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Judge won't block buyout vote for Utah's Ancestry.com

Published December 19, 2012 9:10 pm

Ruling • As ordered, company gives shareholders more info about deal.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Provo-based Ancestry.com complied Wednesday with the order of a Delaware judge and filed additional information ahead of a Dec. 27 stockholder vote on the $1.6 billion acquisition of the genealogy website by a group led by European private equity firm Permira Advisers.

Chancellor Leo Strine Jr. earlier this week ordered that Ancestry.com shareholders be told about the reluctance of the company's financial adviser to issue an opinion on the fairness of the deal based on May financial projections. Shareholders also must be told about a deal-protection measure put into place after Permira submitted its winning bid that prevented other bidders from submitting a better offer, the judge said.

Neither of those details was included in the proxy statement sent to shareholders of the Utah company. But on Wednesday, the company filed the additional information with the Securities and Exchange Commission.

After the suit was filed, the company's general counsel sent potential bidders a letter that clears the way for them to offer higher bids if they so chose, the company said in its SEC filing.

Strine, however, declined to block the Dec. 27 vote as requested by dissident shareholders, which attorneys suggested could be affected by higher taxes next year.

Ancestry.com attorney William Savitt said shareholders "will almost certainly be better off getting their premium money this year rather than next."

Permira's offer of $32 per share represents a premium of nearly 10 percent of the previous day's closing price in October. Ancestry.com has said the offer represented a 41 percent premium over its closing price in early June before reports surfaced that the company had retained a financial adviser for a possible sale. Ancestry.com's shares, which hit a 52-week high of $33.80 in early August, finished trading Wednesday at $32.01, down 2 cents.

Dissident shareholders have alleged that Ancestry.com president and CEO Timothy Sullivan and chief financial officer Howard Hochhauser had conflicts of interest and favored Permira's offer over those of other private equity funds because they would be able to roll over up to $82 million in existing equity into the new privately owned company.

Strine said there was no evidence in the court record to question the motives of the sellers, noting that its common for private equity funds to want to retain current management after a buyout and expect executives to take a stake in the new company.

The plaintiffs also allege that the financial projections that Ancestry.com's financial adviser, Qatalyst Partners, suggested were too optimistic and were changed shortly before the deal was announced to justify the buyout.

Strine said shareholders should have more information before voting about the reluctance of Qatalyst to give an opinion about the fairness of the deal until the revenue projections were changed.

Ancestry.com, which operates a website for researching family history, claims more than 2 million paying subscribers. It says more than 10 billion records have been added to its site over the past 15 years. The company develops and acquires systems that digitize handwritten historical documents. It works with government archives, historical societies and religious institutions around the world.

The company went public in 2009 and reported earnings last year of $62.9 million, or $1.29 per share, on nearly $400 million in revenue.