Investing

Velodyne-Ouster Merger Recommended by ISS and Glass Lewis for Cost Savings and Strategic Benefits.

Greg Morcroft

Published: January 18, 2023 10:21 pm

Velodyne Lidar (US:VLDR) said Tuesday that proxy advisory firm Institutional Shareholder Services (ISS) recommended that shareholders vote for its proposed roughly $400 million merger with Ouster (US:OUST) at Velodyne’s upcoming special shareholder meeting on Jan 26.

The ISS recommendation follows a Jan. 10 report from Glass, Lewis & Co., another proxy adviser that urged stockholders to vote for the deal. Velodyne also supports the deal and urged shareholders to review the reports.

ISS expects the merger to generate $75 million in annual recurring cost synergies and appears to resolve pending litigation between the parties. ISS also said the strategic rationale for the merger appears sound, and the equity form of the merger consideration provides an opportunity for VLDR shareholders to participate in the potential upside that may result from the combination. The ISS report also highlighted that in the context of pending patent litigation, the proposed combination of Ouster and Velodyne Lidar appears to mitigate legal uncertainties and create a company with a greater intellectual property portfolio.

Glass Lewis also recognized the merger’s potential benefits, stating that it is a reasonable response to the current market conditions and is expected to result in a stronger financial position, increased operational efficiencies, and an accelerated path to profitability for the combined company.

In summary, ISS and Glass Lewis have recommended that shareholders vote “FOR” the proposed merger, citing expected cost savings, legal resolution, and strategic benefits for the combined company. The Velodyne Lidar board of Directors also supports the merger, stating that it is in the best interests of all Velodyne Lidar stockholders and will position Velodyne to generate long-term value for all stockholders. Stockholders are urged to consider the recommendations and vote accordingly by Jan. 25, 2023, or in person at the special meeting of stockholders.

Velodyne and Ouster agreed to merge on Nov. 4 in a transaction in which the former’s shareholders will receive 0.8204 shares of Ouster for each Velodyne share they own at closing. Following the merger, existing Velodyne and Ouster shareholders will own approximately 50% of the combined company based on current outstanding shares.

Barclays is serving as financial adviser for Ouster, and Latham & Watkins LLP is serving as legal adviser. BofA Securities, Inc. is acting as financial adviser for Velodyne, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal adviser.

This article originally appeared on Fintel