Sphere 3D Corporation and Overland
Storage, Inc. announced that both companies' boards of Directors have
unanimously approved a definitive merger agreement under which the companies
would combine to create a virtualization
and data management software solutions company.
The name of the combined company will be Sphere 3D.
Under the terms of the merger agreement, each outstanding
share of Overland common stock will be exchanged for 0.510594 common shares
of Sphere 3D, subject to certain potential adjustments as set forth in the
After completion of the transaction, it is expected that
current holders of Overland shares will own approximately 28.8% of Sphere 3D
on a fully diluted basis as a result of their exchange of shares in the
merger. Based on the closing sales price of Sphere 3D common shares on May
14, 2014, the last trading day prior to the announcement of the transaction,
on the TSX Venture Exchange, the total consideration payable to holders of
Overland equity in the transaction has an implied value of approximately
$81.13 million or approximately $4.43 per Overland share.
On May 14, 2014, the last trading day prior to the
announcement of the transaction, the closing price of the Overland shares on
the Nasdaq was $2.90 and the closing price of the Sphere 3D Shares on the
TSXV was C$9.46 (or $8.68).
The acquisition price represents a premium of
approximately 53% over the closing price of the Overland shares on the
Nasdaq on the last trading day immediately preceding the announcement of the
transaction and a premium of approximately 27% over the weighted average
trading price of the Overland shares on the Nasdaq and Sphere 3D on the
TSX-V for the 30 trading days immediately preceding the announcement of the
Sphere 3D and Overland have been working in tandem to
develop an integrated application virtualization and storage platform, as
well as VDI solutions, which are already installed at select strategic
customers and partners.
The application virtualization platform allows native
third party applications to be delivered in the cloud or on premise on a
multitude of endpoint devices independent of their OS.
The VDI market, a key segment of the virtualization
market, is estimated to be over $5 billion and growing 20% annually,
according to Frost & Sullivan.
Through the combination, Sphere 3D will have greater
financial and operational scale, and a large aworldwide distribution network
and tier one OEM partnerships.
The combination of Sphere 3D's Glassware 2.0
virtualization solution and Overland's storage solutions will enable mobile
device users the functionality of any software program or application on any
device, anywhere, eliminating the application limitations, data management
and security problems for enterprises created by the BYOD phenomenon. Mobile
users that need productivity applications such as word processing,
spreadsheets, presentations and collaborations, specialized software for
CAD, magnetic resonance imaging, software development, video production or
customized legacy applications can now experience full application
functionality via the cloud or in the data center.
Commenting on behalf of Sphere 3D, Peter Tassiopoulos, CEO
stated: "This transformational deal allows us to immediately gain the scale,
infrastructure and resources required to become a leading global
virtualization company and strengthens Sphere's ability to service and
support partners and customers globally. In addition, this transaction
provides greater certainty in leveraging Overland's existing global
distribution network as well as their significant tier one OEM
Eric Kelly, president and CEO, Overland, said: "This
merger brings together next generation technologies for virtualization and
cloud coupled with end-to-end scalable storage offerings enabling us to
address the larger and growing virtualization and cloud markets. This along
with Overland's global network of services and reseller partners and our
worldwide manufacturing capabilities supports our path for growth and
profitability to create significant value for shareholders of both
The transaction requires customary
closing conditions, shareholder approval of Overland and receipt of all
necessary regulatory approvals. It is
expected to close in the third calendar quarter of 2014.
Upon the completion of the transaction,
Overland's common stock will cease trading on the Nasdaq and Sphere 3D
shares are expected to trade on the TSX and Nasdaq markets.
Pursuant to the agreement, Overland is subject to
customary non-solicitation covenants. In the event a superior proposal is
made and if in response, Overland's board of directors changes its
recommendation of the transaction to the Overland shareholders or terminates
the transaction under certain circumstances, Overland has agreed to pay
Sphere 3D a termination fee of $3.5 million.
The transaction has received the unanimous support of the
boards of directors and management of both Sphere 3D and Overland. Certain
significant shareholders of Overland, including Cyrus Capital Partners and
its affiliates, have entered into voting agreements with Sphere 3D pursuant
to which they have agreed to vote the Overland shares beneficially owned by
them (collectively representing approximately 64% of the outstanding
Overland shares) in favor of the transaction, subject to the terms and
conditions set forth in the voting agreements.
Kelly, CEO, president, and board member of Overland, is
also the COB of Sphere 3D and accordingly declared his conflict and recused
himself from casting any vote with respect to the transaction. He has
non-material share ownership in both Overland and Sphere 3D. No collateral
benefit has been paid to Kelly in connection with the consummation of the
transaction. The Overland board of directors formed a special committee of
independent directors to review and evaluate the proposed transaction.
Sphere 3D appointed Glenn Bowman, the chairman of the audit committee, as
its lead director with respect to the evaluation of this transaction.