United States securities and exchange commission logo
June 9, 2021
Martin D. McNulty, Jr.
Chief Executive Officer
Starboard Value Acquisition Corp.
777 Third Avenue, 18th Floor
New York, New York 10017
Re: Starboard Value
Acquisition Corp.
Preliminary Proxy
Statement on Schedule 14A
Filed May 13, 2021
File No. 001-39496
Dear Mr. McNulty:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14A filed May 13, 2021
Questions and Answers about the Proposals for SVAC Stockholders
What consideration will the Cyxtera Stockholder receive in the Business
Combination?, page 8
1. We note that, at the
effective time of the First Merger, SVAC shall issue 106,100,000
shares of Class A
common stock to the Cyxtera Stockholder. Please provide the
approximate dollar
value of the merger consideration and disclose that the market value of
the shares to be issued
could vary from the market value as of the date of the proxy
statement. In this
regard, we note that the $9.92 per share value you used on the proxy
statement cover page is
based on the average of the high and low prices of Starboard
Value Acquisition Corp.
Class A common stock reported on the Nasdaq Stock Market on
May 11, 2021.
Martin D. McNulty, Jr.
FirstName LastNameMartin
Acquisition D. McNulty, Jr.
Starboard Value Corp.
Comapany
June 9, 2021NameStarboard Value Acquisition Corp.
June 9,
Page 2 2021 Page 2
FirstName LastName
Summary of the Proxy Statement
Summary of Risk Factors, page 28
2. Please revise the bullet point that states "Cyxtera has incurred
substantial losses in the past
and may incur additional losses in the future" to quantify their net
losses for each of the
reporting periods. Additionally, please revise the last bullet point
to quantify Cyxtera's
indebtedness.
Risk Factors, page 43
3. On page 173, you state that "Lumen accounts for more than 5% of
Cyxtera s annual
revenues (approximately 13% in 2020) and Cyxtera s top 20 customers
account for
approximately 42% of total revenues on a combined basis." Similarly,
on page 182, you
state that "Cyxtera s largest customer accounted for approximately
15% of its recurring
revenues on average for the years ended December 31, 2020, 2019 and
2018. Cyxtera s 50
largest customers accounted for approximately 57%, 59% and 55%,
respectively, of its
recurring revenues for the years ended December 31, 2020, 2019 and
2018." Please
provide risk factor disclosure related to Cyxtera's customer
concentration and, where
applicable, discuss the material terms of the agreements with these
customers, including,
but not limited to, terms and termination provisions.
Cyxtera's government customers, contracts and subcontracts may subject it to
additional risks,
page 51
4. To the extent material, please quantify the amount or percentages of
revenue generated
from government contracts that may be terminated at any time, without
cause.
The BC Stockholder and the Medina Stockholder will own a substantial amount of
equity
interests in us, page 79
5. You state that as of the closing of the Transactions, the Cyxtera
Stockholder will
beneficially hold approximately 58.4 % of the Class A common stock.
Please clarify
whether the company will be a controlled company under the
definition of the
applicable listing exchange immediately after the closing of the
Transactions and provide
applicable disclosure to the extent appropriate.
Unaudited Pro Forma Condensed Combined Financial Information
Description of the Transactions, page 82
6. You indicate the maximum redemption scenario is based on the maximum
number of
redemptions that may occur but which would still provide sufficient
cash to satisfy the
minimum cash condition. Please revise to clarify whether the public
shareholders have
the ability to redeem shares such that the minimum cash condition may
not be met. If so,
disclose whether the merger will still be consummated if that happens
or tell us how you
intend to fund any additional redemptions. As applicable, consider
including an additional
Martin D. McNulty, Jr.
FirstName LastNameMartin
Acquisition D. McNulty, Jr.
Starboard Value Corp.
Comapany
June 9, 2021NameStarboard Value Acquisition Corp.
June 9,
Page 3 2021 Page 3
FirstName LastName
pro forma column that assumes 100% of the shares are redeemed. If the
shareholders do
not have the ability to redeem additional shares, tell us what
conditions are in place to
restrict such redemptions.
Adjustment to Unaudited Pro Forma Condensed Combined Balance Sheet, page 89
7. We note your adjustment (I) , which is to reflect the
reclassification of SVAC historical
accumulated deficit to additional paid-in capital. It would appear
that such adjustment
should be a credit of $27.1 million to accumulated deficit and a
corresponding debit to
additional paid-in capital; however, you are reflecting the debit to
accumulated deficit and
the credit to additional paid in capital. Please revise or explain.
Background of the Business Combination, page 99
8. You state that "SVAC s management team evaluated over 300 potential
business
combination targets, made contact with representatives of dozens such
potential
combination targets to discuss the potential for a business
combination transaction and
entered into non-disclosure agreements with 11 such potential business
combination
targets." Please disclose the point at which the potential
alternatives were eliminated from
consideration and the reasons why as well as the bases for your
determination that
Cyxtera was the most attractive business combination target of the 11.
9. Please discuss the negotiations regarding the enterprise value and the
other material terms
from the non-binding indication of interest until execution of the
merger agreement. For
example, clarify whether what was proposed by one party with respect
to
the enterprise value and other material terms was agreed to by the
other party or whether a
counteroffer was made. If there was a counteroffer, explain how the
parties came to an
agreement on the final material term. Also disclose how SVAC
determined the
enterprise value during negotiation of the merger agreement.
10. Please discuss how the parties arrived at the exact terms of the
merger agreement,
including how the merger consideration and post-combination ownership
structure and
percentages were determined, and expand your discussion regarding the
negotiations for
the PIPE financing.
Proposal Number 1 -- The Business Combination Proposal
SVACs Board of Directors Reasons for the Approval of the Business Combination,
page 103
11. You state on page 104 that although SVAC s board of directors did
not seek a third-party
valuation, the SVAC board of directors relied on reports from SVAC s
various consultants
and advisors. If a report, opinion or appraisal materially related to
the transaction has been
received from an outside party and referred to in the proxy statement,
your disclosure
must provide the information required by Item 1015(b) of Regulation
M-A with respect to
such report, opinion or appraisal. Please refer to Item 14(b)(6) of
Schedule 14A.
Alternatively, please tell us why you do not believe Item 14(b)(6)
applies.
Martin D. McNulty, Jr.
FirstName LastNameMartin
Acquisition D. McNulty, Jr.
Starboard Value Corp.
Comapany
June 9, 2021NameStarboard Value Acquisition Corp.
June 9,
Page 4 2021 Page 4
FirstName LastName
Unaudited Prospective Financial Information, page 107
12. Please describe in greater detail all material analyses the board
relied upon in evaluating
the financial aspects of the business combination, including the
analyses that led to your
conclusion that the aggregate merger consideration reflects an
attractive valuation. If such
analyses were not performed, please disclose this information.
Additionally, if there were
any analyses that did not support the fairness of the transaction,
please include appropriate
disclosure.
13. You state that "the management of Cyxtera has prepared the prospective
financial
information... to present the key elements of the forecasts provided
to SVAC." On page
107, you describe these as "certain summarized prospective financial
information
regarding Cyxtera for 2021 and 2022." Please tell us if you have
disclosed all
the projections provided to SVAC, or only key elements. If you have
not provided all
projects given to SVAC, revise to include all material projections or
tell us why you
believe any projections not included in the document are not material.
In addition, tell us
whether any other information was provided to SVAC to support the
projections. If so,
disclose the material estimates and hypothetical assumptions upon
which they are based.
Finally, if projections were prepared by the Board, separate from
those offered by
Cyxtera, please provide those projections or tell us why they are not
material to investors.
Satisfaction of 80% Test, page 108
14. Please disclose the components of the enterprise value calculation and
clarify specifically
how SVAC management determined the enterprise value of Cyxtera to
conclude that
$3.425 billion was a fair valuation.
Cautionary Note Regarding Forward-Looking Statements, page 161
15. We note your reliance upon the safe harbor provided by Section
27A(b)(1)(B) of the
Securities Act and Section 21E(b)(1)(B) of the Exchange Act for
forward-looking
statements. However it is unclear whether this safe harbor is
available for forward-
looking statements made in connection with a SPAC merger. Therefore,
please qualify
your assertion with a statement indicating that there is uncertainty
as to the availability of
the safe harbor in connection with a SPAC merger.
Business of Cyxtera
Data Center Industry, page 167
16. We note your reference to market data provided by IDC s Worldwide
Datacenter
Installation Census and Construction Forecast and Structure Research.
Please tell us
whether you commissioned any third party report for use in connection
with this
transaction. If so, please tell us what consideration you gave to
providing the information
required by Item 14(b)(6) of Schedule 14A.
Martin D. McNulty, Jr.
FirstName LastNameMartin
Acquisition D. McNulty, Jr.
Starboard Value Corp.
Comapany
June 9, 2021NameStarboard Value Acquisition Corp.
June 9,
Page 5 2021 Page 5
FirstName LastName
Key Operational and Business Metrics, page 181
17. You state that MRR is calculated as the Total Contract Value/Term of
Contract (months),
where the Total Contract Value is the total value of a contract
including recurring and
non-recurring charges for the service period defined by the contract.
Please revise to
clarify if this measure is calculated at a point in time (e.g. last
month of the period) or
whether it represents an average for a particular period (e.g. average
MRR for fiscal year).
Clarify whether this measure includes both colocation services that
have durations of up to
3 years and interconnection services, which you indicate have
month-to-month contract
terms. Lastly, you refer to both MRR and contracted MRR. To the extent
these measures
differ, revise to ensure that you separately define each measure.
18. You define bookings as the net increase of contracted MRR. Please
revise to disclose the
MRR amounts used in your bookings calculations, noting the periods to
which they relate,
to give context to the net increase in the amounts disclosed. Further,
revise to explain your
reference to "net" increase. In this regard, it is unclear what this
measure is net of and
how that is considered in the calculation. Similar, revisions,
additions and clarifications
should be made with regards to your churn metric.
19. Please tell us whether Cyxtera's considers interconnection revenue and
utilization rate to
be key business metrics that management uses to manage the business.
If so, please tell us
your consideration of disclosing these measures for each of the
periods presented. We
refer you to Section III.B of SEC Release 33-10751.
Key Components of Results of Operations, page 182
20. You indicate that during the past three years, more than 80% of your
monthly recurring
revenue bookings came from existing customers. Since you state that
bookings is the net
increase in contracted MRR, please revise to clarify what monthly
recurring revenue
bookings is and how you determine the portion of such measure
derived from existing
customers. Further, revise to state the exact percentage derived from
existing customers
for all periods presented.
21. Please provide us with a breakdown of the various services included in
your recurring
revenue for each period presented. As certain of your services are
offered on a month-to-
month contract basis and subject to potential termination more
frequently then your
colocation services, tell us your consideration to separately discuss
such services and the
potential risk to your operations should the monthly contracts not
renew.
Results of Operations
Revenues, page 187
22. Please separately quantify the amount of revenue reduction impacted by
the data center
closures, non-renewal of contracts, and regular Churn dynamics.
Additionally, for
additional context, where applicable, please quantify the number of
data centers owned by
Cyxtera for the periods presented.
Martin D. McNulty, Jr.
FirstName LastNameMartin
Acquisition D. McNulty, Jr.
Starboard Value Corp.
Comapany
June 9, 2021NameStarboard Value Acquisition Corp.
June 9,
Page 6 2021 Page 6
FirstName LastName
Beneficial Ownership of Securities, page 219
23. Please disclose the natural person or persons who exercise the voting
and/or dispositive
powers with respect to the securities owned by entities.
Notes to Consolidated Financial Statements
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F-41
24. Tell us how much revenue was recognized from contract settlements in
each period
presented. Further, tell us why such amounts are recognized ratably
over the remaining
term of the contract when the contract has been terminated and, to the
extent amounts are
material, revise your disclosures accordingly.
Note 5. Revenue, page F-49
25. You disclose the remaining performance obligations do not include
variable consideration
such as the usage of metered power. Please tell us the amount of
variable consideration
recognized for usage and how it is recognized during the contract
term. To the extent
material, revise your policy disclosures accordingly.
Note 14. Profit interest units of SIS Holdings LP, page F-58
26. We note there are profit interest units outstanding as of December 31,
2020, which are
Class B limited partnership units in SIS Holdings LP. Please tell us
what happens to these
units in the proposed business combination, if anything, and how they
will be accounted
for going forward. Revise your disclosures where appropriate.
General
27. You state that approval of each of the Business Combination Proposal,
the Nasdaq
Proposal, the Director Election Proposal, the 2021 Incentive Plan
Proposal and the
Adjournment Proposal requires the affirmative vote of the holders of a
majority of the
shares of Class A common stock and Class B common stock entitled to
vote and who
actually cast a vote at the special meeting, voting as a single class.
Please disclose the
percentage of public shares that would be required to approve the
proposals if only a
quorum of SVAC shares are present, assuming no redemption and maximum
redemptions
are made.
28. Please include a form of proxy with your next amended proxy statement.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Martin D. McNulty, Jr.
Starboard Value Acquisition Corp.
June 9, 2021
Page 7
You may contact Melissa Kindelan, Senior Staff Accountant, at 202-551-
3564 or Kathleen Collins, Accounting Branch Chief, at 202-551-3499 if you have
questions
regarding comments on the financial statements and related matters. Please
contact Folake
Ayoola, Senior Counsel, at 202-551-3673, or Larry Spirgel, Office Chief, at
202-551-3815 with
any other questions.
Sincerely,
FirstName LastNameMartin D. McNulty, Jr.
Division of
Corporation Finance
Comapany NameStarboard Value Acquisition Corp.
Office of Technology
June 9, 2021 Page 7
cc: Alice Hsu
FirstName LastName