Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On August 19, 2021, Inovalon Holdings, Inc., a Delaware corporation
("Inovalon"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Ocala Bidco, Inc., a Delaware corporation ("Parent"), and Ocala
Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent
("Merger Sub"). The Merger Agreement provides that, upon the terms and subject
to the satisfaction or waiver of the conditions set forth therein, Merger Sub
will merge with and into Inovalon (the "Merger"), with Inovalon continuing as
the surviving corporation and a wholly owned subsidiary of Parent.
A special committee comprised of independent directors unanimously determined
that the Merger Agreement and the transactions contemplated thereby (including
the Merger) are advisable and in the best interests of the Public Stockholders
(as defined in the Merger Agreement) and unanimously recommended that the board
of directors of Inovalon approve and recommend the same for adoption by the
stockholders of Inovalon. The board of directors of Inovalon approved the Merger
Agreement and the transactions contemplated thereby (including the Merger) and
directed that the Merger Agreement be submitted to the stockholders of Inovalon
for their adoption. Keith R. Dunleavy, M.D., Inovalon's Chairman and Chief
Executive Officer, was not a member of the special committee and did not
participate in the decision by the board of directors.
Pursuant to the terms of the Merger Agreement, at the effective time of the
Merger (the "Effective Time") and as a result of the Merger, each share of
common stock of Inovalon issued and outstanding immediately prior to the
Effective Time will be cancelled and extinguished and, except with respect to
(a) certain shares held by certain stockholders of Inovalon, including shares
held by Dr. Dunleavy and certain holders of Inovalon's Class B common stock who
will, pursuant to one or more rollover agreements, exchange such shares for
equity interests of Ocala Topco, LP, a Delaware limited partnership, (b) shares
held by Parent or Merger Sub (or any of their respective subsidiaries) in the
treasury of Inovalon and (c) shares held by a stockholder who properly exercises
and perfects appraisal of his, her or its shares under Delaware law,
automatically converted into and thereafter represent the right to receive
$41.00 in cash without interest (the "Merger Consideration").
In addition, immediately prior to the Effective Time and as a result of the
Merger, (a) each option to purchase shares of Inovalon common stock that is
outstanding and unexercised immediately prior to the Effective Time will be
cancelled and converted into the right to receive a cash payment in an amount,
without interest, equal to the product of the Merger Consideration, net of the
exercise price, and the aggregate number of shares of Inovalon common stock
subject to the option; (b) each award of restricted stock units covering shares
of Inovalon common stock that is outstanding immediately prior to the Effective
Time, will be cancelled and converted into the right to receive a cash payment
in an amount, without interest, equal to the product of the Merger Consideration
and the aggregate number of shares of Inovalon common stock subject to the
restricted stock unit award and; (c) (i) with respect to each award of
restricted shares of Inovalon common stock that is outstanding immediately prior
to the Effective Time (each, an "RS Award") and held by an Inovalon employee who
has signed a release of claims against Inovalon and its subsidiaries and
affiliates and agreed to waive the right to certain accelerated vesting
treatment following the Effective Time, 30% of any unvested portion of such
employee's RS Award will be converted into the right to receive a cash payment
in an amount, without interest, equal to the product of the Merger Consideration
and the aggregate number of shares of Inovalon common stock subject to the RS
Award (with any performance-based goals deemed to be achieved at the "target"
level of performance) and (ii) all other RS Awards will be converted into a
cash-based retention award in an amount, without interest equal to the product
of the Merger Consideration and the aggregate number of shares of Inovalon
common stock subject to the RS Award which cash-based retention award will
remain subject to the same vesting schedule that applied immediately prior to
the Effective Time (including any applicable vesting criteria and requirements).
All payments in respect of options, restricted stock unit awards and RS Awards
will be subject to applicable tax withholding. At the consummation of the Merger
(the "Closing"), Parent will deposit an amount of cash in an escrow account to
be available to satisfy any payments due under (c)(ii) above. In addition, no
new offering period will commence under the Inovalon 2015 Employee Stock
Purchase Plan (the "ESPP") following the date of the Merger Agreement, and the
ESPP will be terminated no later than immediately prior to the Effective Time.
The consummation of the Merger is subject to customary closing conditions,
including, among others, the following mutual conditions to the obligations of
the parties: (i) the adoption of the Merger Agreement by the holders of (a) a
majority of the voting power of Inovalon's outstanding common stock, (b) a
majority of Inovalon's outstanding Class A common stock, (c) a majority of
Inovalon's outstanding Class B common stock, and (d) a majority of the voting
power of outstanding common stock, voting as a single class, held by the Public
Stockholders (which condition is non-waivable)? (ii) any applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having
expired or having been terminated and applicable clearances from the Committee
on Foreign Investment in the United States having been obtained? (iii) the
Merger having not then been enjoined, restrained, made illegal or otherwise
prohibited by any applicable law or any order, judgment, decree, injunction or
ruling (whether preliminary or final) of any governmental authority? (iv) the
truth and correctness of the other party's representations and warranties in the
Merger Agreement, subject in certain cases to a materiality or material adverse
effect (each as defined in the Merger Agreement) standard? and (v) the
compliance with or performance, in all material
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respects, of the other party's covenants and obligations in the Merger Agreement
required to be performed at or prior to the consummation of the Merger. In
addition, the consummation of the Merger is subject to the following closing
condition to the obligations of Parent and Merger Sub: the absence of a "Company
Material Adverse Effect" (as defined in the Merger Agreement) with respect to
Inovalon and its subsidiaries, taken as a whole.
Inovalon has made customary representations, warranties and covenants in the
Merger Agreement, including, among others, covenants (i) to conduct its
business, in all material respects, in the ordinary course of business and in a
manner consistent with past practice during the interim period between the
execution of the Merger Agreement and the consummation of the Merger? (ii) not
to engage in specified types of transactions or take specified actions during
this period unless agreed to in writing by Parent? (iii) to convene and hold a
meeting of its stockholders for the purpose of the adoption of the Merger
Agreement by Inovalon's stockholders as described above? and (iv) subject to
certain exceptions, not to withdraw, modify or qualify in a manner adverse to
Parent the recommendation of the board of directors of Inovalon in its proxy
statement for the foregoing stockholders' meeting that its stockholders vote for
the adoption of the Merger Agreement.
Inovalon has agreed, in each case subject to the fulfillment of certain
fiduciary obligations of the board of directors of Inovalon, (i) to cease any
existing solicitation or negotiations with or encouragement of third parties
regarding other acquisition proposals or any alternative business combination
transactions to the Merger or any inquiry, discussion or request that would
reasonably be expected to lead to an acquisition proposal, (ii) not to solicit,
initiate or knowingly facilitate any additional discussions or negotiations with
or encouragement of third parties regarding other acquisition proposals or any
alternative business combination transactions to the Merger or any inquiry,
discussion or request that would reasonably be expected to lead to an
acquisition proposal, (iii) not to enter into, continue, initiate or otherwise
participate in any discussions or negotiations with, or furnish non-public
information to, any third parties in connection with other acquisition proposals
or any alternative business combination transactions to the Merger, and (iv) to
certain other restrictions on its ability to respond to such proposals. However,
subject to the satisfaction of certain conditions, Inovalon and the board of
directors and/or special committee of Inovalon, as applicable, are permitted to
take certain actions which may, as more fully described in the Merger Agreement,
include changing the recommendation of the board of directors of Inovalon
following receipt of a "Superior Proposal" (as defined in the Merger Agreement)
or after an "Intervening Event" (as defined in the Merger Agreement) if the
board of directors of Inovalon (upon the recommendation of the special
committee) has determined in good faith, after consultation with Inovalon's
financial and outside legal advisors (including the special committee's
. . .
Item 8.01. Other Events.
On August 19, 2021, Inovalon issued a press release announcing entry into the
Merger Agreement. A copy of this press release is attached hereto as Exhibit
99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated August 19, 2021, by and among
Inovalon Holdings, Inc., Ocala Bidco, Inc. and Ocala Merger Sub, Inc.
(filed herewith)*
99.1 Press Release of Inovalon Holdings, Inc., dated August 19, 2021
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained
in Exhibit 101)
* The schedules to the Agreement and Plan of Merger have been omitted from this
filing pursuant to Item 601(b)(2) of Regulation S-K. Inovalon will furnish
copies of any such schedules to the SEC upon request.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. This
communication may be deemed to be solicitation material in respect of the
proposed transaction involving Inovalon Holdings, Inc. ("Inovalon") and
affiliates of Nordic Capital. In connection with the proposed transaction,
Inovalon intends to file with the Securities and Exchange Commission (the "SEC")
and furnish to stockholders a proxy statement. This communication is not a
substitute for the proxy statement or any other document that Inovalon may file
with the SEC or send to its stockholders in connection with the proposed
transaction. INVESTORS AND STOCKHOLDERS OF INOVALON ARE URGED TO READ THE PROXY
STATEMENT AND OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING
ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT INOVALON AND THE PROPOSED
TRANSACTION. The materials to be filed by Inovalon will be made available to
Inovalon's investors
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and stockholders at no expense to them and copies may be obtained free of charge
on Inovalon's website at www.inovalon.com. In addition, all of those materials
will be available at no charge on the SEC's website at www.sec.gov.
Inovalon and its directors, executive officers, other members of its management
and employees may be deemed to be participants in the solicitation of proxies of
Inovalon stockholders in connection with the proposed transaction under SEC
rules. Investors and stockholders may obtain more detailed information regarding
the names, affiliations and interests of Inovalon's executive officers and
directors in the solicitation by reading Inovalon's proxy statement for its 2021
annual meeting of stockholders, the Annual Report on Form 10-K for the fiscal
year ended December 31, 2020, and the proxy statement and other relevant
materials that will be filed with the SEC in connection with the proposed
transaction when they become available. Information concerning the interests of
Inovalon's participants in the solicitation, which may, in some cases, be
different than those of the Inovalon's stockholders generally, will be set forth
in the proxy statement relating to the proposed transaction when it becomes
available.
Forward-Looking Statements
All statements and assumptions in this communication that do not directly and
exclusively relate to historical facts could be deemed "forward-looking
statements." Forward-looking statements are often identified by the use of words
such as "anticipates," "believes," "estimates," "expects," "may," "could,"
"should," "forecast," "goal," "intends," "objective," "plans," "projects,"
"strategy," "target" and "will" and similar words and terms or variations of
such. These statements represent current intentions, expectations, beliefs or
projections, and no assurance can be given that the results described in such
statements will be achieved. Forward-looking statements include, among other
things, statements about the potential benefits of the proposed transaction; the
prospective performance and outlook of Inovalon's business, performance and
opportunities; the ability of the parties to complete the proposed transaction
and the expected timing of completion of the proposed transaction; as well as
any assumptions underlying any of the foregoing. Such statements are subject to
numerous assumptions, risks, uncertainties and other factors that could cause
actual results to differ materially from those described in such statements,
many of which are outside of Inovalon's control. Important factors that could
cause actual results to differ materially from those described in
forward-looking statements include, but are not limited to, (i) the ability to
obtain the requisite approval from stockholders of Inovalon; (ii) uncertainties
as to the timing of the proposed transaction; (iii) the risk that the proposed
transaction may not be completed in a timely manner or at all; (iv) the
possibility that competing offers or acquisition proposals for Inovalon will be
made; (v) the possibility that any or all of the various conditions to the
consummation of the proposed transaction may not be satisfied or waived,
including the failure to receive any required regulatory approvals from any
applicable governmental entities (or any conditions, limitations or restrictions
placed on such approvals); (vi) the occurrence of any event, change or other
circumstance that could give rise to the termination of the merger agreement,
including in circumstances that would require Inovalon to pay a termination fee
or other expenses; (vii) the effect of the pendency of the proposed transaction
on Inovalon's ability to retain and hire key personnel, its ability to maintain
relationships with its customers, suppliers and others with whom it does
business, its business generally or its stock price; (viii) risks related to
diverting management's attention from Inovalon's ongoing business operations or
the loss of one or more members of the management team; (ix) the risk that
stockholder litigation in connection with the proposed transaction may result in
significant costs of defense, indemnification and liability; (x) various risks
related to health epidemics, pandemics and similar outbreaks, such as the
COVID-19 pandemic, which may have material adverse effects on Inovalon's
business, financial position, results of operations and/or cash flows; (xi)
failure to comply with numerous laws, regulations and rules, including regarding
employment, anti-bribery, foreign investment, tax, privacy, and data protection
laws and regulations; (xii) problems or delays in the development, delivery and
transition of new products and services or the enhancement of existing products
and services to meet customer needs and respond to emerging technological
trends; (xiii) failure of third parties to deliver on commitments under
contracts with Inovalon; (xiv) misconduct or other improper activities from
Inovalon's employees or subcontractors; (xv) failure of Inovalon's internal
control over financial reporting to detect fraud or other issues; (xvi) failure
or disruptions to Inovalon's systems, due to cyber-attack, service interruptions
or other security threats; (xvii) uncertainty from the expected discontinuance
of the London Interbank Offered Rate and transition to any other interest rate
benchmark; and (xviii) other factors as set forth from time to time in
Inovalon's filings with the SEC, including its Annual Report on Form 10-K for
the fiscal year ended December 31, 2020, as may be updated or supplemented by
any subsequent Quarterly Reports on Form 10-Q or other filings with the SEC.
Readers are cautioned not to place undue reliance on such statements which speak
only as of the date they are made. Inovalon does not undertake any obligation to
update or release any revisions to any forward-looking statement or to report
any events or circumstances after the date of this communication or to reflect
the occurrence of unanticipated events except as required by law.
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