Details Execution of its Three Pillar Strategic
Plan for Shareholder Value Creation that Culminated in
Value-Maximizing Transaction
Urges Shareholders to Protect the Value of
Their Investment by Voting "FOR" the Company's Two Independent and
Highly Qualified Director Nominees on the WHITE Proxy Card
Mails Letter to Shareholders
Virtusa Corporation (NASDAQ GS: VRTU), a leading IT services
provider that enables the digital transformation of Global 2000
enterprises by imagining, building and implementing the end-to-end
technology solutions that are essential to compete in a
digital-first world, today mailed a letter to shareholders
following the Company’s announcement of a value-maximizing
transaction to be acquired by Baring Private Equity Asia (BPEA) on
September 10, 2020 and in connection with its 2020 Annual Meeting
of Stockholders (the “2020 Annual Meeting”).
This press release features multimedia. View
the full release here:
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In its letter, the full text of which can be found below, the
Virtusa Board of Directors covered the following key points:
- The Virtusa Board of Directors’ comprehensive process to
maximize value on behalf of shareholders and ultimately, its
unanimous decision to pursue a significant and certain premium
all-cash transaction with BPEA;
- The multi-year origins of the Virtusa’s Three Pillar Strategic
Plan, the principles that informed its crystallization and the
results that positioned the Company to benefit from a
value-maximizing transaction;
- The merits of the Company’s acquisition of Polaris in 2015 and
why it was strategically necessary to add scale and capabilities as
well as broaden and deepen its Global 2000 client base;
- The independence, strength and diversity of the Board, and the
mission-critical credentials of its nominees, Al-Noor Ramji and
Joseph Doody; and,
- New Mountain Capital’s championing of flawed analysis, the
risks associated with its attempts to gain disproportionate
influence on the Board and its misguided criticism of a
comprehensive process and the value-maximizing transaction that
resulted.
In addition, the Company also highlighted its investor
presentation, which was filed prior to the Company’s transaction
announcement with BPEA, and encouraged shareholders to review the
presentation in full at
https://www.virtusa.com/investors/2020meeting/.
Dear Fellow Shareholder,
Your Board and management team have been
solely focused on maximizing value for all of Virtusa’s
shareholders, and the recently announced sale to Baring Private
Equity Asia (BPEA), which will deliver a significant premium and
$51.35 per share in cash to you, is a testament to that unwavering
commitment.
The Virtusa 2020 Annual Meeting (“Annual
Meeting”) on October 2nd is fast approaching, and New Mountain
Capital (NMC) continues to wage its costly and unnecessary proxy
fight to replace two mission-critical directors on our Board. NMC
is making dubious assertions and unfounded claims about the
performance of Virtusa, your Board and the management team in an
effort to advance its own interests ahead of yours. Your vote on
the WHITE proxy card in connection with the election of directors
at the Annual Meeting will ensure you receive maximum value for
your investment in Virtusa.
VOTE THE WHITE
PROXY CARD TO RE-ELECT VIRTUSA DIRECTORS AL-NOOR RAMJI AND JOSEPH
DOODY TO ENSURE YOU RECEIVE MAXIMUM VALUE FOR YOUR
INVESTMENT
As you may know, on September 10, 2020,
Virtusa and Baring Private Equity Asia (BPEA) announced that funds
affiliated with BPEA will acquire all outstanding shares of common
stock of Virtusa for $51.35 per share in an all-cash transaction
valued at approximately $2.0 billion. The transaction, which was
unanimously approved by the Virtusa Board of Directors, will
deliver to Virtusa shareholders:
- A premium of approximately 27 percent to the closing
price of Virtusa common stock on September 9, 2020, the last
trading day prior to the transaction announcement; and
- Premiums of approximately 29 percent and 46 percent to
Virtusa’s volume-weighted average prices (“VWAP”) for the last 30
and 60 trading days, respectively.
The price paid implies a valuation of 16.2x
Firm Value / Last Twelve Months EBITDA as of June 30, 2020 – a
premium valuation made all the more compelling by the volatile and
risky market environment.
We urge shareholders to vote for Virtusa’s
two director nominees, Al-Noor Ramji and Joseph Doody, on the WHITE
proxy card to ensure we continue on our path toward completing this
value maximizing transaction without delay and to ensure you
receive significant and certain premium cash value for your
investment in Virtusa. Do not allow NMC to distract from this
significant and positive outcome for all Virtusa shareholders. We
urge you to discard any proxy materials and blue proxy cards mailed
to you by NMC and vote the WHITE proxy card today.
BPEA’S PENDING ACQUISITION REFLECTS OUR
BOARD’S UNWAVERING COMMITMENT TO MAXIMIZING VALUE FOR
SHAREHOLDERS
In July of 2020, as Virtusa was steadfast in
its execution of the Three Pillar Strategic Plan, the Company
received an unsolicited acquisition proposal from an interested
party. Following receipt of the offer, and consistent with the
Board’s fiduciary duties to maximize shareholder value, the Board
authorized the Company and its financial advisors to engage with
other potential strategic buyers and financial sponsors regarding a
potential acquisition.
As part of this process, the Company signed
non-disclosure agreements with five parties and engaged with two
others in a robust competitive process. After an independent review
of the available alternatives, including the value creation
opportunity through continued execution of the Three Pillar
Strategic Plan, and negotiation with multiple bidders in the
competitive process to obtain the highest value at the best terms,
the Virtusa Board unanimously determined that the all-cash premium
transaction with BPEA for $51.35 per share maximizes value for
Virtusa’s shareholders.
Independent analysts agree that the Board
conducted a robust process to maximize value on behalf of
shareholders:1
“With this under consideration, as well as
VRTU’s announcement that the Board conducted a thorough strategic
review of alternatives which included signing NDA’s with five
interested parties before determining that the Baring Private
Equity Asia offer provided the best value for shareholders, we
believe this is the best path forward for shareholders.” –
Needham
“Given management’s comprehensive process,
including signing nondisclosure agreements with five parties and
engaging two others, and the premium associated with the
transaction, we do not expect to see additional competitive
bidders.” – William Blair
“Deal value appears fair relative to prior
similar transactions (LXFT). Virtusa consummated a detailed process
over 1.5 months that engaged 7 potential suitors (5 signing NDAs).”
– Cowen
The Board’s single most important mission is
shareholder value creation. Over the last six months, in the face
of both significant market uncertainty and opportunity created by
the COVID-19 pandemic, the Board and management team have been
delivering on that promise through the successful execution of the
Company’s Three Pillar Strategic Plan. Indeed, BPEA recognizes the
power of Virtusa’s platform – our digital engineering leadership
position, our ability to provide end-to-end digital and cloud
transformation solutions to the largest companies in the world and
our longstanding track record of growth and profitability – and are
now paying a significant premium to our shareholders to continue
Virtusa’s strategic evolution.
NEW MOUNTAIN CAPITAL CONTINUES TO WAGE A
COSTLY AND DISRUPTIVE PROXY CONTEST; VIRTUSA’S BOARD CONTINUES TO
WORK FOR ITS SHAREHOLDERS
Despite NMC’s claims that its nominees to the
Virtusa Board would add value, NMC has offered no new ideas other
than to put its candidates on a newly formed board committee tasked
simply with evaluating ideas – a circular proposition without merit
– especially in light of the current Board’s regular and rigorous
evaluation of the business and all strategies related thereto.
Nowhere in its 112-page presentation did NMC offer any specifics on
what it would do differently to create value other than form such a
committee, with the only tangible outcome being NMC gaining
disproportionate and distracting influence over Virtusa’s strategy
and Board. Importantly, this new operating committee, which
would likely be led by NMC’s nominees, if elected and established,
could disrupt our progress.
As part of our commitment to you and all
shareholders, and to set the record straight, we have published an
investor presentation detailing our comprehensive Three Pillar
Strategic Plan to accelerate growth, firmly establish Virtusa as
the de facto leader in the digital engineering category and unlock
shareholder value. It is the rigorous implementation of that plan
that is yielding material results. The presentation, which was
published prior to our transaction announcement with BPEA, also
highlights the many merits and qualifications of our Board, which
has been instrumental in the development, implementation and
oversight of the Plan.
The Virtusa Board has always and will
continue to act in the best interest of all shareholders and
believes you deserve absolute clarity regarding our progress,
performance trajectory and efforts to deliver maximum value on your
behalf. We encourage you to review the entire presentation
available at https://www.virtusa.com/investors/2020meeting/, and
urge you not to be misled and distracted by NMC and its
self-serving agenda that offers no new ideas on creating value for
all shareholders.
THE THREE PILLAR STRATEGIC PLAN – THE
DEFINING PRINCIPLES THAT HAVE SOLIDIFIED VIRTUSA’S POSITIONING AND
MADE WAY FOR THE VALUE MAXIMIZING TRANSACTION WITH BPEA – HAVE BEEN
IN PLACE LONG BEFORE NMC’S INVESTMENT IN VIRTUSA
Crystallized in fiscal year 2020 and building
on the long-term strategic priorities of the business following its
acquisition of Polaris, Virtusa’s Three Pillar Strategic Plan has
delivered results and culminated in the value maximizing
transaction with BPEA. A summary is depicted in the attached
multimedia.
To be clear, our Three Pillar Strategic Plan
is not, as NMC has posited, a “repackaged version of its prior
unfulfilled promises,” but rather a longstanding and deliberate
formula that has delivered significant shareholder value in the
form of the significant premium transaction with BPEA. Ironically,
NMC has not put forward its own strategic plan.
In late 2015, clear industry warning signs of
vendor consolidation, diminishing pricing power for small IT
players and client migration toward end-to-end vendors with scale
were becoming increasingly evident. Virtusa responded by taking
decisive action to increase its scale and broaden its capabilities
by executing the transformational acquisition of Polaris. While the
acquisition created temporary margin headwinds, Polaris laid the
foundation for the rapid growth we are experiencing today. It
enabled us to become an integral partner to large companies and a
leader in digital transformation. In 2017, following the Polaris
acquisition, Virtusa began to emphasize the importance of
diversification, high quality revenue growth, and margin
expansion, laying the groundwork for our Three Pillar Strategic
Plan. Through this transaction with BPEA, shareholders are now
being rewarded for the evolution and sustained relevance of Virtusa
and the work of your Board in delivering maximum value for
shareholders.
In short, these principles predate any
conversations with NMC, and were a key topic of focus in
internal and external management discussions, including on our Q2
FY2020 earnings call in November of 2019. Excerpts from that call
follow:
On High Quality Growth:
- “We have been making strategic investments across our business
in building a workforce with strong cloud expertise, augmenting our
in-house cloud capabilities, creating cloud-native solutions and
strengthening our partnerships with industry-leading public cloud
service providers.”
On Revenue Diversification:
- “We continue to make revenue diversification a priority” and
“are targeting high-growth verticals, including Healthcare and High
Tech, and increasing our focus on high-growth geographies in EMEA,”
as well as “growing high-potential accounts faster than the
Company’s growth rate to further diversify revenue.”
On Margin Expansion:
- “We continue to be on the road map to growing margins by 100 to
150 basis points annually, which would mean that we have plenty of
levers in our gross margin as well as in our SG&A.”
These three imperatives, which the Company
had already been executing towards, were later named the Three
Pillar Strategic Plan in conjunction with the Company’s fourth
quarter fiscal 2020 earnings in May 2020. The underlying three
elements of the Three Pillar Strategic Plan have been our focus
since the acquisition of Polaris further evidenced in numerous
earnings call transcripts, press releases and IR presentations
since 2017. Steadfast execution against these three imperatives is
what ultimately resulted in the significant premium transaction
with BPEA.
NMC’S TACTICS ARE NOTHING MORE THAN AN
ATTEMPT TO MISLEAD VIRTUSA SHAREHOLDERS INTO SUPPORTING ITS
SELF-SERVING PROXY CONTEST TO
GAIN BOARD SEATS
When prompted, NMC offered no new ideas
beyond those set forth by the Company, which we can only assume
means that NMC effectively agrees with Virtusa that the current
strategy in place is the right strategy to drive shareholder value
creation at the Company.
Developed and implemented by our experienced
management team, under the oversight and strategic direction set
forth by the Board, the focused implementation of the elements
underlying Virtusa’s Three Pillar Strategic Plan is driving:
- Continued and material market share gains in an uncertain
economic environment;
- Virtusa’s emergence as a clear and sustainable leader in IT
services;
- Solid progress towards our longer-term financial objectives;
and,
- Significant value creation potential for our shareholders as
proven in BPEA’s cash premium offer.
In stark contrast to NMC’s hypothetical,
vague and unrealistic assertions that two less qualified and
non-additive director nominees could somehow unlock value, the
Virtusa Board and management team have already delivered
significant results from the Three Pillar Strategic Plan. Moreover,
these results paved the way for a value-maximizing transaction with
BPEA.
VIRTUSA’S BOARD IS INDEPENDENT, DIVERSE AND
ENGAGED; WE HAVE REFRESHED OVER 50% OF OUR BOARD SINCE 2016 AND OUR
STRONG CORPORATE GOVERNANCE PROFILE IS REFLECTIVE OF AN ENDURING
COMMITMENT TO THE LONG-TERM INTERESTS OF OUR SHAREHOLDERS
The Virtusa Board’s ability to create
meaningful results and evaluate opportunities that arise to
maximize value is rooted in its diverse and cohesive make-up.
Virtusa’s directors possess deep business and strategic management
experience from service in significant leadership positions, and in
the IT space specifically.
Virtusa has always recognized the
importance of maintaining best-in-class corporate governance
procedures and the Board’s current structure and composition are
key facilitators of the Company’s enduring strength and stability.
Virtusa’s Board has:
- Refreshed over 50 percent of the independent directors since
2016;
- A strong, empowered Lead Independent Director;
- Active and engaged directors;
- 67 percent diversity, in race, gender or ethnicity;
- Average independent director board tenure of 7 years;
- A formal CEO and key executive officers succession plan;
and,
- Annual, independent performance evaluations of directors.
VOTE “FOR”
AL-NOOR RAMJI AND JOSEPH DOODY, TWO KEY ARCHITECHTS OF VIRTUSA’S
THREE PILLAR STRATEGIC PLAN, ON THE WHITE PROXY CARD TODAY, TO ENSURE THAT THE BOARD THAT NEGOTIATED
MAXIMUM VALUE FOR YOU CAN ULTIMATELY DELIVER IT TO YOU
Virtusa’s transaction with BPEA is expected
to close in the first half of calendar 2021. We believe a failure to elect Al-Noor Ramji and Joseph
Doody at this year’s Annual Meeting would create an opening for New
Mountain Capital to gamble with your investment return by
obstructing the approval process of our value-maximizing
transaction with BPEA.
Al-Noor Ramji and Joseph Doody will be
integral to the Company’s continued execution and its efforts to
complete the transaction:
- Al-Noor Ramji represents “the voice of the client” and
has been particularly instrumental in the formulation of the
Company’s Three Pillar Strategic Plan, as well as our response to
the opportunities and challenges presented by the COVID-19
pandemic. Not only does Mr. Ramji possess deep knowledge of how
enterprises are transforming digitally, he is also a powerful
connector and enabler of Virtusa’s full-service offerings, given
his deep relationships with IT Application outsourcing companies
and Digital Engineering firms. Mr. Ramji’s critical insights and
practical guidance are drawn from his extensive industry, domain
and operational expertise, honed over 35 years as an IT executive.
As the Group Chief Digital Officer of Prudential, Mr. Ramji brings
meaningful insights and connections in the healthcare field, which
have been critical in making Healthcare and Life Sciences (HLS) one
of Virtusa’s fastest growing segments.
- Joseph Doody brings international sales and client
expertise that has been instrumental in shaping and implementing
the Company’s strategy. Mr. Doody’s go-to-market and sales
management knowledge are tremendous assets to Virtusa as we scale
our platform and meet increased demand. As head of Staples, Inc.’s
North American Delivery (NAD) business unit, Mr. Doody successfully
grew that business’s annual revenue from approximately $1.8 billion
in 1998 to over $10 billion in 2014, while doubling profit margins
over the same timeframe. Moreover, Mr. Doody’s expertise in
realizing the potential of high-growth international markets from
his tenure at Staples offers the Board mission-critical insights
around geographic revenue diversification. In addition to his
executive experience, Mr. Doody is a Board member recognized for
his independence and leadership qualities. Just recently, Mr. Doody
was named Lead Independent Director at Casella Waste Systems, Inc.,
where he previously served as Compensation Committee Chair. During
his tenure on the Board, Casella developed and successfully
implemented a strategy that has yielded market-leading total
shareholder returns over the last three years.
At this year’s Annual Meeting,
continuity, maximum value and strategic
and operational alignment are of paramount importance. By
mounting a campaign to substitute these highly qualified and proven
directors with non-additive newcomers in an effort to create
disruption, NMC is jeopardizing a value-maximizing proposition, at
the expense of all Virtusa shareholders for its self-serving
benefit.
We urge you to reject NMC’s maneuvering
for disproportionate representation on the Virtusa Board and
protect the value of your investment by voting today on the
enclosed WHITE proxy card "FOR" Al-Noor Ramji and Joseph G. Doody,
who will stand for re-election to the Company’s Board of Directors
at the 2020 Annual Meeting. We further encourage you to discard any
proxy materials you receive from NMC, and remind you that returning
their blue proxy card, even as a protest vote, may cancel your
earlier vote for your Company’s director candidates. Only your
latest dated proxy card will be counted at the Annual
Meeting.
We firmly believe that we have the right
Board in place to oversee the successful completion of this
value-maximizing transaction, and to continue delivering strong
results while we remain a public company.
We have been and continue to work tirelessly
to earn your support and encourage you to vote on the WHITE
proxy card and “FOR” Virtusa’s nominees at the upcoming 2020
Annual Meeting.
Sincerely,
The Virtusa Board of Directors
If you have any questions, or
need assistance in voting your shares on the WHITE proxy card,
please call the firm assisting Virtusa with the solicitation of
proxies:
MacKenzie Partners,
Inc.
TOLL-FREE at +1 (800) 322-2885
or via Email: VRTU@mackenziepartners.com
About Virtusa
Virtusa Corporation (NASDAQ GS: VRTU) is a leading provider of
digital business strategy, digital engineering, and information
technology (IT) services and solutions that enable the digital
transformation of Global 2000 enterprises by imagining, building
and implementing the end-to-end technology solutions that are
essential to compete in a digital-first world. Virtusa partners
with the leading companies in the Banking, Financial Services,
Insurance, Healthcare, Communications, Media, Entertainment,
Travel, Manufacturing, and Technology industries.
Virtusa helps its clients accelerate their digital and overall
business transformation by providing multi-disciplinary agile teams
of consultants, designers, engineers and sophisticated gamified
tools. The company integrates its deep domain and digital
engineering expertise with proven assets and processes embedded in
its unique Digital Transformation Studio model, resulting in a
high-performance end to end delivery. Its core services include
consulting and system design, application engineering, analytics
and data, digital process automation, enterprise application
integration, cloud services and managed services.
Cautionary Information Regarding Forward-Looking
Statements
This communication contains certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,
including statements regarding, management's forecast of financial
performance, the impact of the COVID-19 pandemic and related
economic conditions on our business and results of operations, the
growth of our business and management’s plans, objectives, and
strategies, the company’s ability to convert its pipeline into
profitable revenue growth, the company’s ability to diversify its
portfolio of industries, geographies and accounts, the company’s
ability to increase its operating margins, the company’s ability to
increase market share as a result of its Three Pillar Strategic
Plan, the company’s ability to generate long-term value for its
shareholders, the company’s financial performance and the impact of
its operational changes, including its completed acquisitions and
divestitures, the company’s operating leverage in pursuing growth
opportunities, and the company’s upcoming 2020 Annual Meeting of
Stockholders (the “2020 Annual Meeting”), uncertainties regarding
future actions that may be taken by New Mountain in furtherance of
its nomination of director candidates for election at the company’s
2020 Annual Meeting. These forward-looking statements include, but
are not limited to, plans, objectives, expectations and intentions
and other statements contained in this communication that are not
historical facts, and statements identified by words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “see,”
“seeks,” “estimates,” “will,” “should,” “may,” “confident,”
“positions,” “look forward to,” and variations of such words or
words of similar meaning and the use of future dates. These
forward-looking statements reflect our current views about our
plans, intentions, expectations, strategies and prospects and
beliefs about the ability of our board of directors and management
to execute on our strategy and drive shareholder value, beliefs
about the ability of our board of directors and management to make
decisions in the best interest of the company and all shareholders,
which are based on the information currently available to us and on
assumptions we have made. Although we believe that our plans,
intentions, expectations, strategies and prospects as reflected in
or suggested by those forward-looking statements are reasonable, we
can give no assurance that these plans, intentions, expectations or
strategies will be attained or achieved. Furthermore, actual
results may differ materially from those described in the
forward-looking statements and will be affected by a variety of
risks and factors that are beyond our control including, without
limitation, those risks identified in Virtusa’s public filings with
the Securities and Exchange Commission (the “SEC”), including
Virtusa’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2020, and subsequent filings with the SEC. Virtusa
disclaims any obligation to publicly update or revise any such
statements to reflect any change in expectations or in events,
conditions or circumstances on which any such statements may be
based, or that may affect the likelihood that actual results will
differ from those set forth in the forward-looking statements.
Important Stockholder Information
Virtusa filed with the Securities and Exchange Commission and
mailed to its stockholders a definitive proxy statement and
accompanying WHITE proxy cards in connection with the company’s
2020 Annual Meeting. The proxy statement contains important
information about the company, the 2020 Annual Meeting and related
matters. INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE PROXY
STATEMENT AND ANY OTHER RELEVANT SOLICITATION MATERIALS WHEN THEY
BECOME AVAILABLE BECAUSE THESE DOCUMENTS WILL CONTAIN IMPORTANT
INFORMATION. The company, its directors and certain of its
executive officers may be deemed to be participants in the
solicitation of proxies from the company’s stockholders in
connection with the matters to be considered at the company’s 2020
Annual Meeting. Information concerning the company’s directors and
executive officers is included in the proxy statement. The proxy
statement and other relevant solicitation materials (when they
become available), and any and all documents filed by the company
with the Securities and Exchange Commission, may be obtained by
investors and stockholders free of charge on the Securities and
Exchange Commission's web site at www.sec.gov. Copies will also be
available free of charge on the company's website at
www.virtusa.com.
1 Permission to quote neither sought nor granted.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200915005706/en/
Media: Conversion Marketing Ron Favali, 727-512-4490
ron@conversionam.com
Joele Frank, Wilkinson Brimmer Katcher Nick Lamplough / Clayton
Erwin (212) 355-4449
Investors: ICR William Maina, 646-277-1236
william.maina@icrinc.com
Additional Investors: MacKenzie Partners, Inc. Bob
Marese, 212-929-5405 bmarese@mackenziepartners.com
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