Redknee Enters into Subscription Agreement with ESW Capital, LLC

TORONTO, Dec. 20, 2016 /CNW/ – Redknee Solutions Inc. (“Redknee” or the “Company“) (TSX: RKN) announced today that it has entered into a subscription agreement (the “ESW Agreement“) with ESW Capital, LLC (“ESW Capital“) and Wave Systems Corp. (the “ESW Capital Investor“), an affiliate of ESW Capital. Under the ESW Agreement, Redknee will complete a private placement of 800,000 Series A Preferred Shares of the Company (the “Preferred Shares“) and a common share purchase warrant (the “Warrant“) to the ESW Capital Investor for gross proceeds of US$83.2 million (the “Transaction“). The Warrant will entitle the ESW Capital investor to acquire a number of common shares (“Common Shares“) of the Company (each a “Warrant Share“) equal to US$60 million divided by the exercise price per Warrant Share (the “Warrant Exercise Price“) for a period of ten years from the closing date. The Warrant Exercise Price will be determined on the date of closing of the Transaction (the “Closing Date“) and equal to the lower of: (i) the US dollar equivalent on the Closing Date of the volume weighted average trading price of the Common Shares over the period of 10 trading days on the Toronto Stock Exchange (“TSX“) ending in the second trading day prior to the Closing Date; and (ii) US$1.43; provided that the Warrant Exercise Price shall not be less than US$1.09. The Warrant will provide for a cashless exercise feature and will contain customary anti-dilution provisions, including anti-dilution provisions for issuances of Common Shares below the Warrant Exercise Price.

As previously announced by the Company on December 9, 2016, the Company entered into an agreement (the “Constellation Agreement“) with Constellation Software Inc. (“Constellation“) and a subsidiary thereof (the “Constellation Investor“) for gross proceeds of US$80 million. The Constellation Agreement provided that, in the event that Redknee received a competing proposal that was considered to be superior by Redknee to the transaction contemplated by the Constellation Agreement, the Constellation Investor had the right (the “Matching Right“) to offer to amend the Constellation Agreement such that the competing proposal was no longer a superior proposal within a 5 business day matching period (the “Response Period“).

The Company provided notice to Constellation and thereafter announced that it had received an offer from ESW Capital and the ESW Capital Investor which the Company’s Board of Directors had, in good faith after receiving the advice of its financial advisors and outside counsel, unanimously determined constituted a superior proposal within the meaning of the Constellation Agreement.

The Constellation Investor has provided notice in writing to the Company that it will not exercise the Matching Right and is waiving the remainder of the Response Period. Accordingly, the Company has terminated the Constellation Agreement in accordance with its terms with the Company obligated to pay the Constellation Investor a termination fee of US$3.2 million (the “Constellation Termination Payment“). Under the terms of the ESW Agreement, the ESW Capital Investor has assumed the obligation to pay the Constellation Termination Payment, which payment will be non-refundable and credited against the ESW Capital Investor’sobligation to pay the proceeds of US$83.2 million to the Company on closing of the Transaction.

The ESW Agreement provides for, among other things, a non-solicitation covenant on the part of the Company, subject to a customary “fiduciary out” provision that entitles the Company to consider and accept a superior proposal subject to the right of the ESW Capital Investor to match, over a period of two business days, the superior proposal and the payment to the ESW Capital Investor of a termination payment of US$3.2 million.

The closing of the Transaction is subject to the approval of the holders of Common Shares (“Shareholders“) of the Company at a meeting of Shareholders expected to be held on January 25, 2017 (the “Company Meeting“). The Company expects to mail the management information circular which will include additional information about the Transaction to its Shareholders in the first week of January.

Redknee’s largest investor, Invesco Canada Ltd., which holds Common Shares representing approximately 19.9% of the outstanding Common Shares, has agreed to vote its Common Shares in favour of the Transaction. In addition, all directors, certain officers and a shareholder of the Company holding Common Shares representing in aggregate approximately 16% of the outstanding Common Shares have also agreed to vote their Common Shares in favour of the Transaction.

At the Company Meeting, Shareholders will be asked to consider, and if thought advisable, approve:

  • The issuance of the Preferred Shares and the Warrant, in accordance with Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101“) and the policies of the TSX (the “Private Placement Resolution“); and
  • The termination of Redknee’s Shareholder Rights Plan dated March 9, 2016 (the “Shareholder Rights Plan Termination Resolution“).

The Private Placement Resolution requires approval by a simple majority of the votes cast at the Company Meeting by the Shareholders (excluding votes cast by ESW Capital, the ESW Capital Investor, and their affiliates as required by MI 61-101 and the policies of the TSX). The Shareholder Rights Plan Termination Resolution requires approval by a simple majority of the votes cast at the Company Meeting by the Independent Shareholders (as defined under Redknee’s Shareholder Rights Plan).

Closing of the Transaction is also subject to approval of the TSX and customary closing conditions.


About Redknee

Redknee monetizes today’s digital world. We provide a complete portfolio of mission-critical monetization and subscriber management solutions and services that allow communications service providers, utility companies, auto makers and enterprise businesses of all types to charge for things in new and innovative ways. Redknee’s real-time billing, charging, policy and customer care offerings provide the agility and scalability to drive a unique user experience, increase profitability and support any new product or business model. Available on premise, cloud-based, or as a Software-as-a Service, Redknee’s low-risk, flexible solutions power more than 250 businesses across the globe. Established in 1999, Redknee Solutions Inc. (TSX: RKN) is the parent of the wholly-owned operating subsidiary Redknee Inc. and its various subsidiaries. References to Redknee refer to the combined operations of those entities. For more information about Redknee and its solutions, please go to


About ESW Capital, LLC

Based in Austin, Texas, the ESW Capital group ( focuses on buying, strengthening, and growing mature business software companies. By taking advantage of its unique operating platform, ESW revitalizes its acquisitions for sustainable success while making customer satisfaction a top priority. The ESW family of companies have been in the enterprise software space since 1988, and the group includes notable brands such as Aurea, Ignite Technologies, Trilogy, and Versata. For more information, email


Forward-Looking Information

Certain statements in this document may constitute “forward-looking” statements regarding Redknee and its business, which may include, but are not limited to the anticipated benefits of the ESW Agreement to Redknee and its Shareholders, the Company’s ability to close the Transaction, the use of proceeds from the Transaction, assumption of the Constellation Termination Payment by the ESW Capital Investor, the timing of the Company Meeting and mailing of the management information circular and similar statements concerning anticipated future events, results, circumstances, performance or expectations, that reflect management’s current expectations and are based on information currently available to management or Redknee. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Persons reading this news release are cautioned that such information may not be appropriate for other purposes. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future events or results, and will not necessarily be accurate indications of whether or not such events or results will be achieved. Actual events or results could differ materially from those contemplated in forward-looking statements as a result of risks and uncertainties relating to among other things, Redknee’s inability to obtain TSX or Shareholder approval of the Transaction, litigation proceedings related to the Transaction, Redknee’s inability to complete the Transaction, the occurrence of a material adverse change in the business, operating results or financial condition of Redknee, and other factors discussed under the “Risk Factors” section of Redknee’s most recently filed annual information form and management’s discussion and analysis for the fiscal year ended September 30, 2016, which are available on SEDAR at and on Redknee’s web-site at Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual events or results to differ materially from those in the forward-looking statements. Redknee does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

SOURCE Redknee Solutions Inc.