TPG Pace Tech Opportunities Corporation

TPG Pace Tech Opportunities Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: Nerdy Inc.

ENTERPRISE VALUE: $1.405 billion
ANTICIPATED SYMBOL: NRDY

TPG Pace Tech Opportunities Corporation proposes to combine with Nerdy Inc. (“the Company” or “Nerdy”), a leading direct-to-consumer, curated gig economy platform for live online learning benefiting both learners and experts.

Nerdy has built a comprehensive online learning destination that enables the delivery of scaled, high-quality live learning for people of all ages across thousands of subjects and multiple learning formats. Nerdy’s multi-format learning destination covers more than 3,000 subjects and includes one-on-one instruction, live small and large group classes and adaptive self-study tools. Nerdy’s proprietary platform leverages AI and a rich database of past learning interactions to source, evaluate and match top experts to learners ensuring a high-quality experience on both sides of the network. Nerdy’s marketplace offers experts flexibility and collaborative tools for connecting with learners, and the opportunity to earn income from the convenience of home.

In addition to paid products, Nerdy offers free live large-format online classes that are interactive and can accommodate from 500 to 50,000 learners. In 2020, over 500,000 learners experienced over three million hours of free live online instruction, including classes taught by celebrity scientists, astronauts and wildlife experts at no cost to learners. Nerdy’s library of hundreds of thousands of online diagnostic tests and practice problems are offered completely free for learners to improve their knowledge.

Nerdy’s annualized revenue surpassed $120 million in the second half of 2020. In the fourth quarter of 2020, the company achieved 87% online revenue growth, 59% online paid active learner growth and 169% paid online sessions growth, year over year.


SUBSEQUENT EVENT – 7/19/21 (LINK)

On July 14, 2021, TPG Pace, the Merger Subs, the Blockers, Nerdy and the Blocker Holders entered into the Second Amendment to Business Combination Agreement (the “Second Amendment”), pursuant to which the parties thereto

  • (a) adopted a new form of Second Amended and Restated Limited Liability Company Agreement of Nerdy, LLC, a Delaware limited liability company (“OpCo”), in which the parties further refined the governance structure of OpCo to provide that in the event that TPG Pace holds less than a majority of the outstanding limited liability company units in OpCo (“OpCo Units”), the Board shall be fixed at five (5) Managers and such Managers shall be designated as follows:
    • (i) two (2) Persons shall be individuals designated by TPG Pace;
    • (ii) one (1) Person shall be designated by Charles Cohn so long as an entity controlled by Charles Cohn remains a member;
    • (iii) one (1) Person shall be designated by TCV VIII, L.P. or its affiliates, so long as TCV VIII, L.P. remains a member; and
    • (iv) one (1) Person shall be designated by Davis VT LLC or its affiliates, so long as Davis VT LLC remains a member; provided that if any of an entity controlled by Charles Cohn, TCV VIII, L.P. or Davis VT LLC cease to be members, the manager designated with respect to clause (ii), (iii) or (iv) of this sentence, as applicable, shall instead be designated by the member holding the next greatest number of OpCo Units after TPG Pace and any other members then holding manager designation rights,
  • (b) revised the six month lock-up provision to provide that, to the extent that redemptions in connection with the Business Combination are in excess of the number of shares necessary for TPG Pace to retain in excess of 50.0% of OpCo and any holder of Nerdy securities (“Nerdy Holder”) elects to receive shares of TPG Pace Class A Common Stock instead of shares of Nerdy Inc. Class B Common Stock and OpCo Units at closing of the Business Combination (“Closing”) solely to the extent necessary for TPG Pace to retain in excess of 50.0% of OpCo at Closing, such Nerdy Holder shall be permitted to sell a number of shares of TPG Pace Class A Common Stock necessary to cover the cost of income taxes incurred by such member in connection with the receipt of such shares of TPG Pace Class A Common Stock at Closing at any time and
  • (c) amended the Outside Date from the date that is 180 days after the date of the Business Combination Agreement to August 31, 2021.

TRANSACTION

The business combination values Nerdy at a post-money equity value of approximately $1.7 billion. Upon closing of the transaction, and assuming no redemptions by TPG Pace Tech Opportunities stockholders, Nerdy is expected to have approximately $300 million in cash.

The company is expected to become a public company with significant growth capital, including a fully committed PIPE, which includes leading institutional investors Franklin Templeton, Healthcare of Ontario Pension Plan, Koch Industries and Learn Capital. Mr. Cohn and other company management will remain as significant stockholders in the company, with Mr. Cohn remaining the largest individual stockholder.

Upon closing, Nerdy is expected to have a seven-person board composed of a majority independent directors and will continue to be led by Nerdy’s existing management team. The transaction is expected to close in early Q2-2021.

TPG PACE TECH TRANSACTION OVERVIEW


PIPE

  • An aggregate of 15,000,000 newly issued shares of Class A Common Stock for gross proceeds of approximately $150,000,000. The proceeds from the Private Placement will be used to fund a portion of the cash consideration required to effect the Business Combination and for general company purposes.
  • Includes investors:
    • Franklin Templeton, Healthcare of Ontario Pension Plan, Koch Industries and Learn Capital.

FORWARD PURCHASE

  • $150 million, 15,000,000 shares of Class A Common Stock

SPONSOR SHARES AND PRIVATE PLACEMENT WARRANTS/FORWARD PURCHASE

  • Holders of Class F Shares (Forward Purchase) agreed to forfeit for no consideration a number of shares of Class A Common Stock equal to the number of shares of Class A Common Stock issued pursuant to certain Forward Purchase Agreements over an aggregate of 15,000,000 shares of Class A Common Stock,
  • Such holders of Class F Shares agreed to forfeit for no consideration 2,000,000 shares of Class A Common Stock, which shares of Class A Common Stock will be immediately cancelled upon the closing, and
  • Sponsor agreed to forfeit for no consideration 2,444,444 warrants of the Company that will be immediately cancelled upon the closing.
  • Sponsor further agreed to subject 4,000,000 shares of Class A Common Stock following the closing to potential forfeiture based on the achievement of certain stock price thresholds consistent with the Earnout.

EARNOUT

The existing holders of Nerdy equity will be entitled to vest in an aggregate of up to 4 million additional issued (i) shares Class A Common Stock or (ii) OpCo Units (and a corresponding number of Class B Common Stock), as applicable, in earn-out consideration based on the achievement of certain stock price thresholds.

The Sponsors have agreed to subject 4,000,000 shares of Class A Common Stock following the closing to potential forfeiture based on the achievement of certain stock price thresholds consistent with the Earnout.

  • The Earnout Consideration shall no longer be subject to forfeiture as follows:
    • (i) Upon the occurrence of Triggering Event I, 1,333,333 of, as applicable, (A) shares of Pace Class A Common Stock or (B) Company Up-C Units and a corresponding number of shares of Pace Class B Common Stock (as set forth on the Allocation Schedule);
    • (ii) Upon the occurrence of Triggering Event II, 1,333,333 of, as applicable, (A) shares of Pace Class A Common Stock or (B) Company Up-C Units and a corresponding number of shares of Pace Class B Common Stock (as set forth on the Allocation Schedule); and
    • (iii) Upon the occurrence of Triggering Event III, 1,333,334 of, as applicable, (A) shares of Pace Class A Common Stock or (B) Company Up-C Units and a corresponding number of shares of Pace Class B Common Stock (as set forth on the Allocation Schedule).

Triggering Event I” means the date on which the closing sale price of one share of Pace Class A Common Stock is greater than or equal to $12.00 for any 20 Trading Days within any 30 consecutive Trading Day period within the Earnout Period.

Triggering Event II” means the date on which the closing sale price of one share of Pace Class A Common Stock is greater than or equal to $14.00 for any 20 Trading Days within any 30 consecutive Trading Day period within the Earnout Period.

Triggering Event III” means the date on which the closing sale price of one share of Pace Class A Common Stock is greater than or equal to $16.00 for any 20 Trading Days within any 30 consecutive Trading Day period within the Earnout Period.


NOTABLE CONDITIONS TO CLOSING

  • TPG Pace have at least $250 million of Available Cash at Closing.

NOTABLE CONDITIONS TO TERMINATION

  • If the Closing of the Business Combination Agreement has not occurred prior to the date that is 180 days after the date of the Business Combination Agreement (the “Outside Date”) (August 31, 2021).

ADVISORS

  • Goldman Sachs & Co. LLC acted as exclusive financial advisor to Nerdy.
  • Goodwin Procter LLP acted as the legal advisor to Nerdy.
  • Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Barclays Capital Inc. and TPG Capital BD, LLC acted as financial advisors, capital markets advisors and PIPE placement agents to TPG Pace Tech Opportunities.
  • Vinson & Elkins L.L.P. acted as the legal advisor to TPG Pace Tech Opportunities.

MANAGEMENT & BOARD


Executive Officers

Greg Mrva, 50
President

Mr. Mrva has 25 years of experience leading finance and operations teams for technology businesses and leading investment banking teams advising global technology companies. Mr. Mrva was most recently the Chief Financial Officer of StubHub, where from 2018 to 2020 he sat on both the StubHub and eBay finance leadership teams. He was responsible for StubHub’s financial planning, analysis and forecasting, controllership, financial operations and strategic planning. Mr. Mrva also led the North American business for StubHub and completed the successful sale of StubHub to Viagogo in February 2020 for $4 billion. Prior to StubHub, Mr. Mrva was managing director at Morgan Stanley from 2013 to 2018 where he led the firm’s Global Internet Banking practice. Mr. Mrva advised multiple companies on capital markets and strategic acquisition transactions including the initial public offerings of Alibaba, Snap, LendingClub, GoDaddy and Yext and capital markets financings for Amazon, eBay, Google, Facebook, PayPal, MercadoLibre and Zynga. Prior to Morgan Stanley, Mr. Mrva served as global head of internet investment banking for Barclays from 2010 to 2013. Prior to Barclays, Mr. Mrva was the head of corporate development for Yahoo from 2007 to 2010, during which time he led a team that acquired and integrated over a dozen businesses for Yahoo. Mr. Mrva was also an investment professional as a member of TPG’s technology team from 2003 to 2005.


Martin Davidson, 44
Chief Financial Officer

Mr. Davidson is a Managing Director and Chief Accounting Officer of TPG. Mr. Davidson is responsible for all financial operations and reporting related to TPG Holdings, TPG’s parent company, and accounting and operations for TPG’s private equity and real estate funds, as well as TPG’s firm-wide accounting policies. Currently, Mr. Davidson serves as the Chief Financial Officer of TPG Pace Beneficial Finance since July 2020. Previously, Mr. Davidson has served as the Chief Financial Officer of Pace-II from its inception in February 2017 until its business combination with Accel in November 2019. Mr. Davidson has also served as the Chief Financial Officer of Pace Energy from its inception in February 2017 until its business combination with Magnolia in July 2018. In addition, he has held the position of Chief Financial Officer and Financial Operations Principal of TPG’s broker/dealers and served on the board of multiple special purpose investment vehicles of TPG’s investment funds. Prior to joining TPG in 2005, Mr. Davidson was an audit manager at KPMG where he primarily served clients in the financial services industry including private equity funds and hedge funds. Mr. Davidson received a BBA in accounting from Texas Christian University and a Masters of Professional Accounting from The University of Texas at Austin. Mr. Davidson is a Certified Public Accountant.


Eduardo Tamraz, 36
Executive Vice President of Corporate Development, Secretary

Mr. Tamraz is a senior executive on the investment team for TPG Pace Group, TPG’s dedicated initiative to provide permanent capital solutions for companies. Previously, he was a Vice President of TPG Capital in Europe from 2014 to early 2017. Currently, Mr. Tamraz serves as the Secretary and Executive Vice President of Corporate Development of TPG Pace Tech Opportunities since July 2020. Mr. Tamraz has served as Secretary and Executive Vice President of Corporate Development of Pace-II from its inception in February 2017 until its business combination with Accel in November 2019. Mr. Tamraz has also served as Secretary and Executive Vice President of Corporate Development of Pace Energy from its inception in February 2017 until its business combination with Magnolia in July 2018. Mr. Tamraz was responsible for leading the evaluation of several opportunities for TPG Pace Group with the ultimate execution of the Playa and Accel transaction. From 2008 until 2014, Mr. Tamraz was a senior member of the private equity team at Eton Park, a global alternative investment firm. He previously worked at BC Partners and Merrill Lynch. Mr. Tamraz received an MA in economics from the University of Cambridge. He is a Co-Chair of Lincoln Center YP Education and Co-Chair of Young Glimmerglass Opera.


 

Board of Directors

Karl Peterson, 49
Non-Executive Chairman and Director

Mr. Peterson is a Senior Partner of TPG and Managing Partner of TPG Pace Group, the firm’s effort to sponsor special purpose acquisition companies and other permanent capital solutions for companies. Mr. Peterson currently serves as the Non-Executive Chairman and Director of TPG Pace Tech Opportunities since July 2020. Mr. Peterson has served as a director, President and Chief Executive Officer of Pace-II from its inception in February 2017 through its business combination with Accel in November 2019, and is currently the Chairman and a member of the board of directors of Accel. Mr. Peterson has also served as a director, President and Chief Executive Officer of Pace-I from its inception in June 2015 through its business combination with Playa in March 2017, and is currently a member of the board of directors of Playa. From 2010 through 2016, Mr. Peterson was Managing Partner of TPG Europe LLP. Since rejoining TPG in 2004, Mr. Peterson has led investments for TPG in technology, media, financial services and travel sectors. Prior to 2004, he was a co-founder and the president and chief executive officer of Hotwire.com and served as the company’s President and Chief Executive Officer. He led the business from its inception through its sale to InterActiveCorp in 2003. Before Hotwire, Mr. Peterson was a principal at TPG in San Francisco, and from 1992 to 1995, he was a financial analyst at Goldman Sachs & Co. LLC. Mr. Peterson is currently a member of the board of directors of Sabre Corporation. Mr. Peterson is a graduate of the University of Notre Dame, where he earned a Bachelor’s of Business Administration Degree with High Honors.


David Bonderman, 77
Director

Mr. Bonderman is a Founding Partner of TPG, a global alternative asset firm, established in 1992. Mr. Bonderman currently serves or has served on the board of directors of the following public companies among others: Allogene Therapeutics, Inc. from May 2018 to present, RyanAir Holdings, plc, of which he was Chairman from August 1996 until May 2020, China International Capital Corporation Limited from November 2010 to February 2020, Pace-II from April 2017 to November 2019, Pace Energy from April 2017 to July 2018, Energy Future Holdings Corp. from October 2007 to March 2018, Cushman & Wakefield from August 2015 to February 2018, Kite Pharma, Inc. from February 2011 to October 2017, Caesars Entertainment Corporation from January 2008 to October 2017, Pace-I, of which he was Chairman from September 2015 to March 2017 and CoStar Group, Inc. from May 1995 to June 2015. Mr. Bonderman also serves or has served on a number of boards of private companies including Univision Communications, Inc., XOJET, Inc., and Evolution Media Growth Partners. Prior to forming TPG, Mr. Bonderman was Chief Operating Officer of the Robert M. Bass Group, Inc. (“RMBG”), now doing business as Keystone Group, L.P., in Fort Worth, Texas. Mr. Bonderman also serves on the board of directors of TPG Pace Tech Opportunities since August 2020. Prior to joining RMBG in 1983, Mr. Bonderman was a partner in the law firm of Arnold & Porter in Washington D.C., where he specialized in corporate, securities, bankruptcy and antitrust litigation. From 1969 to 1970, Mr. Bonderman was a Fellow in Foreign and Comparative Law in conjunction with Harvard University, and from 1968 to 1969, he was a Special Assistant to the U.S. Attorney General in the Civil Rights division. From 1967 to 1968, Mr. Bonderman was an Assistant Professor at Tulane University School of Law in New Orleans, Louisiana. Mr. Bonderman holds a bachelor’s degree from the University of Washington and a J.D. from Harvard Law School. Mr. Bonderman graduated magna cum laude from Harvard Law School, where he was a member of the Harvard Law Review and a Sheldon Fellow.


Julie Hong Clayton, 39
Director

Ms. Clayton is Partner of TPG and has led TPG Capital’s equity capital markets across its private equity platforms since 2013. Since its inception in June 2015, Ms. Clayton has served as a capital markets advisor for TPG Pace Group, TPG’s dedicated initiative to provide permanent capital solutions for companies. Ms. Clayton has served on the board of directors of Univision Communications Inc. since December 2015. Prior to joining TPG in 2013, Ms. Clayton was a Director in the Equity Capital Markets group at Bank of America Merrill Lynch. Ms. Clayton holds an A.B. in Economics from Harvard College.


Chad Leat, 64
Director

Mr. Leat is a retired Vice Chairman of Global Banking at Citigroup Inc., and has nearly thirty years of markets and banking experience on Wall Street. He is a leader and innovator in corporate credit and M&A finance. Mr. Leat joined Salomon Brothers in 1997 as a partner in HigMr. Leat began his career on Wall Street at The Chase Manhattan Corporation in their Capital Markets Group in 1985 where he ultimately became the head of their highly successful Syndications, Structured Sales and Loan Trading businesses. This group was on the cutting edge of the fast-developing loan market and Mr. Leath Yield Capital Markets and then joined Citigroup in 1998 from where he retired in 2013 as Vice Chairman of Global Investment Banking. Over the years, he served on the firm’s Investment Banking Management Committee, the Fixed Income Management Committee and the Capital Markets Origination Committee. From 1998 until 2005, he served as the Global Head of Loans and Leveraged Finance. He grew this business from a small second-tier position to one of the largest loan and high-yield businesses on Wall Street. During the financial crisis, Mr. Leat helped Citigroup work through many challenging risk, regulatory and client issues. was one of a handful of market professionals associated with the development and creation of this now vibrant capital market. Previously, Mr. Leat has served as a member of the board of directors of Pace-II from June 2017 until its business combination with Accel in November 2019. Mr. Leat has also served as a member of the board of directors of Pace Energy from March 2017 until its business combination with Magnolia in July 2018, and as a member of the board of directors of Pace-I from September 2015 until its business combination with Playa in March 2017. Mr. Leat is also expected to serve as a member of the board of directors of TPG Pace Tech Opportunities, upon completion of its offering. Mr. Leat serves on the board of directors of Norwegian Cruise Line Holdings Ltd. Mr. Leat is the Chairman of the board of directors of MidCap Financial, PLC, a middle-market direct commercial lending business, and of J. Crew Group, Inc. He has previously served as Chairman of the board of directors of HealthEngine LLC, a healthcare technology company, a member of the board of directors of Global Indemnity, PLC, a Cayman-based provider of property and casualty insurance and BAWAG P.S.K., one of the largest banks in Austria. Mr. Leat is dedicated to many civic and philanthropic organizations. Mr. Leat is a member of the Economic Club of New York and has served on the boards of several charitable organizations. Currently, Mr. Leat is a member of the Board of Directors of The Hampton Classic Horse Show and is a Trustee of the Parrish Museum of Art. Mr. Leat is a graduate of the University of Kansas, where he received his Bachelors of Science degree.


Kathleen Philips, 53
Director 

Ms. Philips has served as a member of the board of directors of Pace-II from June 2017 through its business combination with Accel in November 2018, and is currently a member of the board of directors of Accel. Ms. Philips has served as an advisor at Zillow Group, Inc., since January 2019. During her tenure with Zillow Group, Ms. Philips has held many leadership positions, including chief legal officer from September 2014 until December 2018, chief financial officer and treasurer from August 2015 until May 2018, chief operating officer from August 2013 to August 2015 and general counsel from July 2010 to September 2014. Prior to joining Zillow Group, Ms. Philips served as general counsel at FanSnap, Inc., a search engine for live event tickets, from June 2008 to June 2010, as general counsel at Pure Digital Technologies, Inc., the producer of Flip Video camcorders, from September 2007 to June 2008, and as general counsel at StubHub, Inc., an online live event ticket marketplace, from May 2005 to April 2006. Ms. Philips served as general counsel at Hotwire, Inc. from 2001 to 2004 and as its corporate counsel from 2000 to 2001. Ms. Philips was an attorney in private practice at Cooley Godward LLP from 1998 to 2000 and at Stoel Rives LLP from 1997 to 1998. Ms. Philips holds a B.A. in Political Science from the University of California, Berkeley, and a J.D. from the University of Chicago.


Wendi Sturgis, 53
Director 

Ms. Sturgis currently serves as the CEO of Yext Europe since February 2019. She has over twenty years of experience as a technology and marketing leader at some of the world’s largest tech companies. Ms. Sturgis has been a leader at Yext since joining the company in 2011, and has held a variety of executive roles, including leading Sales, Partnerships, Customer Success, Consulting and Global Operations. She has previously held executive positions at Oracle, Gartner, Right Media, and Yahoo!, where she was Vice President of Account Management for North America in charge of the North American Search business. She is currently an independent director for the Container Store Group, Inc. since August 2019 and Kustomer, a private company based in New York City since April 2019. She has served on multiple boards including Dailyworth.com, Student Transportation of America, Nasdaq: STI, Step Up Women’s Network, Chair of Georgia Tech Advisory Board, and the Georgia Tech Foundation. Ms. Sturgis is a graduate of the Georgia Institute of Technology and has served as an adjunct professor of business at Columbia Business School. She was named to the 40 Women to Watch Over 40 list in 2013.


Kneeland Youngblood, 64
Director 

Mr. Youngblood has served as a founding partner of Pharos Capital Group, LLC since 1998, a private equity firm that focuses on providing growth and expansion capital/buyouts in the health care service sector. Mr. Youngblood is a director of Mallinckrodt Pharmaceuticals, a director of Scientific Games Corporation and Chairman of the Finance Committee of the President’s Advisory Board of the UT Southwestern Medical Center. Previously, Mr. Youngblood served as a member of the board of directors of Pace-I from September 2015 through its business combination with Playa in March 2017. Mr. Youngblood has also served as a member of the board of directors of Pace-II from June 2017 through its business combination with Accel. Mr. Youngblood is also a former director of Burger King Corporation, Starwood Hotels and Lodging, Gap Inc. and Energy Future Holdings (formerly TXXU). He also serves on several private company and not-for-profit boards. Mr. Youngblood is also expected to serve as a member of the board of directors of TPG Pace Tech Opportunities, upon completion of its offering. Mr. Youngblood graduated from Princeton University in 1978 with an A.B in Politics/Science in Human Affairs and earned an M.D. degree from the University of Texas, Southwestern Medical School. He is a member of the Council on Foreign Relations.