Tick tock: How Perspecta decided on its sale to Veritas

Veritas Capital eventually became the winner of the race to buy Perspecta, whose board of directors had to consider not just the offers before it but how another investor wanted to see things happen.

Roughly five months went by after Veritas Capital asked in July 2020 for a waiver from its agreement with Perspecta that governed how the private equity firm could try to buy the company.

The Perspecta board of directors granted Veritas that waiver on Jan. 6, though before that Veritas was able to give ranges of what it thought the government technology company was worth.

After Jan. 6, Veritas submitted three bids over the next 20 days and its final offer prevailed over a competing bid by unnamed government contractor in the final round, according to regulatory filings posted Friday.

The final offer by that contractor called “Company A” in the filing came in at $28.50 per share in cash and stock, while Veritas’ last and winning bid was $29.35 per share in all cash.

A second government contractor labeled “Company B” also showed interest in an acquisition of Perspecta over the fall and winter of 2020 and outlined broad terms of such a deal at various points. That pursuit ended in late December.

Perspecta’s proxy filing, of which we clipped the relevant 30 pages here, is a required disclosure they must make ahead of a yet-unscheduled shareholder vote on Veritas’ proposal to acquire the company.

The six-month period between Veritas’ first request and sealing the deal also represents the amount of time its CEO Ramzi Musallam was not a participant in any meeting of Perspecta’s board of directors, of which he is a member but was recused from board deliberations for this situation.

Veritas owned two of the three businesses that helped launch the publicly-traded Perspecta in 2018. The private equity firm holds 14.4 percent of the stock today.

Perspecta’s third-largest shareholder was a second significant player in this story. Jana Partners, the activist hedge fund founded and led by Barry Rosenstein, holds 8.6 percent of the stock and first disclosed its Perspecta holdings in June 2020.

Representatives from Jana met with Perspecta CEO Mac Curtis and then-board Chairman Mike Lawrie twice in March. A third meeting happened in July with Curtis and other Perspecta senior executives. Curtis became chairman in August.

That July 16 meeting is when Jana put forth options they thought could help increase Perspecta’s shareholder value, including a sale of the company or other transformative transaction.

By my count, Curtis and his Perspecta colleagues briefed Jana representatives on the contractor’s performance and outlook three more times after that.

For what it’s worth, Curtis told investors in a November earnings call that Perspecta believed its stock was undervalued and the board was looking at how to remedy that.

August is apparently when the interest from other contractors who wanted to buy Perspecta began to kick off. Company A’s CEO told Curtis in one phone call an unsolicited proposal to acquire Perspecta was on the way.

Perspecta’s board then instructed Curtis to work with the company’s financial advisers to see who else may be interested in a transaction.

Curtis then separately called the chief executives of two other GovCon companies -- Company B and a “Company C” -- that Perspecta was expecting a bid from Company A.

Perspecta was confident in itself as a standalone company but at least wanted Companies B and C to evaluate the possibility of a transaction, Curtis told both of those CEOs.

Company C decided not to go forward. Company B then made its interest known to Curtis in a Sept. 14 letter and in an Oct. 3 phone call between both CEOs.

Oct. 6 indicates when Perspecta’s board began to discuss due diligence in a potential transaction. The board determined varying degrees of that activity should take place with Companies A and B, plus Veritas.

Veritas and Musallam’s first contact regarding Perspecta’s willingness to grant the waiver happened in July 2020, but the Perspecta board determined that was premature the following month.

Musallam sent a letter in September to Perspecta’s lead independent director Phil Nolan outlining a valuation range of $28.00-$30.00 per share in cash in a potential acquisition.

A second unnamed private equity firm showed some interest in Perspecta. That PE firm attended presentations from Perspecta management and was sent a bid process letter in December outlining how to put forth a proposal. No offer from that PE firm is detailed in the proxy filing.

Veritas and Company A got the same letter, along with a draft merger agreement. Dec. 23 is when Company B ended its pursuit.

Company A gave a presentation to Perspecta’s board on Jan. 19 on a strategic plan for the combined company.

Multiple rounds of bids took place with Company A’s final bid made on Jan. 25. Veritas made two more offers, including the final and winning bid the next day.

Then we all found out on Jan. 27 that Veritas won the race for Perspecta, which apparently took a multiple-blind approach in this process.

No details of conversation between Musallam, Veritas and Curtis. Nolan represented Perspecta to Musallam. Curtis represented Perspecta to the prospective strategic buyers.