provided by the Sellers and Topco to Adobe in connection with the signing of the Purchase Agreement. These confidential disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties and certain covenants set forth in the Purchase Agreement. Moreover, certain representations and warranties in the Purchase Agreement were used for the purposes of allocating risk between Adobe and the Sellers rather than establishing matters of fact. Accordingly, the representations and warranties in the Purchase Agreement should not be relied on as characterizations of the actual state of facts about Adobe, the Sellers or Marketo.