UK startup Huddle is being sold to a private equity firm for an estimated $89 million

Alastair Mitchell and Andy McLoughlin of HuddleHuddleHuddle’s founders Alastair Mitchell right and Andy McLoughlin, who left the business in 2015.

British enterprise software startup Huddle is selling to San Francisco-based private equity firm Turn/River, after months of financial struggles left the firm urgently seeking a buyer or a new round of funding.

The company offers collaboration software and competes with Silicon Valley rivals like Box and Dropbox.

One source estimated the deal at $US89 million (£68 million). The company was once reportedly valued between $US250 to $US300 million in a previous fundraising round (£192 million to £231 million).

Huddle published, then deleted, a blog post on Sunday announcing Turn/River as a majority shareholder.

On Monday, it sent a letter to its shareholders, including employees, notifying them that Turn/River would be acquiring the company’s shares.

Business Insider was shown a copy of the letter, and the deleted blog post that was written by Huddle CEO Morten Brøgger announcing Turn/River as a majority shareholder.

Brøgger, Huddle’s press team, and staff at Huddle’s office did not respond to multiple requests for comment.

When Business Insider turned up at Huddle’s office in east London, a spokesman confirmed that the shareholder letter was genuine but wouldn’t give any more details.

Here’s the deleted post:

The letter confirms that Turn/River, operating in the UK as “Harmony,” would be acquiring the company’s shares under what’s known as a “drag along” covenant. This essentially means a majority shareholder in a company can force minority shareholders to accept an acquisition.

In this case, the letter states that only Huddle’s preferred shareholders will see a payout. That means its early investors and some management may profit from the deal, but ordinary shareholders like current and former employees will lose out. As a gesture of goodwill, Huddle is paying its ordinary shareholders $US100 each (£77).

According to an excerpt from the letter:

“[The] holders of Preferred Shares have a priority right to receive from the total consideration payable for the Shares an amount equal to the Preference Amount for each Preferred Share that they hold. As the consideration payable for all of the Shares is less than the aggregate Preference Amount due to the holders of Preferred Shares, no consideration is due to the holders of Ordinary Shares.”

And here’s the part showing where Huddle will pay its ordinary shareholders $US100:

According to company filings, Huddle’s preferred shareholders include former chairman Charles McGregor, Indian investor and former Cisco exec Subrah Iyar, and investors Matrix Partners, Eden Ventures, Dag Ventures, among others.

In 2015, Huddle’s cofounders Alastair Mitchell and Andy McLoughlin stepped down, with Brøgger taking over as CEO. The company laid off staff from its London office the same year.

The company said in April it urgently needed to raise at least $US5 million (£3.8 million) or find a buyer to stay in business for the next 12 months.

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