i_SVG Created with Sketch.

Capital Markets Elite Group is not a registered U.S. broker-dealer. It does not accept a U.S. Person as a client if that person was solicited by Capital Markets Elite Group. (The definition of “U.S. Person” is here.) Capital Markets Elite Group will rely on a certification from a potential customer that the potential customer either is not a U.S. Person or has not been solicited, directly or indirectly, by Capital Markets Elite Group and has not been induced by Capital Markets Elite Group to engage in securities transactions. In particular, they must certify that they were directed to this website by someone other than Capital Markets Elite Group. They must also certify that they understand that they will not be protected by U.S. laws, regulations and supervisory structures applicable to broker-dealers registered in the U.S. and they do not expect such protections to apply. You should give these certifications only if they are true. If you wish to proceed to the website knowing that, please click “Continue” below. Otherwise click “Leave Website”

Leave Website
Start Trading

Zendesk Shares are Up Almost 30%, Here’s Why

Ticker Symbol: ZEN

Zendesk shares are surging by nearly 30% in the morning trading session as the company announced an agreement to be acquired by buyout firms for $9.5 billion, in an all-cash transaction. The agreed deal would imply a 34% premium to Zendesk’s closing price on Thursday, or an acquisition price of $77.50 a share. Including the company’s debt, the deal for the company implies an enterprise value of roughly $10.2 billion.

The buyout group is being led by Hellman & Friedman and Permira. The deal also comes after the company announced on June 9th that it was no longer seeking to be acquired after reaching out to 16 potential interest parties and 10 financial sponsors. Upon completing a strategic review, the board decided that no actionable proposals were attractive enough for the company to consider selling itself.

An unsolicited takeover offer was also made to the firm from the same companies which Zendesk has made a deal with now, back in February at a price of $127 to $132 a share. The deal was rejected by the company’s board at the time. The current valuation comes at a roughly 40% discount to the mid-price of the previous offer. The company blamed “adverse market conditions and financing difficulties” in assessing the various bids.

Zendesk does offer strong and comprehensive customer service software, but shares are down sharply from the 52-week high of $150.84 they hit in July of 2021. Shares bottomed around $54.50 earlier this month after the company announced it was not selling itself. The offer price from the buyout firms represents a 42% premium to that 52-week low, but an almost 50% haircut from the previous high.

Savvy investors can look to arbitrage the current market price of $74 and the offer price of $77.50, for a gain of $3.50 a share, or a close to 5% acquisition arbitrage return. The deal faces few obstacles from being completed given that the board of directors of Zendesk has already agreed to the transaction.

Furthermore, the all-cash nature of the agreement removes downside complications associated with merger and acquisitions deals that have a share component. The transaction is expected to close in the fourth quarter and Zendesk will operate as a privately run company from that point onwards. Hellman & Friedman and Permira also announced that the buyout firms have finalized debt and equity financing commitments for financing the transaction.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.