comScore, Inc. announced that it has entered into agreements with Starboard Value LP under which comScore has: issued $150 million in senior secured convertible notes due 2022 to Starboard in exchange for $85 million in cash and $65 million in shares of comScore common stock based on a value of $25.00 per share; granted Starboard the option to acquire up to an additional $50 million in Starboard Notes in exchange for a range of $15 million to $35 million of stock, at Starboard's option, and the balance in cash; agreed to grant Starboard warrants to purchase 250,000 shares of common stock; and has the right to conduct a rights offering, which will be open to all shareholders, for up to $150 million in senior secured convertible notes (the "Rights Offering Notes"), with $100 million backstopped by Starboard. The cash proceeds from the financing arrangements will be used for general corporate purposes.
Having reviewed financing alternatives from various sources, comScore's Board determined that these financing arrangements provide the Company with financial and strategic flexibility, while also providing shareholders the opportunity to participate in the future financing, and are in the best interests of the Company and its shareholders.
comScore is also providing preliminary selected financial data for 2016 and the first nine months of 2017. In addition, the Company is announcing that it is making substantial progress toward completing the audit of its financial statements for 2015, 2016 and 2017, which is now expected to be completed by the end of March 2018.
Sue Riley, comScore's Board Chair, said, "comScore has made significant progress on a number of fronts and we are entering 2018 with renewed confidence. Notwithstanding the distractions of the last two years, we are in a strong marketplace position and are excited about our future. Our focus now will be on delivering cross-platform measurement, while increasing profitability across the business by driving efficiencies and prioritizing our highest growth products."
Peter Feld, Managing Member of Starboard, said, "We are pleased to have reached this financing agreement with comScore that should provide the Company the capital and flexibility it needs as it works to complete the audit process and return focus to improving the operations and profitability of the business."
Financing Arrangements
Under the terms of the financing agreements, which are being filed with the U.S. Securities and Exchange Commission on a Form 8-K, Starboard has purchased the Starboard Notes in exchange for $85 million in cash and 2.6 million shares of comScore common stock, which were valued at $65 million based on a valuation of $25 per comScore share. The Starboard Notes mature on January 16, 2022. The interest rate on the Starboard Notes is a minimum of 6% per annum during the first year and a minimum of 4% per annum in subsequent years, in each case subject to increase as described below. The Starboard Notes are convertible into comScore common stock at a conversion premium of 30% to the volume-weighted average trading prices of comScore's common stock over the ten trading days beginning on the date hereof and ending on January 29, 2018, subject to a conversion price floor of $28 per share. The interest rate may be increased to a maximum of 12% per year in the event that the conversion premium is more than 30% relative to the average comScore common stock price over the above 10-day period, or under certain other circumstances. Additional details and a full adjustment schedule are contained in the agreements being filed on the Form 8-K. The interest payable at each interest payment date may be paid in cash or paid-in-kind with shares of comScore common stock, at the option of comScore.
The Starboard Notes are guaranteed by certain of the Company's direct and indirect wholly-owned domestic subsidiaries, and are secured by a first lien security interest on comScore's and the guarantors' assets, subject to certain exceptions.
comScore also has the right to conduct a rights offering for up to $150 million of the Rights Offering Notes following the filing of its 2017 Form 10-K. The terms of the Rights Offering Notes will be substantially similar to those of the Starboard Notes, with certain exceptions. All of the Company's shareholders, including Starboard, would be eligible to participate in the rights offering, and participants would be able to elect to have up to 30% of the value of the Rights Offering Notes they subscribe for delivered in exchange for shares of comScore common stock. Starboard has agreed to backstop the rights offering by purchasing up to $100 million of additional Starboard Notes to the extent that Rights Offering Notes are not purchased by other shareholders. In the event that the rights offering is oversubscribed, Rights Offering Notes would be allotted to shareholders on a pro rata basis in accordance with applicable rules of the SEC.
The Company has also granted Starboard an option, exercisable prior to the commencement of the rights offering, to purchase up to an additional $50.0 million of Starboard Notes. The terms of the additional notes would be the same as the Starboard Notes and the exercise of the option would reduce the backstop obligation in the rights offering by an equivalent amount. If exercised in full, the option can be exercised for a range of $15 million to $35 million of comScore common stock, at Starboard's option, and the balance in cash. In addition, comScore has agreed to grant Starboard warrants to purchase 250,000 shares of common stock. The Warrants will be exercisable at an exercise price equal to $0.01 per share and will have a five (5)-year term.
The financing provides the Company a minimum of $135 million in cash from the Starboard Notes and other Starboard commitments, and the maximum value of comScore common stock Starboard can exchange is $115 million.
Jones Day served as the Company's legal advisor in connection with the financing. Goldman Sachs served as the Company's exclusive placement agent in connection with the sale of the Starboard Notes and as exclusive financial advisor in connection with the Company's analysis and consideration of other financing alternatives.