GSE Systems says received non-binding indication of interest

In a regulatory filing, GSE Systems announced that on October 1, after business hours, the company received a non-binding, unsolicited letter from a third party that stated Company Z was prepared to offer $5.50 to $5.75 per share for the company’s common stock. Company Z requested that the company enter into “exclusivity” with company Z to allow 17-21 days to conduct due diligence and negotiate a definitive agreement. The Board of Directors of the company met with representatives of Robert W. Baird & Co. Incorporated and Miles & Stockbridge P.C. on Wednesday, October 2, 2024, to assess the letter. The Board instructed its representatives to seek clarification and ascertain whether the letter was a Takeover Proposal that was likely to lead to a Superior Proposal. The company then provided Parent with all required notifications under the Merger Agreement. The same day, representatives of Baird and M&S contacted a representative of Company Z to clarify the terms of the letter. Among other things, the company’s representatives notified Company Z that the terms of its letter were inconsistent with Section 5.2 of the Merger Agreement and the best interests of the company’s stockholders. Further, it became clear that Company Z lacked an understanding of the full extent of the transaction value. A representative of Baird informed Company Z that it would need to enter into an Acceptable Confidentiality Agreement and conduct expedited due diligence. Shortly after the call, a representative of M&S provided Company Z with a draft confidentiality agreement. While the Board was prepared to enter into an Acceptable Confidentiality Agreement and provide information to Company Z as permitted by Section 5.2(b) of the Merger Agreement, Company Z did not take any further action. On Thursday, October 3, 2024, a representative of M&S emailed Company Z to inquire as to status and to remind Company Z that time is of the essence. Company Z provided no response. On Friday, October 4, 2024, a representative of M&S again emailed Company Z to inquire as to status. In response, a representative of Company Z advised that it did not agree with the requirements of an Acceptable Confidentiality Agreement or an expedited diligence process. In response, a representative of M&S advised that Baird and M&S were available to review any comments to the draft confidentiality agreement and then address concerns related to a potential process. Company Z provided no further response. In light of the foregoing, the Transaction Committee held a meeting the afternoon of October 4, 2024. The Transaction Committee discussed prior non-binding indications of interest received from third parties, including those reflected in the Background of the Merger section of the Company’s proxy statement on Form DEFM14A, prior negotiations with Company A, prior negotiations with Company B and prior negotiations with Company D, each of which had conducted extensive due diligence. After discussing that each of the foregoing parties had submitted non-binding offers or indications of interest, but later withdrew from the process after receiving access to due diligence, and also citing Company Z’s failure to comply with the procedural requirements set forth in the Merger Agreement, the Board expressed concern that Company Z’s non-binding proposal appears unlikely to mature into a binding Takeover Proposal, much less a Superior Proposal. GSE reaffirms its recommendation that the stockholders approve the merger agreement with Parent at the October 25 special meeting.