Major Zendesk Investor Opposes Takeover, Suggests $4B Recapitalization Alternative

Light Street Capital Management, which owns more than 2% of Zendesk, Inc ZEN, aims to oppose the $9.5 billion takeover and has proposed an alternative strategy that includes a $4 billion investment to keep the software company independent.
Light Street also wants Zendesk to expand its board to 10 seats, including five independent directors, and replace CEO Mikkel Svane, who would remain Chair under the proposal.
Light Street sought a new CEO with a successful track record in the software business and three of its nominees for the board to participate in a CEO search.
Light Street considers Hellman & Friedman and Permira's takeover price as low.
Light Street offered to recapitalize the company with $2 billion in preferred shares and $2 billion in an incremental debt facility.
With $1 billion of cash from the balance sheet, Zendesk could conduct a $5 billion tender offer at $82.50 per share.
Light Street sees the private equity drive Zendesk to higher profitability and then sell to one of the interested strategic buyers. With higher margins, Zendesk is much more likely to immediately accretive to these buyers, enabling them to pay a much higher price and appease their shareholders.
Price Action: ZEN shares traded higher by 0.05% at $76.57 on the last check Monday.