The Special Committee of Independent Directors of MDC Partners Inc. released the below letter in response to Indaba Capital Management, L.P. (“Indaba”) and the letter it sent on May 26, 2021 regarding the proposed business combination (the “Proposed Transaction”) involving MDC Partners and Stagwell Media (“Stagwell”).
Dear Mr. Schrier,
We received your letter dated May 26, 2021, regarding the proposed business combination transaction between MDC Partners (“MDC”) and Stagwell Media (“Stagwell”).
While we have appreciated our dialogue over the past months, frankly we are surprised that you continue to misunderstand our process, the negotiation history, the strategic rationale for the transaction and the significant value the transaction has, and we believe, will continue to create for MDC shareholders.
We understand your desire to own an even bigger part of the combined company. However, the Special Committee worked for months to negotiate the best transaction possible for MDC shareholders. Notably, after many hard negotiations which achieved substantial increases in value for MDC shareholders, we were told by Stagwell that it was unwilling to provide MDC shareholders with more. We have no doubt that the resulting transaction is in the best interests of MDC shareholders.
In the meantime, MDC stock has rallied from $1.15 per share — before Stagwell publicly indicated its interest in combining with MDC in June 2020 — to nearly $5 per share now. This price movement is the hallmark of a transaction that has been well received by shareholders broadly. The transaction has already, and we believe likely will, continue to create value for MDC shareholders. Rarely, in our experience, does a stock quadruple during negotiations and announcement of a large acquisition; even more unusual is for a shareholder to oppose such a deal. MDC’s stock price closed at a three year high of $5.46 per share on May 20, around the same time that your firm paradoxically was complaining that the transaction did not provide sufficient value to MDC. Once you privately and publicly indicated your intention to vote against the deal, the stock declined as shareholders began to fear that this accretive transaction may not be approved. We believe a rejection of the transaction would be a mistake and would leave MDC a weaker company, and its stock less valuable, than if the deal were completed.
To put a fine point on it, we believe your concerns about the transaction are unfounded and misguided. Our sound and robust process, vigorous negotiations, strategic rationale and the opportunities for value creation are undeniable:
We understand you would prefer more. We have a counterparty in Stagwell that has a strong business and has insisted on receiving a fair value for its contributions to the combined company. Notably, the economics of this transaction have been public since early October, and the Company has not received a single inquiry about an alternative transaction during that time.
You are, of course, welcome to exercise your voting rights in any manner you wish. We firmly believe that voting against this transaction is a mistake and risks leaving MDC in a much weaker position, with too much leverage and too little scale, and without the critical digital capabilities to compete in the future.
We are pleased with the reception to the transaction that we have received from shareholders large and small and are disappointed that your desire to have a greater stake in the combined business is seemingly blinding you to the significant merits of the present deal, as well as the value it has already created, and is putting the transaction at risk for all MDC shareholders.
We encourage Indaba to reconsider its stated opposition and join with other MDC shareholders to vote FOR this combination.
The Special Committee of the Board of Directors of MDC Partners
About MDC Partners Inc.
MDC Partners is one of the most influential marketing and communications networks in the world. As “The Place Where Great Talent Lives,” MDC Partners is celebrated for its innovative advertising, public relations, branding, digital, social and event marketing agency partners, which are responsible for some of the most memorable and effective campaigns for the world’s most respected brands. By leveraging technology, data analytics, insights and strategic consulting solutions, MDC Partners drives creative excellence, business growth and measurable return on marketing investment for over 1,700 clients worldwide. For more information about MDC Partners and its partner firms, visit our website at www.mdc-partners.com and follow us on Twitter at http://www.twitter.com/mdcpartners.