Summary of Unlevered Free Cash Flows
The table below sets forth the calculation of unlevered free cash flows for the periods presented based on the December Projections and other projected financial information provided by Citrix senior management. The December Projections assumed revenue growth from fiscal year 2021 through 2026 at a compound annual growth rate of approximately 6.4% (assuming the acquisition of Wrike closed January 1, 2021) and non-GAAP operating margin growth to 35.0% in fiscal year 2026. The unlevered free cash flows calculated based on the December Projections were used in Qatalyst Partners’ Illustrative Discounted Cash Flow Analysis at the direction of the Company. See “—Opinion of Qatalyst Partners—Illustrative Discounted Cash Flow Analysis” beginning on page 43.
| ($ in millions) | 2022E | 2023E | 2024E | 2025E | 2026E | |||||||||||||||
| Revenue |
$ | 3,409 | $ | 3,765 | $ | 4,040 | $ | 4,241 | $ | 4,423 | ||||||||||
| Non-GAAP Operating Income (1) |
$ | 1,008 | $ | 1,194 | $ | 1,350 | $ | 1,451 | $ | 1,548 | ||||||||||
| Net Operating Profit After Tax (2) |
$ | 905 | $ | 1,056 | $ | 1,186 | $ | 1,271 | $ | 1,351 | ||||||||||
| Less: Capital Expenditures |
(90 | ) | (90 | ) | (90 | ) | (90 | ) | (90 | ) | ||||||||||
| Plus: Depreciation and Amortization |
83 | 85 | 87 | 88 | 90 | |||||||||||||||
| Plus: Other Amortization (3) |
125 | 127 | 130 | 133 | 137 | |||||||||||||||
| Less: Change in Working Capital |
(96 | ) | (168 | ) | (87 | ) | (8 | ) | 40 | |||||||||||
| Less: Other (4) |
(44 | ) | (19 | ) | (19 | ) | (19 | ) | (19 | ) | ||||||||||
| Unlevered Free Cash Flow |
$ | 883 | $ | 992 | $ | 1,208 | $ | 1,375 | $ | 1,509 | ||||||||||
| (1) | Non-GAAP Operating Income excludes the effects of stock-based compensation expense, amortization and impairment of acquired intangible assets, acquisition-related costs and restructuring charges. |
| (2) | Net Operating Profit After Tax is calculated as non-GAAP operating income less taxes calculated at an assumed cash tax rate of 10% in 2022, 12% in each of 2023, 2024 and 2025, and 13% in 2026. |
| (3) | Includes amortization of capitalized commissions and other operating lease related amortization. |
| (4) | Includes restructuring and other cash flow items. |
The table below sets forth the calculation of unlevered free cash flows for the periods presented for an illustrative sensitivity case based on the December Projections, which illustrative discounted cash flow analysis sensitivity was reviewed by the Transaction Committee on December 7, 2021, and other projected financial information provided by Citrix senior management. The illustrative sensitivity case assumed revenue growth from fiscal year 2021 through 2026 at a compound annual growth rate of approximately 4.4% (assuming the acquisition of Wrike closed January 1, 2021) and non-GAAP operating margin growth to 32.5% in fiscal year 2026. The unlevered free cash flows calculated based on this illustrative sensitivity case were used in Qatalyst Partners’ Illustrative Discounted Cash Flow Analysis at the direction of the Company. See “—Opinion of Qatalyst Partners—Illustrative Discounted Cash Flow Analysis” beginning on page 43.
| ($ in millions) | 2022E | 2023E | 2024E | 2025E | 2026E | |||||||||||||||
| Revenue |
$ | 3,344 | $ | 3,626 | $ | 3,819 | $ | 3,932 | $ | 4,022 | ||||||||||
| Non-GAAP Operating Income (1) |
$ | 988 | $ | 1,099 | $ | 1,185 | $ | 1,249 | $ | 1,307 | ||||||||||
| Net Operating Profit After Tax (2) |
$ | 888 | $ | 971 | $ | 1,041 | $ | 1,094 | $ | 1,141 | ||||||||||
| Less: Capital Expenditures |
(88 | ) | (87 | ) | (85 | ) | (83 | ) | (82 | ) | ||||||||||
| Plus: Depreciation and Amortization |
82 | 82 | 82 | 82 | 82 | |||||||||||||||
| Plus: Other Amortization (3) |
123 | 123 | 123 | 124 | 124 | |||||||||||||||
| Less: Change in Working Capital |
(94 | ) | (162 | ) | (82 | ) | (8 | ) | 36 | |||||||||||
| Less: Other (4) |
(44 | ) | (19 | ) | (19 | ) | (19 | ) | (19 | ) | ||||||||||
| Unlevered Free Cash Flow |
$ | 866 | $ | 909 | $ | 1,060 | $ | 1,189 | $ | 1,283 | ||||||||||
| (1) | Non-GAAP Operating Income excludes the effects of stock-based compensation expense, amortization and impairment of acquired intangible assets, acquisition-related costs and restructuring charges. |
| (2) | Net Operating Profit After Tax is calculated as non-GAAP operating income less taxes calculated at an assumed cash tax rate of 10% in 2022, 12% in each of 2023, 2024 and 2025, and 13% in 2026. |
| (3) | Includes amortization of capitalized commissions and other operating lease related amortization. |
| (4) | Includes restructuring and other cash flow items. |
The inclusion of selected elements of the Financial Projections in the tables and accompanying narrative above should not be regarded as an indication that Citrix and/or any of our affiliates, officers, directors, advisors or other representatives consider the Financial Projections to be necessarily predictive of actual future events, and this information should not be relied upon as such. The Financial Projections were based upon certain financial, operating and commercial assumptions developed solely using the information available to Citrix’s senior management at the time the Financial Projections were created. None of Citrix and/or its affiliates, officers, directors, advisors or other representatives gives any Citrix stockholder or any other person any assurance that actual results will not differ materially from the Financial Projections and, except as otherwise required by law, Citrix and/or its affiliates, officers, directors, advisors or other representatives undertake no obligation to update or otherwise revise or reconcile the Financial Projections to reflect circumstances existing after the date on which the Financial Projections were prepared or to reflect the occurrence of future events, even in the event that any or all of the assumptions and estimates underlying the Financial Projections are shown to be in error. Citrix has made no representation to Vista, Elliott, Parent or Merger Subsidiary concerning the Financial Projections in the Merger Agreement or otherwise.
In light of the foregoing factors and the uncertainties inherent in the Financial Projections, Citrix stockholders are cautioned not to place undue, if any, reliance on such Financial Projections.
If the merger proposal is approved and the other conditions to the closing of the Merger are either satisfied or waived, Merger Subsidiary will be merged with and into Citrix upon the terms set forth in the Merger Agreement. As the surviving corporation in the Merger, Citrix will continue to exist following the Merger as a wholly owned subsidiary of Parent.
Following the Merger, all of the Citrix common stock will be beneficially owned by Parent and none of the Company’s current stockholders will have any direct ownership interest in, or be a stockholder of, the Company, the surviving corporation or Parent after the consummation of the Merger. As a result, the Company’s current stockholders will no longer have the potential to benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Citrix common stock. Following the Merger, Parent will have the potential to benefit from any increase in the Company’s value and also will bear the risk of any decrease in the Company’s value.
At the effective time of the Merger, and without any action by any stockholder, each share of Citrix common stock that is outstanding immediately prior to the effective time of the Merger (other than shares held by the Company as treasury stock, owned by Parent or Merger Subsidiary or as to which the holders thereof have properly and validly exercised their statutory rights of appraisal in accordance with Section 262 of the DGCL) will be automatically converted into the right to receive cash in an amount equal to $104.00, without interest (which is referred to as the “merger consideration”), less any applicable withholding taxes. Please see the section of this proxy statement titled “The Merger Agreement—Consideration to be Received in the Merger.”
Immediately prior to the effective time of the Merger:
| • | Vested Citrix stock options: Each vested Citrix stock option will be automatically cancelled and converted into the right to receive an amount in cash equal to the product obtained by multiplying (1) the excess, if any, of the merger consideration over the per share exercise price of such Citrix stock option, by (2) the aggregate number of shares of Citrix common stock that would have been issuable upon exercise of such Citrix stock option immediately prior to the effective time. |
| • | Unvested Citrix stock options: Each unvested Citrix stock option will be automatically cancelled and converted into the contingent right to receive an aggregate amount in cash (referred to as a “converted |
| cash award”) equal to the product obtained by multiplying (1) the excess, if any, of the merger consideration over the per share exercise price of such Citrix stock option, by (2) the aggregate number of shares of Citrix common stock that would have been issuable upon exercise of such Citrix stock option immediately prior to the effective time. The converted cash award will be subject to generally the same terms as the corresponding, cancelled equity award, including vesting conditions. |
| • | Citrix DSU awards: Each Citrix DSU award, whether or not vested, will be automatically cancelled and converted into the right to receive an amount in cash equal to the product obtained by multiplying (1) the aggregate number of shares of Citrix common stock subject to such Citrix DSU award by (2) the merger consideration. |
| • | Citrix RSU awards: Each Citrix RSU award (with time-based vesting only) will be automatically cancelled and converted into a converted cash award with respect to an aggregate amount in cash equal to the product obtained by multiplying (1) the aggregate number of shares of Citrix common stock subject to such Citrix RSU award by (2) the merger consideration. The converted cash award will be subject to generally the same terms as the corresponding, cancelled equity award, including vesting conditions. |
| • | Citrix PRSU awards: Each Citrix PRSU award will be deemed earned for such number of shares of Citrix common stock as determined in accordance with the terms of the applicable award agreement, and such Citrix PRSU awards will be automatically cancelled and converted into a converted cash award with respect to an aggregate amount in cash equal to the product obtained by multiplying (1) the aggregate number of shares of Citrix common stock subject to such Citrix PRSU award (as deemed earned) by (2) the merger consideration. The converted cash award will be subject to generally the same terms as the corresponding, cancelled equity award, including vesting conditions. |
All payments with respect to Citrix equity awards will be made without interest and less any applicable withholding taxes.
Citrix common stock is currently registered under the Exchange Act and trades on Nasdaq under the ticker symbol “CTXS.” Following the consummation of the Merger, shares of Citrix common stock will be delisted from Nasdaq. In addition, the registration of shares of Citrix common stock under the Exchange Act will be terminated and the Company will no longer be required to file periodic and other reports with the SEC with respect to its common stock. Termination of registration of Citrix common stock under the Exchange Act will reduce the information required to be furnished by the Company to the Company’s stockholders and the SEC, and will make provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company.
Effects on the Company if the Merger Is Not Completed
If the merger proposal is not approved by the Company’s stockholders, or if the Merger is not completed for any other reason, the Company’s stockholders will not receive any payment for their shares of Citrix common stock in connection with the Merger. Instead, the Company will remain an independent public company, the Citrix common stock will continue to be listed and traded on Nasdaq, the Citrix common stock will continue to be registered under the Exchange Act and the Company’s stockholders will continue to own their shares of Citrix common stock and will continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of Citrix common stock.
If the Merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your shares of Citrix common stock, including the risk that the market price of Citrix common stock may decline to the extent that the current market price of Citrix common stock reflects a market assumption that the Merger will be completed. If the Merger is not completed, there is no assurance that any other transaction acceptable to the Company will be offered or that the business, operations, financial condition, earnings or prospects of the Company will not be adversely affected. Pursuant to the Merger Agreement, under certain circumstances, the Company is permitted to terminate the Merger Agreement in order to enter into an alternative transaction and may be obligated to pay to Parent the Company termination fee. Please see the section of this proxy statement titled “The Merger Agreement—Termination.”
Under certain circumstances, if the Merger is not completed, Parent may be obligated to pay to the Company the Parent termination fee. Please see the section of this proxy statement titled “The Merger Agreement—Termination Fees and Expenses.”
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. It is anticipated that the total amount of funds necessary to complete the Merger and the related transactions, and to pay the fees and expenses required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement, will be approximately $17.3 billion in cash. Parent has obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement, the aggregate proceeds of which, together with cash on hand at TIBCO and the Company, will be used by Parent to pay the aggregate merger consideration and all related fees and expenses of Parent and Merger Sub and to repay the Company’s outstanding debt.
Elliott Associates, L.P. (“Elliott Associates”) and Elliott International, L.P. (“Elliott International” and, together with Elliott Associates, the “Elliott Funds”), have committed, pursuant to an equity commitment letter dated as of January 31, 2022 (the “Equity Commitment Letter”), to capitalize Parent, at or prior to the effective time of the Merger, with an aggregate equity contribution in an amount of $2.275 billion, on the terms and subject to the conditions set forth in the Equity Commitment Letter. The Equity Commitment Letter also provides that, at or prior to the closing of the Merger, the Elliott Funds will, directly or indirectly, contribute to Parent an aggregate of 1,200,000 shares of Citrix common stock in exchange for, directly or indirectly through one or more intermediate entities, additional equity securities of Parent. Citrix is an express third-party beneficiary of the Equity Commitment Letter for the purpose of specifically enforcing Parent’s right to cause each investor to fund or contribute, as applicable, its commitment under the Equity Commitment Letter, subject to (1) the limitations and conditions set forth in each Equity Commitment Letter and (2) the terms and conditions of the Merger Agreement.
Certain institutional investors have committed, pursuant to a commitment letter dated as of January 31, 2022 (the “Preferred Equity Commitment Letter”), to purchase, directly or through one or more of their respective affiliates or managed funds, preferred equity interests to be issued by Picard Holdco, LLC, an indirect parent entity of TIBCO, at or prior to the effective time of the Merger, with an aggregate initial liquidation preference amount of up to $2.5 billion, on the terms and subject to the conditions set forth in the Preferred Equity Commitment Letter. The obligations of the Preferred Investors to purchase the preferred equity interests pursuant to the Preferred Equity Commitment Letter are subject to a number of conditions, including the receipt of executed investor documentation, accuracy of representations and warranties, consummation of the transactions contemplated in the Merger Agreement and contribution of the equity contemplated by the Equity Commitment Letter.
In addition, Bank of America, N.A., Credit Suisse AG, Goldman Sachs Bank USA, Barclays Bank PLC, Citigroup Global Markets Inc., Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, KKR Capital Markets LLC, Mizuho Bank, Ltd., Morgan Stanley Senior Funding, Inc. and Royal Bank of Canada have committed to provide debt financing for the Merger consisting of (1) a senior secured term loan
