DEFA14A 1 ddefa14a.htm DEFINITIVE ADDITIONAL MATERIALS Definitive Additional Materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

¨    Preliminary Proxy Statement    ¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨    Definitive Proxy Statement      
x    Definitive Additional Materials      
¨    Soliciting Material Pursuant to §240.14a-12      

 

ENTRUST, INC.

 

(Name of Registrant as Specified In Its Charter)

 

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

 

  

 

 

  (2) Aggregate number of securities to which transaction applies:

 

  

 

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  

 

 

  (4) Proposed maximum aggregate value of transaction:

 

  

 

 

  (5) Total fee paid:

 

  

 

 

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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Cash Acquisition By Thoma
Bravo
Transaction Update
July 2009

©
Copyright Entrust, Inc. 2008
2
Today's Presentation contains forward-looking statements, within the meaning of Section 27A of the Securities Act
of
1933
and
Section
21E
of
the
Securities
Act
of
1934,
relating
to
the
proposed
Thoma
Bravo
transaction
including
the impact of a “no-vote”
on the Company’s stock price, the expectation that the merger agreement will be
terminated
if
a
“no-vote”
occurs,
and
other
consequences
if
the
Thoma
Bravo
transaction
does
not
close,
including
the amount of the transaction-related fees payable by the Company. Such statements involve a number of risks
and uncertainties. The following factors, among others, could cause actual results to differ materially from those
described in the forward-looking statements: risks associated with uncertainty as to whether the transaction will be
completed,
costs
and
potential
litigation
associated
with
the
transaction,
the
failure
to
obtain
Entrust's
stockholder
approval, the failure of either party to meet the closing conditions set forth in the merger agreement, the extent and
timing of regulatory approvals and the risk factors discussed from time to time by the company in reports filed with
the
Securities
and
Exchange
Commission,
as
well
as
the
risk
factors
detailed
from
time
to
time
in
Entrust’s
periodic
reports and registration statements filed with the Securities and Exchange Commission, including without limitation
Entrust’s
Annual Report on Form 10-K and 10-Q for the fiscal quarter ended March 31, 2009. While Entrust may
elect
to
update
forward-looking
statements
in
the
future,
Entrust
specifically
disclaims
any
obligation
to
do
so,
even
if its estimates change.
This
presentation
does
not
constitute
an
offer
of
any
securities
for
sale.
In
connection
with
the
proposed
merger
transaction, Entrust has filed a proxy statement regarding the proposed merger transaction with the Securities and
Exchange Commission.  Investors and security holders are urged to read the proxy statement and other
documents filed by Entrust with the SEC because they contain important information about Entrust and the
proposed
merger
transaction.
Investors
and
security
holders
may
obtain
a
free
copy
of
the
definitive
proxy
statement
and
other
documents
at
the
SEC’s
website
at
www.sec.gov.
The
definitive
proxy
statement
and
other
relevant documents may also be obtained free of charge from Entrust by directing such requests to:  Entrust, Inc.,
5400 LBJ Freeway, Suite 1340, Dallas, Texas 75240, Attention:  Investor Relations.  Investors and security holders
are urged to read the proxy statement and other relevant materials before making any voting or investment
decisions with respect to the merger.

©
Copyright Entrust, Inc. 2008
3
Overview
•
The Thoma
Bravo-Entrust transaction was the result of an extensive
and thorough exploration of strategic alternatives
•
Thoma
Bravo’s increased $2.00 per share all-cash offer provides
immediate, certain and premium value to Entrust stockholders
•
Entrust’s
Board conducted an extensive and thorough “go-shop”
process –
to date, no one has delivered a “superior proposal”
•
$2.00
per
share
is
Thoma
Bravo’s
“best
and
final”
offer
•
“No vote”
expected to have a negative impact on stock price

©
Copyright Entrust, Inc. 2008
4
Thoma
Bravo’s
Increased
$2.00
Per
Share
Offer
(1
of
2)
•
Thoma
Bravo to acquire 100% of the outstanding shares for $2.00 per share in cash
–
Increase
of
over
8%
over
the
$1.85
per
share
cash
purchase
price
previously
contemplated
–
Immediate and certain cash value for Entrust stockholders
–
Total transaction value of approximately $124 million
•
Premium to Entrust’s
pre-deal stock price and historical trading prices
–
32% premium over Entrust average closing price during the 30 trading days ending April 9, 2009*
–
36% premium over Entrust average closing price during the 90 trading days ending April 9, 2009*
•
$2.00 per share offer represents a meaningful premium to peer group
–
Premium to peer 2009 and 2010 EBITDA and PE multiples
–
Significant premium to LTM multiples
–
Entrust has historically traded at a discount to peers
•
Committed financing in place
–
Equity
and
debt
commitments
previously
obtained
by
Thoma
Bravo
remain
–
No financing risk
equity backstop from Thoma
Bravo
*
April
9,
2009
is
the
last
trading
day
prior
to
the
announcement
of
the
original
merger
agreement
entered
into
between
Entrust
and
Thoma
Bravo

©
Copyright Entrust, Inc. 2008
5
Thoma
Bravo’s
Increased
$2.00
Per
Share
Offer
(2
of
2)
•
Entrust’s
Board of Directors approved amended merger agreement
–
Eight directors voted to approve the amended merger agreement
–
One director (Schloss) abstained
•
Customary closing conditions
–
No financing condition
–
Transaction requires affirmative vote of 66 2/3% of the outstanding shares
–
HSR clearance received
–
Cash closing condition achievable
Thoma
Bravo’s $2.00 Per Share Cash Offer is Compelling
and Represents Substantial Value for Entrust Stockholders

©
Copyright Entrust, Inc. 2008
6
6
Substantial Cash Premium
Source: Company filings, wall street research and Reuters consensus estimates as of July 10, 2009.
(1)  Represents contractually obligated long term lease obligation per Q2 2009.
(2)  Per
Company’s
preliminary
earnings
release
on
July
7,
2009.
Expenses
will
have
to
be
paid
regardless
of
outcome
of
deal
with Thoma
Bravo
(3)  Trading
day
averages
ending
4/9/09.
Intraday
low
during
period
in
which
the
original
Thoma
Bravo
offer
of
$1.75
per
share
had
been
outstanding.
Entrust
Thoma
Bravo Offer Price
$2.00
Diluted Shares Outstanding (mm)
61.950
Equity Value
$123.9
Plus: Total Debt
(1)
13.1
Less: Cash & Cash Equivalents
(31.7)
Plus: Billed but Unpaid Deal Expenses
(2)
3.1
Enterprise Value
$108.4
Valuation Summary
Financial Results
Sales
EBITDA
P/E
LTM 6/30/09A
$94.5
$10.4
$0.13
CY 2009E Street
$94.1
$12.4
$0.15
CY 2010E Street
$97.4
$14.4
$0.18
Valuation Multiples
Sales
EBITDA
P/E
LTM 6/30/09A
1.15x
10.41x
15.38x
CY 2009E Street
1.15x
8.76x
13.70x
CY 2010E Street
1.11x
7.52x
11.43x
Offer Price Premium
(3)
Premium to 30-Trading Day Average
$1.51
32.5%
Premium to 90-Trading Day Average
$1.47
36.1%
Premium to Intraday Low
$0.98
104.1%

©
Copyright Entrust, Inc. 2008
7
7
Meaningful Premium to Peer Group
Source: Company filings, wall street research and Reuters consensus estimates.  Closing stock prices as of July 10, 2009.
Note:
“NM“
denotes
data
that
is
not
meaningful
and
“NA”
denotes
data
is
not
available
because
of
non-existence
of
research
coverage.
(1) Uses 50% of ARS value in calculation of EV as these securities are not worth $0 and current market valuations have them on average well above 50% for liquidation value.
(2) Long term lease obligation of $13.1mm is treated as debt in calculation of Enterprise Value.  Cash balance of $31.7mm has been adjusted for billed, but unpaid deal expenses of $3.1mm
per
the
company’s
July
7,
2009
press
release.
These
expenses
will
be
paid
regardless
of
outcome
of
deal
with
Thoma
Bravo.
•
Premium
to
EBITDA
multiple
of
~35%
–
45%
•
Premium
to
PE
multiple
of
~5%
–
30%
–
Premium is even larger when compared to larger peers who trade on PE
–
Data for similarly sized peers less reliable as they don’t trade on PE multiple and have not consistently
been profitable
Share
Market
Enterprise
EBITDA ($)
EPS ($)
EBITDA (x)
PE (x)
Price
Cap
Value
LTM
CY 2009E
CY 2010E
LTM
CY 2009E
CY 2010E
LTM
CY 2009E
CY 2010E
LTM
CY 2009E
CY 2010E
>$250mm in revenue
Symantec
$15.59
$12,750
$12,809
$2,129
$2,367
$2,368
$1.57
$1.53
$1.59
6.0x
5.4x
5.4x
9.9x
10.2x
9.8x
CA
16.44
8,530
7,754
1,493
1,519
1,602
1.41
1.56
1.68
5.2
5.1
4.8
11.7
10.5
9.8
McAfee
40.73
6,328
5,651
556
564
610
2.15
2.34
2.63
10.2
10.0
9.3
18.9
17.4
15.5
Verisign
18.06
3,483
3,106
443
447
491
1.13
1.30
1.54
7.0
7.0
6.3
16.0
13.9
11.7
CheckPoint
22.37
4,669
3,371
453
465
492
1.82
1.89
2.09
7.4
7.2
6.8
12.3
11.8
10.7
Websense
15.59
690
726
80
128
133
1.39
1.29
1.44
9.1
5.7
5.5
11.2
12.1
10.8
>$250mm in Revenue Median:
7.2x
6.3x
5.9x
12.0x
12.0x
10.8x
<$250mm in revenue
Vasco
$7.29
$273
$216
$29
$21
$25
$0.61
$0.38
$0.46
7.4x
10.1x
8.7x
11.9x
19.2x
15.8x
SonicWall
5.99
322
174
28
29
33
0.32
0.30
0.34
6.1
6.0
5.2
18.7
19.8
17.9
ActivIdentity
2.60
119
33
(4)
NA
NA
(0.18)
NA
NA
NM
NM
NM
NM
NM
NM
Guidance
3.58
84
47
1
(6)
(3)
(0.30)
(0.08)
0.06
NM
NM
NM
NM
NM
NM
Sourcefire, Inc.
12.52
327
223
3
5
7
(0.05)
0.18
0.26
NM
NM
NM
NM
NM
NM
<$250mm in Revenue Median:
NM
NM
NM
NM
NM
NM
Aggregate Median:
7.2x
6.5x
5.9x
12.1x
13.0x
11.3x
Entrust
(2)
$2.00
$124
$108
$10
$12
$14
$0.13
$0.15
$0.18
10.4x
8.8x
7.5x
15.4x
13.7x
11.4x
(1)

©
Copyright Entrust, Inc. 2008
8
Entrust Faces Significant Operational and Financial Challenges as
a Standalone Sub-Scale Public Company
•
Recent performance
–
Entrust revenue declined over 10%
in first half of 2009
–
Stock traded as low as $0.98 during LTM; traded at $1.55 three days prior to original merger announcement; and
traded under $1.50 two weeks prior
–
6 of 11 peers identified by Barclays have traded down since April 9th
•
Volatile market conditions provide high risk to consistent quarterly execution
–
Historically, third quarter represents most financial performance risk
•
Continuing to transition product revenue
–
New
products
trying
to
gain
scale
and
market
share
against
large
incumbents
–
PKI shifting to a subscription managed service offering which means revenue impacted downward
•
Competitive pressures
–
Key markets dominated by larger companies
–
Entrust
vulnerable
to
large
and
small
competitors
due
to
lack
of
scale
across
multiple
product
lines
•
Cost cutting driving increased profitability, not revenue growth
•
If
transaction
fails,
Entrust
will
pay
deal
fees
and
expenses
of
between
$5
-
$6
million,
or
$0.08
-
$0.10
per share

©
Copyright Entrust, Inc. 2008
9
Mix Shift and Weak Services Flattening Growth Curve
$M
$91M
$98M
$95M
$100M
$100M
$50.3M
$45.0M
-11% Total
-4% Product
7% CAGR on
Software;
31% Growth
2% Total
CAGR;
10% Growth
Overall
Services
Flat

©
Copyright Entrust, Inc. 2008
10
20.1
22.3
10.8
15.2
14.8
6.8
7.3
0.9
1.6
9.7
6.0
3.6
2.5
1.0
3.5
4.5
5.5
7.3
9.6
4.6
5.9
4.8
5.8
9.4
7.9
10.4
4.8
3.6
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
2004
2005
2006
2007
2008
1st Half
2008
1st Half
2009
Public Key Infrastruture
Public Key Infrastructure Info Protection
SSL
Risk Based Authentication
Product Transition: Growth Rate Flat as PKI Model Transitions
$mm
$29.3
$34.2
$35.5
$36.4
$38.4
$18.6
$17.7

©
Copyright Entrust, Inc. 2008
11
Increasingly Competitive Market Dynamics
Security Software
Managed Services
Enterprise Software
System Integrators/Networks
Entrust
Oracle
Cisco
Microsoft
CA
Verizon
SI’s
EMC
Verisign
Symantec
Local Vendors
Local Vendors
IBM
McAfee
Open Source
Checkpoint
HP
Microsoft
“SAAS”
Siemens
Thales
IBM
Open Source
Local Vendors

©
Copyright Entrust, Inc. 2008
12
Extensive and Thorough Board Process
•
Board
began
formal
process
to
evaluate
strategic
alternatives
in
September
2007;
Thoma
Bravo
offer
announced on April 13, 2009
•
30-day “go-shop”
period allowed Entrust to consider and accept better offers
–
From
April
12
–
May
13,
2009,
Strategic
Planning
Committee
of
Entrust’s
Board
and Barclays Capital, the
Company’s independent financial advisor, actively initiated, solicited and encouraged submission of third-
party acquisition proposals
•
In
contact
with
35
separate
parties,
including
security
software
companies,
diversified
software,
technology and industrial companies, and private equity firms
•
11 separate parties completed NDAs, met with Entrust management and were granted access to key
company information
•
Received highly-conditional and non-binding indications of interest from three separate parties (one
private equity firm and two medium/small sized operating companies)
–
Each indication of interest was subject to numerous conditions, including arranging financing and due
diligence
–
Entrust provided extensive due diligence materials to, and continued discussions and negotiations with,
each of the three parties and their representatives
–
None of the three parties provided sufficient information regarding intended financing plans
•
No
“Superior
Proposals”
were
submitted
–
None of the three parties put forth any proposal deemed to be superior
–
Any
interested
party
had
8
full
weeks
from
announcement
of
the
Thoma
Bravo
agreement until the
originally scheduled Special Meeting of Stockholders and, to date, no one has delivered a superior
proposal 
After an Extensive and Thorough Board Process, the Thoma
Bravo
Transaction Achieves the Highest Attainable Value for Stockholders

©
Copyright Entrust, Inc. 2008
13
$2.00 Per Share is Thoma
Bravo’s “Best and Final”
Offer
•
Thoma
Bravo’s
increased
$2.00
per
share
all-cash
offer
is
“best
and
final”
offer
•
Merger
Agreement
will
be
terminated
if
a
“no
vote”
occurs
–
Entrust would continue as a standalone sub-scale public company, facing significant operational
and financial challenges
–
No
other
buyers
emerged
through
“go-shop”
there
is
no
superior
proposal
•
Entrust
is
obligated
to
pay
Thoma
Bravo
a
$2
million
fee
if
“no
vote”
is
outcome
–
Entrust
will
pay
total
deal
fees
and
expenses
of
between
$5
-
$6
million
if
transaction
does
not
close
•
No
“excluded
party”
under
amended
merger
agreement
–
If Entrust enters into an agreement with any third party within 12 months of termination of the
Thoma
Bravo agreement, Entrust is obligated to pay Thoma
Bravo ~$5 million
Thoma
Bravo’s
$2.00
Per
Share
Cash
Offer
Represents
the
Best
Outcome Available to Entrust Stockholders

©
Copyright Entrust, Inc. 2008
14
Summary
•
The Thoma
Bravo-Entrust transaction was the result of an extensive
and thorough exploration of strategic alternatives
•
Thoma
Bravo’s increased $2.00 per share all-cash offer provides
immediate, certain and premium value to Entrust stockholders
•
Entrust’s
Board conducted an extensive and thorough “go-shop”
process
–
to
date,
no
one
has
delivered
a
“superior
proposal”
•
$2.00
per
share
is
Thoma
Bravo’s
“best
and
final”
offer
•
“No vote”
expected to have a negative impact on stock price
Entrust’s
Board of Directors Recommends that All Stockholders
Vote
“FOR”
the
Thoma
Bravo
Transaction