This summary highlights selected information from this proxy statement related to the merger of Spirit Merger Corp. with and into Splunk Inc. (the “Merger”) and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement (as defined below), along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption “Where You Can Find More Information.” The Merger Agreement is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.
Except as otherwise specifically noted in this proxy statement, “Splunk,” “we,” “our,” “us,” the “Company” and similar words refer to Splunk Inc. Throughout this proxy statement, we refer to Cisco Systems, Inc. as “Parent” or “Cisco” and Spirit Merger Corp. as “Merger Sub.” In addition, throughout this proxy statement, we refer to the Agreement and Plan of Merger, dated September 20, 2023, by and among Parent, Merger Sub and Splunk as the “Merger Agreement,” our common stock, par value $0.001 per share, as “Splunk common stock,” and the holders of Splunk common stock as “Splunk Stockholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.
Splunk Inc.
Splunk helps customers build a safer and more resilient digital world. We deliver innovative solutions that enable organizations to harness the value of their data to help keep their digital systems secure, available and performant. As organizations’ reliance on resilient systems continues to increase, it is critical that they keep pace with increasing complexity and potential vulnerabilities associated with these systems. Our solutions for security and observability empower Security Operations, IT Operations, and Development Operations teams to maintain resilient systems by monitoring and securing them more quickly and efficiently. We also believe our offerings empower operational transformation, helping customers move from reactive, non-scalable and ineffective approaches to proactive, automated, and machine learning-assisted processes that drive better outcomes even as the scale and complexity of their technology continue to grow. We believe that the increasing reliance on digital systems has made the resilience of these systems mission-critical for nearly every organization and the sustained ongoing importance of digital systems amidst the evolving threat landscape further elevates Splunk’s central role in enabling secure and reliable operations for our customers. We were incorporated in California in October 2003 and were reincorporated in Delaware in May 2006. Splunk common stock is listed on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “SPLK.”
Cisco Systems, Inc.
Parent designs and sells a broad range of technologies that power the Internet. Parent is integrating its product portfolios across networking, security, collaboration, applications and the cloud to create highly secure, intelligent platforms for our customers’ digital businesses. These platforms are designed to help Parent’s customers manage more users, devices and things connecting to their networks to enable Parent to provide customers with a highly secure, intelligent platform for their digital business. Parent conducts its business globally and manages its business by geography. Parent’s business is organized into the following three geographic segments: Americas; Europe, Middle East, and Africa (EMEA); and Asia Pacific, Japan, and China (APJC).
Parent’s products and technologies are grouped into the following categories: Networking, Security, Collaboration, and Observability. In addition to Parent’s product offerings, Parent provides a broad range of service offerings, including technical support services and advanced services. Increasingly, Parent is delivering its technologies through software and services. Parent’s customers include businesses of all sizes, public institutions, governments, and service providers, including large webscale providers. These customers often look to Parent as a strategic partner to help them use information technology (IT) to differentiate themselves and drive positive business outcomes.
Parent was incorporated in California in 1984 and reincorporated in Delaware in 2021. Parent’s headquarters are in San Jose, California. Parent common stock is listed on Nasdaq under the symbol “CSCO.”
Spirit Merger Corp.
Merger Sub is a wholly owned subsidiary of Parent and was formed on September 14, 2023, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. It has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Splunk and the separate corporate existence of Merger Sub will cease, with Splunk continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, Splunk common stock will no longer be publicly traded and will be delisted from Nasdaq. In addition, Splunk common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Splunk will no longer file periodic reports with the United States Securities and Exchange Commission (the “SEC”). If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation. The time at which the Merger will become effective will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware in accordance with the applicable provision of the General Corporation Law of the State of Delaware (the “DGCL”) (the time of such filing and the acceptance for record by the Secretary of State of the State of Delaware, or such later time as may be agreed in writing by Parent, Merger Sub and Splunk and specified in the certificate of merger, the “Effective Time”).
Splunk Common Stock
At the Effective Time, each then outstanding share of Splunk common stock (other than shares of Splunk common stock (i) held by Splunk as treasury stock, (ii) owned by Parent, any direct or indirect subsidiary of Splunk, or subsidiary of Parent, or (iii) owned by Splunk Stockholders who have properly demanded and not withdrawn their statutory rights of appraisal in respect of such shares of Splunk common stock in accordance with Section 262 of the DGCL, collectively, the “Excluded Shares”) will be cancelled and extinguished and automatically converted into the right to receive an amount in cash equal to $157.00, without interest thereon (the “Per Share Merger Consideration”), less any applicable withholding taxes.
At or promptly following the Effective Time, Parent will deposit (or cause to be deposited) an amount of cash equal to the aggregate Per Share Merger Consideration with a designated exchange agent for payment of each share of Splunk common stock owned by each Splunk Stockholder. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Exchange and Payment Procedures.”
After the Merger is completed, you will have the right to receive the Per Share Merger Consideration, but you will no longer have any rights as a Splunk Stockholder (except that Splunk Stockholders who properly exercise their appraisal rights may have the right to receive payment for the “fair value” of their shares determined pursuant to an appraisal proceeding, as contemplated by Delaware law). For more information, please see the section of this proxy statement captioned “The Merger—Dissenters’ Rights.”
Treatment of Company Equity Awards
The Merger Agreement provides that Splunk’s equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment as of the Effective Time:
Vested Company Equity Awards
At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each (i) option to purchase shares of Splunk common stock (a “Company Option”) that (x) is vested as of immediately prior to the Effective Time or (y) vests effective as of the Effective Time and in accordance with the terms of the applicable contract with Splunk as in effect immediately prior to the Effective Time (each, a “Vested Company Option”) that is unexpired, unexercised and outstanding as of immediately prior to the Effective Time, (ii) restricted stock unit (a “Company RSU”) that (x) is vested but not yet settled as of immediately prior to the Effective Time (including any restricted stock unit agreement), (y) outstanding as of immediately prior to the Effective Time and held by a non-employee member of the Board of Directors of Splunk (the “Board of Directors”) or (z) vests effective as of the Effective Time and in accordance with its terms (a “Vested Company RSU”), and
(iii) performance-based restricted stock unit (a “Company PSU”) that (x) is vested but not yet settled as of immediately prior to the Effective Time or (y) vests effective as of the Effective Time based on attainment of the actual level of performance as determined prior to the Closing by the Board of Directors or a committee thereof in accordance solely with the terms of the applicable contract with Splunk as in effect immediately prior to the Effective Time (a “Vested Company PSU”), will terminate and be converted into and represent the right to receive the applicable “Cash-Out Amount” from Parent for such Vested Company Option, Vested Company RSU or Vested Company PSU, less any applicable taxes.
For each Vested Company Option, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock subject to such Vested Company Option by (y) the Per Share Merger Consideration less the exercise price per share of such Vested Company Option in effect immediately prior to the Effective Time. For each Vested Company RSU, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock issuable upon settlement of such Vested Company RSU by (y) the Per Share Merger Consideration. For each Vested Company PSU, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock issuable upon settlement of such Vested Company PSU by (y) the Per Share Merger Consideration.
Unvested Company Equity Awards
Unvested Company Shares. At the Effective Time, the Per Share Merger Consideration in respect of each share of Splunk common stock that is restricted, subject to repurchase rights or otherwise not fully vested (an “Unvested Company Share”) will remain subject to the same restrictions, vesting arrangements or repurchase rights that were applicable to such Unvested Company Shares immediately prior to or at the Effective Time, and will become payable by Parent on the date that such Unvested Company Share would have become vested under the vesting schedule in place for such shares immediately prior to or at the Effective Time, and will otherwise remain subject to substantially the same terms and conditions as were applicable to the underlying Unvested Company Share immediately prior to the Effective Time, and each outstanding repurchase right will be assigned to Parent in the Merger and will thereafter be exercisable by Parent upon the same terms and subject to the same conditions that were in effect immediately prior to the Effective Time.
Unvested Company Options and Unvested Company RSUs. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Company Option that is not a Vested Company Option (an “Unvested Company Option”) that is unexpired, unexercised and outstanding as of immediately prior to the Effective Time, and each Company RSU that is not a Vested Company RSU (an “Unvested Company RSU”) that is outstanding as of immediately prior to the Effective Time, will be converted into and represent the right to receive the applicable “Cash-Out Amount” from Parent for such Unvested Company Option or Unvested Company RSU (the “Unvested Cash (Options/RSUs)”). Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, the Unvested Cash (Options/RSUs) will vest and become payable at the same time as the Unvested Company Option or Unvested Company RSU, as applicable, from which such resulting Unvested Cash (Options/RSUs) was converted would have vested and been payable pursuant to its terms and will otherwise remain subject to the same terms, conditions, restrictions and service-based vesting arrangements that were applicable to such Unvested Company Options or Unvested Company RSUs, as applicable, including those provisions for accelerated vesting on certain terminations of employment, in each case, as in effect from time to time unless otherwise superseded by any applicable contract between the holder thereof and Splunk or Parent or their respective affiliates, but effective from and after the Effective Time.
For each Unvested Company Option, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock subject to such Unvested Company Option by (y) the Per Share Merger Consideration less the exercise price per share of such Unvested Company Option in effect immediately prior to the Effective Time.
For each Unvested Company RSU, the Cash-Out Amount will be determined by multiplying (x) the number of shares of Splunk common stock issuable upon settlement of such Unvested Company RSU by (y) the Per Share Merger Consideration.
Unvested Company PSUs. At the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof, each Company PSU that is not a Vested Company PSU (an “Unvested Company PSU”) that is outstanding immediately prior to the Effective Time will be converted into and represent the right to
receive the applicable “Cash-Out Amount” from Parent for such Unvested Company PSU (the “Unvested Cash (PSUs)”). Subject to the holder’s continued service with Parent and its affiliates (including the Surviving Corporation and its subsidiaries) through the applicable vesting dates, the Unvested Cash (PSUs) will vest and be payable at the same time as the Unvested Company PSU from which such Unvested Cash (PSUs) was converted would have vested and been payable pursuant to its terms and will otherwise remain subject to the same terms, conditions, restrictions and service-based vesting arrangements that were applicable to such Unvested Company PSUs, including those provisions for accelerated vesting on certain terminations of employment as in effect from time to time unless otherwise superseded by any applicable contract between the holder thereof and Splunk or Parent or their respective affiliates, but effective from and after the Effective Time.
For each Unvested Company PSU, the Cash-Out Amount will be determined by multiplying (x) the total number of shares of Splunk common stock underlying such Unvested Company PSU (assuming conversion of performance-based vesting to service-based vesting and satisfaction of such service-based vesting schedule and based on the attainment of the applicable performance metrics at the actual level of performance through Closing as determined prior to the Closing by the Board of Directors or committee thereof in accordance solely with the terms applicable to such Unvested Company PSU), by (y) the Per Share Merger Consideration.
For more information on the treatment of Unvested Company Shares, Company Options, Company RSUs and Company PSUs (collectively, the “Company Equity Awards”), please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Treatment of Company Equity Awards.”
Treatment of Company ESPP
In accordance with the terms of the Merger Agreement, on September 20, 2023, the Board of Directors adopted resolutions with respect to the Splunk 2012 Employee Stock Purchase Plan (the “Company ESPP”), providing that (i) with respect to any “Offering Period” (as defined in the Company ESPP) in effect as of September 20, 2023 (the “Current ESPP Offering Period”), no employee who is not a participant in the Company ESPP as of September 20, 2023 may become a participant in the Company ESPP and no participant may increase the percentage amount of his or her payroll deduction election from that in effect on September 20, 2023, for such Current ESPP Offering Period, (ii) subject to the consummation of the Merger, the Company ESPP will terminate effective immediately prior to the Effective Time, (iii) if all such Current ESPP Offering Periods terminate prior to the Effective Time, then the Company ESPP will be suspended, (iv) no new Offering Period will be commenced under the Company ESPP prior to the termination of the Merger Agreement and (v) if any Current ESPP Offering Period is still in effect at the Effective Time, then the last day of such Current ESPP Offering Period will be accelerated to the Business Day prior to the Closing Date and the final settlement or purchase of shares of Company Common Stock thereunder will be made on that day.
For more information on the treatment of the Company ESPP, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Merger Consideration—Treatment of Company ESPP.”
The Merger Agreement provides that, on the Closing Date, Parent, Merger Sub and Splunk are required, as and to the extent required by the Convertible Notes Indentures (as defined in the section of this proxy statement captioned “—Financing of the Merger”), to execute any supplemental indentures required by the Convertible Notes Indentures and deliver any certificates and other documents required by the Convertible Notes Indentures. Splunk must provide Parent and its counsel reasonable opportunity to review and comment on any notices, certificates, press releases, supplemental indentures, or other documents or instruments deliverable pursuant to the Convertible Notes Indentures prior to the dispatch or making thereof.
Prior to the Effective Time, Splunk is required to (i) use its commercially reasonable efforts to cooperate with Parent to enter into arrangements with the counterparties to the Capped Call Transactions (as defined in the section of this proxy statement captioned “The Merger—Capped Call Transactions”) to cause the Capped Call Transactions to be exercised, settled, cancelled or otherwise terminated as of the Closing Date, and to enter into any documentation required to effect such termination, (ii) use reasonable efforts to keep Parent informed of any discussions and negotiations with the counterparties to the Capped Call Transactions with respect to the Capped Call Transactions and give Parent reasonable opportunity to participate (or have its counsel participate) in any such discussions and negotiations, (iii) as promptly as reasonably practicable, provide Parent with any notices or other written
communication received from any counterparties to the Capped Call Transactions with respect to the Capped Call Transactions and (iv) provide Parent and its counsel reasonable opportunity to review and comment on any such notice or other written communication prior to making any response.
The receipt of cash by Splunk Stockholders in exchange for shares of Splunk common stock in the Merger will be a taxable transaction for U.S. federal income tax purposes. Such receipt of cash by a U.S. Holder (as defined in the section of this proxy statement captioned “The Merger—U.S. Federal Income Tax Consequences of the Merger”) generally will result in the recognition of gain or loss in an amount equal to the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Splunk common stock surrendered pursuant to the Merger.
For a more complete description of the U.S. federal income tax consequences of the Merger, Splunk Stockholders should read the section of this proxy statement captioned “The Merger—U.S. Federal Income Tax Consequences of the Merger.”
Splunk Stockholders should consult their tax advisors concerning the U.S. federal income tax consequences relating to the Merger in light of their particular circumstances and any consequences arising under the laws of any state, local or non-U.S. tax jurisdiction.
Pursuant to Section 262 of the DGCL, dissenting Splunk Stockholders will be entitled to seek appraisal of their shares of Splunk common stock in connection with the Merger under Section 262 of the DGCL. The “fair value” of such shares as determined by the Delaware Court of Chancery could be greater than, the same as, or less than the Per Share Merger Consideration.
The right to seek appraisal will be lost if a Splunk Stockholder votes FOR the Merger Agreement. However, abstaining or voting against the Merger Agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights. To exercise appraisal rights, Splunk Stockholders who wish to exercise the right to seek an appraisal of their shares of Splunk common stock must advise Splunk by submitting a written demand for appraisal to Splunk prior to the taking of the vote on the Merger Agreement at the Special Meeting, and must otherwise strictly follow the applicable procedures and requirements prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of Splunk common stock held of record in the name of another person, such as a bank, broker or other nominee, may perfect appraisal rights in such person’s name if such beneficial owner continuously owns such shares through the Effective Time and otherwise satisfies the requirements applicable to Splunk Stockholders of record under Section 262(a) of the DGCL. In addition, the beneficial owner must (1) reasonably identify in his, her or its demand the holder of record of the shares of Splunk common stock for which the demand is made, (2) provide documentary evidence of such beneficial owner’s beneficial ownership and a statement that such documentary evidence is a true and correct copy of what it purports to be and (3) provide an address at which such beneficial owner consents to receive notices given by Splunk and to be set forth on the verified list of persons who have demanded appraisal for their shares pursuant to Section 262(f) of the DGCL. In addition, under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all Splunk Stockholders who have perfected their appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Splunk common stock or (2) the value of the Per Share Merger Consideration multiplied by the total number of shares of Splunk common stock entitled to appraisal exceeds $1 million. In view of the complexity of Section 262 of the DGCL, Splunk Stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors.
For a more complete description of the right of Splunk Stockholders to dissent, Splunk Stockholders should read the section of this proxy statement captioned “Background of the Merger—Dissenter’s Rights.”
Following the announcement of the proposed transaction, Splunk received demands on behalf of purported stockholders alleging that the proxy statement filed in connection with the Merger between Splunk and Parent omitted certain purportedly material information regarding Splunk’s financial projections and Qatalyst Partners’ and Morgan Stanley’s financial analyses. Each demand requests corrective disclosures in advance of the Special Meeting. Splunk believes the demands are without merit. It is possible additional demands may be sent or lawsuits may be filed between the date of this proxy statement and consummation of the Merger.
HSR Act, U.S. Antitrust Matters and Other Regulatory Approvals
Under the Merger Agreement, the Merger cannot be completed until the applicable waiting period (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), has expired or been terminated and all requisite clearances, consents and approvals have been obtained from the relevant antitrust authorities, or any applicable waiting periods (and any extensions thereof) have expired or been terminated under the relevant antitrust laws of certain other jurisdictions, including the European Union.
Completion of the Merger is further subject to the receipt of approval, clearance or expiration of the applicable review periods under the foreign investment laws of certain jurisdictions.
For more information, please see the section of this proxy statement captioned “The Merger—Regulatory Approvals Required for the Merger.”
The obligations of Splunk, Parent and Merger Sub, as applicable, to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions) the following:
• | the adoption of the Merger Agreement by the requisite affirmative vote of Splunk Stockholders; |
• | the expiration or termination of the applicable waiting period under the HSR Act and the receipt of clearances, consents and approvals under other applicable antitrust and foreign investment regimes; |
• | the absence of any injunction, law or order in an applicable jurisdiction making the Merger illegal or otherwise prohibiting the Merger; |
• | in the case of Parent and Merger Sub, the absence, since the date of the Merger Agreement, of any continuing change, event, occurrence, circumstance, condition or effect at Splunk that is or would reasonably be expected to be materially adverse (with certain limitations) to the business, financial condition, operations or results of operations of Splunk and its subsidiaries, taken as a whole; |
• | the accuracy of the respective representations and warranties of Splunk, Parent and Merger Sub in the Merger Agreement, subject to certain applicable qualifiers, as of the date of the Merger Agreement, the Effective Time and/or the date in respect of which such representation or warranty was specifically made; |
• | the performance in all material respects by Splunk, Parent and Merger Sub of their respective obligations required to be performed by them under the Merger Agreement at or prior to the Effective Time; |
• | the receipt by Parent of a certificate of Splunk, dated as of the Closing Date and signed by its chief executive officer or chief financial officer, certifying that certain of the conditions as they relate to Splunk described in the fifth (5th) and sixth (6th) of the preceding bullets have been satisfied; and |
• | the receipt by Splunk of a certificate of Parent and Merger Sub, dated as of the Closing Date and signed by a duly authorized officer, certifying that certain of the conditions as they relate to Parent and Merger Sub described in the fifth (5th) and sixth (6th) of the preceding bullets have been satisfied. |
The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. Parent and Merger Sub have represented to Splunk that, as of September 20, 2023, they had and will have available to them sufficient funds to make the payments required to be paid at the closing of the Merger by Parent and Merger Sub under the Merger Agreement. This includes funds needed to: (1) pay Splunk Stockholders the amounts due under the Merger Agreement for their Splunk common stock and (2) make payments in respect of outstanding Company Options, Company RSUs and Company PSUs payable at the closing of the Merger pursuant to the Merger Agreement.
For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
The affirmative vote of the holders of a majority of the outstanding shares of Splunk common stock is required to adopt the Merger Agreement. At the close of business on October 23, 2023 (the “Record Date”), 84,268,367 votes constitute a majority of the outstanding shares of Splunk common stock. Approval of the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Splunk’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”) and the proposal to adjourn the Special Meeting (the “Adjournment Proposal”), whether or not a quorum is present, requires the affirmative vote of a majority of the shares of Splunk common stock present or represented by proxy at the Special Meeting and entitled to vote on the subject matter and voted for or against the matter. The approval of the Compensation Proposal is advisory (non-binding) and is not a condition to the completion of the Merger.
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, 273,627 shares of Splunk common stock, representing approximately 0.2% of the shares of Splunk common stock outstanding as of the Record Date (and approximately 0.2% of the shares of Splunk common stock outstanding when taking into account Company Options, Company RSUs and Company PSUs held, in the aggregate, by our directors and executive officers).
On September 20, 2023, in connection with the Merger Agreement, Parent also entered into a Voting and Support Agreement (the “Voting and Support Agreement”) with certain funds affiliated with Hellman & Friedman Advisors LLC (collectively, “H&F”) and Splunk. As of the Record Date, H&F owns 12,799,822 shares of Splunk common stock, representing approximately 7.6% of the shares of Splunk common stock outstanding as of the Record Date. The Voting and Support Agreement provides H&F with certain registration rights pursuant to which, among other things, the Company has agreed to prepare and file a registration statement with the SEC as soon as practicable for purposes of registering the resale of any Registrable Securities (as defined in the Voting and Support Agreement). A copy of the Voting and Support Agreement is attached as Annex B and is incorporated herein by reference.
Pursuant to the Voting and Support Agreement, H&F has agreed, among other things, to (i) vote in favor of the proposal to adopt and approve the Merger Agreement and (ii) vote against (x) any action or agreement that would reasonably be expected to result in any of the conditions of Splunk’s obligations set forth in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger” not being fulfilled and (y) any Acquisition Proposal, or any agreement, transaction or other matter that is intended to, or would reasonably be expected to, prevent, materially impede or interfere with the consummation of the Merger and the other transactions contemplated by the Merger Agreement.
We currently expect that our directors and executive officers will vote all of their respective shares of Splunk common stock: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Date, Time and Place
A special meeting of Splunk Stockholders to consider and vote on the proposal to adopt the Merger Agreement will be held on November 29, 2023, at 2:00 p.m., Pacific time (the “Special Meeting”). Splunk will hold the Special Meeting virtually via the Internet at www.virtualshareholdermeeting.com/SPLK2023SM (the “virtual meeting website”). You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present” or “in person” shall mean virtually present at the Special Meeting.
Record Date; Shares Entitled to Vote
You are entitled to vote at the Special Meeting if you owned shares of Splunk common stock at the close of business on the Record Date. Each holder of Splunk common stock shall be entitled to one (1) vote for each such share owned at the close of business on the Record Date.
Quorum
As of the Record Date, there were 168,536,732 shares of Splunk common stock outstanding and entitled to vote at the Special Meeting. The holders of a majority of the shares of Splunk common stock issued and outstanding and entitled to vote, present or represented by proxy, will constitute a quorum at the Special Meeting.
The Board of Directors has unanimously: (i) determined that it is in the best interests of Splunk and Splunk Stockholders, and declared it advisable, to enter into the Merger Agreement in accordance with the DGCL and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (ii) approved the execution and delivery of the Merger Agreement by Splunk, the performance by Splunk of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; and (iii) resolved to recommend that Splunk Stockholders adopt the Merger Agreement in accordance with the DGCL.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.
Prior to the adoption of the Merger Agreement by Splunk Stockholders, under certain circumstances, the Board of Directors may withdraw or change the foregoing recommendation if it determines in good faith (after consultation with its outside legal counsel) that failure to do so would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to Splunk Stockholders under applicable law. However, the Board of Directors cannot withdraw or change the foregoing recommendation unless it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent and its representatives in good faith over a four-(4)-business-day period, after which the Board of Directors shall have determined that the failure of the Board of Directors to make a Change of Recommendation (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation”) would reasonably be expected to be inconsistent with the Board of Directors’ fiduciary duties to Splunk Stockholders under applicable law. The termination of the Merger Agreement by Splunk following the Board of Directors’ authorization for Splunk to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—No Solicitation of Other Offers”) will result in the payment by Splunk of a termination fee of $1,000,000,000 if the Merger Agreement is terminated. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation.”
Opinion of Qatalyst Partners LP
The Company retained Qatalyst Partners LP (“Qatalyst Partners”) to act as its financial advisor in connection with a potential transaction such as the Merger and to evaluate whether the Per Share Merger Consideration to be received pursuant to, and in accordance with, the terms of the Merger Agreement by the Splunk Stockholders (other than Parent or any affiliate of Parent) was fair, from a financial point of view, to such holders. The Company selected Qatalyst Partners to act as the Company’s financial advisor based on Qatalyst Partners’ long-standing relationship with the Company as well as Qatalyst Partners’ qualifications, expertise, reputation and knowledge of the business and affairs of the Company and the industry in which it operates. Qatalyst Partners has provided its written consent to the reproduction of its opinion in this proxy statement. At the meeting of the Board of Directors on September 20, 2023, Qatalyst Partners rendered to the Board of Directors its oral opinion, subsequently confirmed in writing, to the effect that, as of the date thereof and based upon and subject to the various assumptions, qualifications, limitations, and other matters set forth therein, the Per Share Merger Consideration to be received pursuant to, and in accordance with, the terms of the Merger Agreement by the Splunk Stockholders (other than Parent or any affiliate of Parent) was fair, from a financial point of view, to such holders. Qatalyst Partners delivered its written opinion, dated September 20, 2023, to the Board of Directors following the meeting of the Board of Directors.
The full text of Qatalyst Partners’ written opinion, dated September 20, 2023, is attached hereto as Annex C-1 and is incorporated by reference herein. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered, and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. Splunk Stockholders should read the opinion carefully in its entirety. Qatalyst Partners’ opinion was provided to the Board of Directors and addresses only, as of the date of the opinion, the fairness, from a financial point of view, of the Per Share Merger Consideration to be received pursuant to, and in accordance with, the terms of the Merger Agreement by the Splunk Stockholders (other than Parent or any affiliate of Parent), to such holders, and it does not address any other aspect of the
Merger. It does not constitute a recommendation as to how any holder of shares of Splunk common stock should vote with respect to the Merger or any other matter and does not in any manner address the price at which Splunk common stock will trade or otherwise be transferable at any time. The summary of Qatalyst Partners’ opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached to this proxy statement as Annex C-1.
For more information, see the section of this proxy statement captioned “Opinions of Qatalyst Partners LP and Morgan Stanley & Co. LLC — Opinion of Qatalyst Partners LP” and Annex C-1 to this proxy statement.
Opinion of Morgan Stanley & Co. LLC
In connection with the Merger, Splunk retained Morgan Stanley & Co. LLC (“Morgan Stanley”) to provide it with financial advisory services and a financial opinion in connection with the possible sale of Splunk. The Board of Directors selected Morgan Stanley to act as Splunk’s financial advisor based on, among other things, Morgan Stanley’s qualifications, reputation, experience and expertise, its knowledge of and involvement in recent transactions in Splunk’s industry, and its knowledge of Splunk’s business and affairs since it served as a lead underwriter on various Splunk capital markets transactions, including its initial public offering. At the meeting of the Board of Directors on September 20, 2023, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that, as of September 20, 2023, and based upon and subject to the various limitations, qualifications, assumptions and other matters set forth in its written opinion, the Per Share Merger Consideration to be received pursuant to the Merger Agreement by the holders of shares of Splunk common stock (other than the holders of the Excluded Shares) was fair, from a financial point of view, to such holders of shares of Splunk common stock, as set forth in such opinion as more fully described in the section of this proxy statement captioned “Opinions of Qatalyst Partners LP and Morgan Stanley & Co. LLC — Opinion of Morgan Stanley & Co. LLC.”
The full text of the written opinion of Morgan Stanley, dated as of September 20, 2023, which sets forth, among other things, the various limitations, qualifications, assumptions and other matters, is attached to this proxy statement as Annex C-2 and incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the written opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was rendered to the Board of Directors, in its capacity as such, and addresses only the fairness, from a financial point of view, of the Per Share Merger Consideration to be received pursuant to the Merger Agreement by the holders of shares of Splunk common stock (other than the holders of the Excluded Shares) as of the date of the opinion and does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how Splunk Stockholders should vote at the Special Meeting to be held in connection with the Merger.
For more information, see the section of this proxy statement captioned “Opinions of Qatalyst Partners LP and Morgan Stanley & Co. LLC — Opinion of Morgan Stanley & Co. LLC” and Annex C-2 to this proxy statement.
When considering the foregoing recommendation of the Board of Directors that you vote to approve the proposal to adopt the Merger Agreement, Splunk Stockholders should be aware that Splunk’s directors and executive officers may have interests in the Merger that are different from, or in addition to, Splunk Stockholders more generally. In (1) evaluating and negotiating the Merger Agreement, (2) approving the Merger Agreement and the Merger and (3) recommending that the Merger Agreement be adopted by Splunk Stockholders, the Board of Directors was aware of and considered these interests, among other matters, to the extent that these interests existed at the time. These interests include:
• | at the Effective Time, each Company Equity Award held by a director or executive officer will receive the treatment described in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Splunk in the Merger—Treatment and Quantification of Company Equity Awards”; |
• | eligibility of Splunk’s executive officers to receive severance payments and benefits (including equity award vesting acceleration) either under their employment agreements with Splunk or under a new employment agreement entered into with Parent in connection with the Merger, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Splunk in the Merger”; |
• | eligibility of certain of Splunk’s executive officers to receive a cash retention bonus from Splunk or under their employment agreement with Parent, as described in more detail in the sections of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Splunk in the Merger—Retention Bonus” and “—Interests of Executive Officers and Directors of Splunk in the Merger—Compensation Arrangements with Parent.”; and |
• | continued indemnification and directors’ and officers’ liability insurance to be provided by the Surviving Corporation. |
If the proposal to adopt the Merger Agreement is approved, the shares of Splunk common stock held by Splunk directors and executive officers will be treated in the same manner as outstanding shares of Splunk common stock held by all other Splunk Stockholders. For more information, see the section of this proxy statement captioned “The Merger—Interests of Executive Officers and Directors of Splunk in the Merger.”
No Solicitation of Other Offers
From the date of the Merger Agreement until the earlier of the date the Merger Agreement is terminated and the Effective Time, Splunk may not, directly or indirectly: (i) solicit, initiate or knowingly encourage, support, facilitate or induce the making, submission or public announcement of any inquiry, indication of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal; (ii) enter into, participate in, maintain or continue discussions or negotiations with, or provide any non-public information to, any person relating to, an Acquisition Proposal; (iii) agree to, accept, approve, endorse or recommend any Acquisition Proposal; (iv) enter into any agreement or contract relating to an Acquisition Proposal, other than a confidentiality agreement; (v) approve any transaction or any third-party becoming an “interested stockholder” under the DGCL; or (vi) submit any such transaction to the vote of Splunk Stockholders.
Notwithstanding the foregoing, if, at any time prior to the time that Splunk Stockholders approve the adoption of the Merger Agreement, Splunk or any of its representatives receives an unsolicited Acquisition Proposal that the Board concludes in good faith (after consultation with its outside legal counsel) is, or could reasonably be expected to lead to, a Superior Proposal (as defined in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—No Solicitation of Other Offers”) and the Board of Directors concludes in good faith (after consultation with its outside legal counsel) that the failure to take such action would be inconsistent with its fiduciary duties to Splunk Stockholders under applicable laws, Splunk may (i) enter into discussions with such person regarding such Acquisition Proposal and (ii) deliver or make available to such person non-public information regarding Splunk and its subsidiaries. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—No Solicitation of Other Offers.”
Splunk is entitled to terminate the Merger Agreement for the purpose of entering into an agreement in respect of a Superior Proposal only if it complies with certain procedures in the Merger Agreement, including, but not limited to, negotiating with Parent in good faith over a four-(4)-business-day period in an effort to amend the terms and conditions of the Merger Agreement, so that such Superior Proposal no longer constitutes a “Superior Proposal” relative to the transactions contemplated by the Merger Agreement, as amended pursuant to such negotiations.
The termination of the Merger Agreement by Splunk following the Board of Directors’ authorization for Splunk to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Splunk to Parent of a termination fee of $1,000,000,000. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation.”
In addition to the circumstances described above, Parent and Splunk have certain rights to terminate the Merger Agreement under certain customary circumstances, including by mutual agreement, the imposition of non-appealable
court orders that permanently enjoin or otherwise prohibit the Merger, an uncured breach of the Merger Agreement by the other party, if the Merger has not been consummated by 11:59 p.m., Eastern time on March 20, 2025 (the “End Date”), or if Splunk Stockholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof). Under certain specified circumstances, Splunk is required to pay Parent a termination fee equal to $1,000,000,000, and under certain other specified circumstances, Parent is required to pay Splunk a termination fee equal to $1,478,000,000, in each case, in connection with, and upon, the termination of the Merger Agreement. Please see the sections of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fees” and “Proposal 1: Adoption of the Merger Agreement—Termination of the Merger Agreement.”
If the Merger Agreement is not adopted by Splunk Stockholders, or if the Merger is not completed for any other reason:
i. | Splunk Stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Splunk common stock pursuant to the Merger Agreement; |
ii. | (A) Splunk will remain an independent public company; (B) Splunk common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act; and (C) Splunk will continue to file periodic reports with the SEC; and |
iii. | under certain specified circumstances, Splunk is required to pay Parent a termination fee equal to $1,000,000,000, and under certain other specified circumstances, Parent is required to pay Splunk a termination fee equal to $1,478,000,000, in each case, in connection with, and upon, the termination of the Merger Agreement. For more information, please see the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Termination Fees.” |
On September 20, 2023, in connection with the Merger Agreement, Parent also entered into a Voting and Support Agreement with H&F and Splunk. As of the Record Date, H&F owns 12,799,822 shares of Common Stock, representing approximately 7.6% of the shares of Splunk common stock outstanding as of the Record Date. The Voting and Support Agreement provides H&F with certain registration rights pursuant to which, among other things, the Company has agreed to prepare and file a registration statement with the SEC as soon as practicable for purposes of registering the resale of any Registrable Securities (as defined in the Voting and Support Agreement). A copy of the Voting and Support Agreement is attached as Annex B and is incorporated herein by reference.
Pursuant to the Voting and Support Agreement, H&F has agreed, among other things, to (i) vote in favor of the proposal to adopt and approve the Merger Agreement and (ii) vote against (x) any action or agreement that would reasonably be expected to result in any of the conditions of Splunk’s obligations set forth in the section of this proxy statement captioned “Proposal 1: Adoption of the Merger Agreement—Conditions to the Closing of the Merger” not being fulfilled and (y) any Acquisition Proposal, or any agreement, transaction or other matter that is intended to, or would reasonably be expected to, prevent, materially impede or interfere with the consummation of the Merger and the other transactions contemplated by the Merger Agreement.
