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Jad Saliba, right, and Adam Belsher, in Waterloo, Ont. Dec. 21, 2011.Fred Lum/The Globe and Mail

Magnet Forensics MAGT-T received shareholder approval Thursday for its $1.8-billion buyout by U.S. private equity giant Thoma Bravo LP after efforts by a dissident shareholder to stop the deal fell short.

At a special meeting of shareholders broadcast online, the cybercrime detection software company, based in Waterloo, Ont., received “all of the votes required” for the deal to proceed, independent director Carol Leaman said after receiving the scrutineers’ report on the voting.

The deal required two-thirds overall support by investors, which was already a foregone conclusion as the three multiple voting stockowners – chief executive Adam Belsher, chief technology officer Jad Saliba and chairman Jim Balsillie – collectively own 70 per cent of the total shares. But it also needed majority voting support by holders of the 12.3 million subordinate voting shares to proceed.

Late Thursday, the company announced the vote tally, showing it got 68.2 per cent support of the 9.3 million votes cash by subordinate voting shareholders. Nearly half of the three million votes cast against the deal belonged to the dissident, Silicon Valley hedge fund Nellore Capital Management.

The deal next goes to the Ontario Superior Court of Justice on March 27 for its final order, and the deal is expected to become effective in early April, the company said.

Nellore, which owns 11 per cent of the subordinate voting shares, still plans to challenge the fairness of the deal in court. Founder Sakya Duvvuru said Thursday that Nellore had submitted a notice of dissent to the company, exercising its right to take Magnet to court to determine the fair value of its shares. He is also asking for a proxy review. “This is not the end of the road for our efforts,” Mr. Duvvuru said.

The deal received shareholder support despite a campaign by Nellore, Magnet’s largest subordinate voting stockowner, to rally investors to its cause. Nellore felt subordinate voting shareholders weren’t getting enough – $44.25 per share – based on the company’s trading price and future potential.

The offer, revealed in January, was just 15.4 per cent above the stock’s last prior closing price for the subordinate voting shares. While the three multiple voting shareholders got just $39 per share, they get to roll 55 per cent of their stock into the privatized company.

Thoma Bravo plans to merge Magnet with portfolio company Grayshift LLC, which makes similar digital tools for mobile devices. Magnet, which makes software for desktop computers and digital workflows, had tried to buy Grayshift but was outbid by Thoma in 2022.

Nellore had said it would either prefer a higher price or that Thoma roll Grayshift into Magnet in exchange for stock in a still-public company. The dissident argued that despite getting a lower price for their stock, the multiple-voting trio would end up with stock in a company that would be much more valuable over time than what subordinate shareholders get in the takeover. Nellore did not tender a rival offer and Mr. Duvvuru did not make a comment at the meeting prior to the vote.

Mr. Duvvuru did manage to generate some momentum for his campaign. Four other shareholders had told The Globe and Mail that they also didn’t support the deal. The Globe is not disclosing their identities because they are describing matters that are confidential to their companies.

In addition, independent proxy advisory company Glass Lewis & Co. last week recommended that voters oppose the deal, while two others, Institutional Shareholder Services and Egan-Jones Proxy Services, supported it.

Magnet had countered that the deal provided an “excellent” outcome for shareholders and that rollover requirements are common in private equity deals. An independent board committee defended the deal, noting it negotiated the price higher by 30 per cent from Thoma’s initial bid in a “robust” process. Absent the deal, Magnet would face “strategic and execution risks of maintaining the status quo,” including greater competition, it said.

Magnet has been one of the top performing stocks among the 20 technology companies that went public from mid-2020 through late 2021 on the Toronto Stock Exchange, and one of the few to generate both strong revenue growth and profits. Like most other technology companies, its stock was trading well off its pandemic-level highs prior to the bid.

Once the takeover is completed and Magnet merges with Grayshift, it is expected to become an all-encompassing “category killer” led by Mr. Belsher. The combined entity is expected to return to public markets once demand for technology stocks, which has been depressed since late 2021, picks up sharply again, a source familiar with the situation said in January. The Globe is not identifying the source as they are not authorized to discuss the matter.