OPT Optiva Inc

ESW Capital, LLC (“ESW”) announces that it intends to make a tender offer to acquire subordinate voting shares (the “Shares”) of Optiva Inc. (TSX:OPT) (“Optiva” or the “Company”) at a price of CAD$60.00 in cash per Share (the “Offer”). While ESW is willing to acquire any and all Shares that are tendered, certain approvals will be required from applicable securities regulators, including the Ontario Securities Commission (the “OSC”), prior to the launch of the Offer.

The Offer values Optiva's equity at approximately CAD$379 million on a fully diluted basis which ESW believes is a more than full valuation representing a significant premium to Optiva stock’s trading history, and is:

• a 122% premium to the 20 day VWAP ending on July 24, 2020, being the last trading day immediately preceding the day on which ESW announced its intention to make the Offer;
• a 92% premium to the 52-week high of the Shares; and
• above any closing price for the Shares since February 16, 2017.

Background to the Offer

Maple Rock Capital Partners (“Maple Rock”) and EdgePoint Investment Group Inc. (together with Maple Rock, the “Activists”) launched a “proxy fight” via Maple Rock’s open letter and requisition this past January. Subsequently in June, in order to disqualify ESW’s director nominees, Optiva declared that ESW, through one or more of its affiliates, competes with Optiva - an assertion with which ESW strenuously disagrees. These actions have predictably resulted in a state of disarray as Optiva and ESW work to unwind an operating model put in place with full transparency and shareholder approval and which had, until Optiva's declaration, formed the basis of a successful relationship between the parties. As Optiva’s largest shareholder, ESW fears that the situation is likely to continue to deteriorate. As one of many examples, Optiva recently issued debentures (over 85% issued to the Activists) that are, in ESW’s analysis, markedly worse for shareholders than the preferred shares they redeemed.

ESW’s Offer will have a simple goal: to allow any and all shareholders who wish to walk away from this infighting to sell their Shares at a premium value of CAD$60/share.

ESW first made a proposal to Optiva’s board of directors to acquire the Shares on June 26, 2020. Per applicable securities laws, Optiva was required to convene a special committee and supervise the preparation of a formal valuation (the "Required Valuation") by an independent valuator so that ESW could make its bid public. ESW had requested that the valuator be engaged no later than July 2, 2020. It is now July 27, 2020 – more than three weeks later – and Optiva is only now proposing the engagement of a valuator but only on commercially unreasonable terms. As a result of what seems to us to be Optiva's unwillingness to engage with ESW in good faith, we have determined to announce our intention to make the Offer through this press release.

Following completion of the Required Valuation and subject to receipt of the Exemption (defined below), ESW will deliver its formal take-over bid circular to the shareholders of Optiva and make all filings with the appropriate securities regulatory authorities necessary to commence the Offer.

Exemptive Relief Application

ESW will not impose a minimum tender condition in the Offer – it is willing to acquire the Shares of any shareholder that wishes to participate for CAD $60/share. However, applicable securities law requires that at least 50% of the outstanding Shares (calculated on a fully diluted basis excluding the Shares held by ESW), be validly deposited under the Offer (the “Majority of the Minority Requirement”).

ESW believes that, consistent with prior public disclosure, the Activists will not tender their Shares to the Offer, preventing the Offer from meeting the Majority of the Minority Requirement and as result will stymie the Offer. Accordingly, prior to formally launching the Offer, ESW will make an application to the OSC for a hearing to approve an amendment to the Majority of the Minority Requirements so that any and all shareholders wishing to participate in the Offer will be permitted to sell their Shares (the "Exemption"). In connection with the Exemption, ESW will seek to have the Majority of the Minority Requirements amended, such that Shares tendered to the Offer will be permitted to be taken up on the tendering of a majority of the Shares, determined without reference to those Shares held by ESW, the Activists or any of their respective affiliates or joint actors that have not tendered their Shares. ESW believes the Exemption is in the best interest of all shareholders, and shall be seeking a hearing on its application for Exemption on an expedited basis. The launch of the Offer is conditional upon ESW successfully obtaining the Exemption; shareholders are cautioned that there can be no guarantee that ESW will be successful in obtaining the Exemption.

ESW believes that selling shareholders should receive the highest possible price for their Shares, and will equally support an application for an exemption from the Majority of the Minority requirement made by any other party, including the Activists, to acquire any and all tendered shares for a price higher than that contained in the Offer.

Conditions to the Take Up of Shares Tendered under the Offer

The formal Offer will be subject to customary take-up conditions, and will include (but not be limited to) a requirement that Optiva has no change to its equity capitalization prior to or as a result of the Offer. Such a condition is entirely within the control of Optiva’s board of directors, and the taking of any action that triggers equity dilution during or as a result of the Offer would inhibit shareholder choice and block willing shareholders from being able to sell their Shares at CAD$60/share (or higher).

The Offer, which may be made by an affiliate of ESW, will not be subject to any financing condition and will be financed through ESW’s existing cash reserves. Further details concerning the Offer will be included in the take-over bid circular to be sent to Optiva’s shareholders.

Early Warning Matters

This press release is issued pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, which requires a report to be filed under Optiva’s profile on SEDAR (www.sedar.com) containing additional information with respect to the foregoing matters. A copy of such report may be obtained by contacting ESW at info@eswcapital.com.

ESW currently holds an aggregate of 1,194,725 Shares representing approximately 27.7% of the outstanding Shares on an undiluted basis. ESW also holds warrants exercisable for up to 975,712 Shares, which, upon exercise would increase ESW’s position to approximately 38.9% on a partially diluted basis. As noted above, as ESW is an “insider” of Optiva for purposes of applicable securities laws, ESW has requested that the board of directors of Optiva establish a special committee of independent directors to supervise the preparation of a formal valuation of the Shares by an independent valuator.

Disclaimer

This press release is not a recommendation, an offer to purchase or a solicitation of an offer to sell securities of Optiva. ESW has not commenced an offer to purchase or a take-over bid for Shares as described in this press release. ESW will only commence an offer to purchase or a take-over bid for Shares by filing a take-over bid circular with the applicable securities regulatory authorities in Canada which will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted. Once filed with the applicable securities regulatory authorities in Canada, the take-over bid circular and other related documentation will be available on www.sedar.com.

ESW’s address is:

ESW Capital, LLC 401 Congress Avenue, Suite 2650 Austin, TX 78701 USA info@eswcapital.com

About ESW Capital, LLC

ESW Capital, LLC is based in Austin, Texas and is focused on buying, strengthening, and growing mature business software companies. By taking advantage of its unique operating platform, ESW revitalizes its acquisitions for sustainable success while making customer satisfaction a top priority. ESW and its affiliated companies have been in the enterprise software space since 1988, and the group includes notable brands such as Aurea, Ignite Technologies, Trilogy and Versata.

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this press release, including any information as to ESW’s estimates, strategy, projects, plans, prospects, future outlook, anticipated events or results or future financial or operating performance and ESW`s intention to make an Offer and to seek exemptive relief from the Ontario Securities Commission with respect to certain securities law requirements, may constitute “forward-looking information” within the meaning of Canadian securities laws. All statements, other than statements of historical fact, constitute forward-looking information. Forward-looking information can often, but not always, be identified by the use of words such as “intends”, “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “predicts”, “potential”, “continue” or “believes”, or variations (including negative variations) of such words, or statements that certain actions, events or results “may”, “could”, “would”, “should”, “might”, “potential to”, or “will” be taken, occur or be achieved or other similar expressions concerning matters that are not historical facts. The purpose of forward-looking information is to provide the reader with information about management’s expectations and plans. Readers are cautioned that forward-looking statements are not guarantees of future performance. All forward-looking statements made or incorporated in this press release are qualified by these cautionary statements.

Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future realities or anticipated events to differ materially from those expressed or implied in any forward-looking information and, accordingly, should not be read as guarantees of future performance or realities. Material factors or assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting the Company’s operations will continue substantially in their current state, including, without limitation, with respect to industry conditions, general levels of economic activity, continuity and availability of personnel and third party service providers, local and international laws and regulations, foreign currency exchange rates, litigation and intellectual property, and interest rates, inflation, taxes, and that there will be no unplanned material changes to the Company’s facilities, equipment, software, pricing models, operations, customer and employee relations and credit arrangements, and the assumption that the conditions of the Offer will be satisfied. The Company cautions that the foregoing list of material factors and assumptions is not exhaustive. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove correct. The risks and other factors that may cause actual future realities or anticipated events to differ materially from those expressed or implied in any forward-looking information include, but are not limited to the financial and operational performance of the Company; the potential interference of activist shareholders; the results of the valuation; the ability of the ESW to obtain the Exemption; the cooperation of management of the Company in the Offer process and/or defensive tactics that may be employed; sales of Shares in the public market; political factors; the capital requirements associated with operations; dependence on key personnel; dependence on sales channel partners and suppliers; dependence on related party contracts; compliance with regulations; protection of intellectual property; litigation and product liability; competition; and satisfaction of the conditions of the Offer. There is no assurance that the conditions of the Offer will be satisfied or that the Offer will be successfully completed.

Actual performance or achievement could differ materially from that expressed in, or implied by, any forward-looking information in this press release and, accordingly, investors should not place undue reliance on any such forward-looking information. Further, any forward-looking information speaks only as of the date on which such statement is made, and ESW does not undertake any obligation to update any forward-looking information to reflect information, events, results, circumstances or realities after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable Canadian securities laws. All forward-looking information contained in this press release is qualified by such cautionary statements. New risk factors emerge from time to time, and it is not possible for ESW to predict all of such risk factors and to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual realities to differ materially from those contained in any forward-looking information.

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