Shareholders of Toronto Stock Exchange-listed software company Kneat.com Inc. KSI-T have voted decisively in favour of a $650-million takeover by U.S. private capital giant Thoma Bravo LP., despite vocal opposition by two shareholders to the deal.
Kneat, which is domiciled in Toronto but managed by CEO Edmund Ryan out of Limerick, Ireland, said Thursday that shareholders had voted 87 per cent in favour of the $6.50 a share deal. The transaction is pending approval by the Ontario Superior Court of Justice at a hearing next week. It’s expected to close soon after. Kneat’s software is used by pharmaceutical makers to track and validate their data for quality control and regulatory purposes.
“We appreciate the strong support of our shareholders whose approval marks an important milestone toward completing our value-maximizing transaction with Thoma Bravo,” said Carol Leaman, chair of the Kneat board committee that oversaw the deal. “With Thoma Bravo’s partnership, operational expertise and deep software sector experience, we will be well-positioned to accelerate Kneat’s industry-leading position in digital validation and quality process automation.”
Kneat is the latest in a slew of Canadian-listed online subscription software companies that have submitted to takeovers or management buyouts or delisted from public markets during a prolonged period of depressed valuations for the sector that started after the COVID-19 pandemic tech bubble burst in late 2021.
The selloff was exacerbated first by sharply rising interest rates and later by perceived threats from generative artificial intelligence companies and tools, which investors fear could displace incumbent software vendors. The latter, labelled “Saas-pocalypse” by market watchers, has been a drag on software stocks in the past year, including Kneat, whose stock was trading below $3.60 a share in March.
The deal, announced in June, initially met with opposition from some shareholders, who felt Thoma was taking advantage of suppressed valuations. The takeover price was 40-per-cent higher than the last trading day before Kneat said in May that it was undergoing a strategic review, but lower than where the stock was trading in early 2025.
The buyer’s managing partner Orlando Bravo even declared last month the Saas-pocalypse was over and said that software companies would benefit from an “enormous tailwind” thanks to AI. Thoma has been one of the most active buyers of Canadian companies whose shares have been hit by the software selloff, including Magnet Forensics Inc., Dayforce Inc., Absolute Software Inc. and Blackline Safety Corp.
Top Kneat shareholder rebukes Thoma Bravo takeover offer, vows to vote against deal
One of Kneat’s largest shareholders, PenderFund Capital Management, which collectively controls 9 per cent of the stock, said last month it would vote against the deal. PenderFund CEO David Barr said at the time he was disappointed the board would start a strategic process “in the middle of a massive sell-off in SaaS companies.” (SaaS refers to cloud-based software-as-a-service companies, a category that encompasses such names as Salesforce, Shopify and Workday.)
But deal opponents suffered a blow earlier this month when leading proxy advisory firms Institutional Shareholder Services and Glass Lewis & Co. both supported of the deal.
Mr. Barr said Wednesday after the vote: “We are disappointed to lose another great Canadian public software company. Eddie and the team are doing a wonderful job and we hoped to participate and support them for the long term. Unfortunately most Canadian investors seem to think a loonie in their pocket today is better than $10 five years from now.”
Nick Achkarian, another investor who opposed the deal, said that he was disappointed in the price and outcome. But he noted that software stocks in general had performed poorly since the deal was announced in June “presenting more compelling opportunities.”
Mr. Ryan and fellow senior executives Kevin Fitzgerald and Brian Ahearne are rolling over some of their shares into the new private entity.
CIBC World Markets Inc. acted as Kneat’s financial adviser on the sale. It also provided a fairness opinion along with ATB Cormark Capital Markets. Bank of Nova Scotia acted as financial adviser to Thoma Bravo.