SUMMARY
Zilingo cofounder and CTO Dhruv Kapoor has written to Zilingo's shareholders with a buyout offer on the basis of investor commitments
The investor backing this MBO effort will infuse $8 Mn in committed new equity into the company as per the terms proposed
The terms proposed by Kapoor, which have been backed by cofounder Ankiti Bose, who was CEO of Zilingo till May 2022
In a major twist in the Zilingo tale, cofounders Ankiti Bose and Dhruv Kapoor have proposed a management buyout of Zilingo and come to an agreement over the terms of the offer. Incidentally, the terms were sent by Kapoor to shareholders, including Bose, who has backed the proposal. Bose was CEO of Zilingo till she was terminated in May 2022 after being suspended in March amid an investigation into a whistleblower complaint.
The proposal comes a day before the critical board meeting for Zilingo, where liquidation of the company was one of the potential agenda points, sources told us last week. The board including the lead investor, Sequoia Capital, have been in talks with various buyout funds based in US, Singapore, for a likely liquidation, sources said.
In an email sent to Zilingo’s shareholders, which Inc42 has seen, Kapoor said, “I make this offer on the basis of firm investor commitments and having appointed legal and financial advisers in respect of the MBO (collectively, “Investor Group”). To give comfort to the board, shareholders and lenders, the Investor Group is happy to meet with each of the stakeholders to give comfort on their credentials and ability to consummate the MBO.”
Responding to the management buyout offer, Zilingo’s Bose told Inc42, “As founders it is our ultimate responsibility to make sure that we do whatever it takes to make sure the lights stay on at Zilingo and in the homes of the hundreds of people who are part of it. No matter what our differences may be, at the end of the day we started this company with the same goal. Today we have come together to fight for that same goal.”
Zilingo Founders’ Buyout Proposal
The investor backing this MBO effort will infuse $8 Mn in committed new equity into the company as per the terms proposed by Dhruv Kapoor and backed by cofounder Ankiti Bose.
It would involve Zilingo’s business being transferred to the ownership of a newly incorporated entity or ‘NewCo’, whereas all remaining assets and the old corporate entity will be liquidated in due course. Any proceeds from such liquidation would go towards repayments to ‘Zorro’, one of the creditors of the company with a 36-month moratorium on repayment being proposed.
The amount being infused by the investor can be drawn down by the management of the NewCo in tranches to meet needs as set out in the five-year business plan which will be proposed by the buyout team. The terms of the MBO also state that the new investor group is is willing to negotiate grant of equity in the NewCo to existing shareholders of Zilingo.
“This offer is a preliminary non-binding offer, and the exact structure will be finalized by the Investor Group based on discussions with the directors, shareholders and lenders. However, the Investor Group and I firmly believe that the best outcome for all parties would be an expeditious scheme of arrangement which allows preservation of Zilingo’s business as it stands today,” Kapoor goes on to say in the email.
The MBO would apply for Z Factory, Z Sourcing, Z Connect (Digitize), Z Trade, and Z Spotlight, the company’s various subsidiaries in the fashion supply chain, sourcing and manufacturing services verticals.
It is as yet unclear whether Bose will be back at the company as the CEO, or whether there will be new leadership to take charge of the NewCo, if at all the other shareholders accept the proposed MBO.
Update note (June 19, 2022; 18:15)
Edited parts of this article for clarity and to rectify grammatical errors
