- Current report filing (8-K)
June 02 2011 - 4:26PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 2, 2011
AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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000 30733
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41-1978822
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(State or other jurisdiction of
incorporation)
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(Commission File Number)
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(I.R.S. Employer
Identification Number)
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10700 Bren Road West
Minnetonka, Minnesota
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55343
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(Address of principal executive offices)
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(Zip Code)
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(952) 930-6000
(Registrants telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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As previously disclosed, putative class action lawsuits captioned Walker v. Bihl, et al., and
Prime Investors Fund v. Bihl, et al., respectively, were filed in the Hennepin County District
Court on April 29, 2011 and May 5, 2011, respectively (collectively, the
Merger
Litigation
). The Merger Litigation relates to the Agreement and Plan of Merger, dated as of
April 10, 2011, by and among Endo Pharmaceuticals Holdings Inc. (
Endo
), NIKA Merger Sub,
Inc., a wholly owned indirect subsidiary of Endo, and American Medical Systems Holdings, Inc. (the
Company
or
AMS
).
On June 2
,
2011, solely to avoid the costs, risks and uncertainties inherent in litigation,
and without admitting any liability or wrongdoing, AMS and the other named defendants in the Merger
Litigation signed a memorandum of understanding with the plaintiffs to settle the Merger
Litigation. This memorandum of understanding provides, among other things, that the parties will
seek to enter into a stipulation of settlement which provides for the release of all asserted
claims. The asserted claims will not be released until such stipulation of settlement is approved
by the court. There can be no assurance that the parties will ultimately enter into a stipulation
of settlement or that the court will approve such settlement even if the parties were to enter into
such stipulation. Additionally, as part of the memorandum of understanding, AMS has agreed to make
certain additional disclosures related to the proposed merger, which are set forth below. Finally,
in connection with the proposed settlement, plaintiffs intend to seek, and the defendants have
agreed to pay, an award of attorneys fees and expenses in an amount to be determined by the
Hennepin County District Court. This payment will not affect the amount of merger consideration to
be paid in the merger or the timing of the special meeting of AMS stockholders scheduled for June
15, 2011 in Minnetonka, Minnesota.
The additional disclosures in this Current Report on Form 8-K supplement the disclosure
contained in the definitive proxy statement of AMS filed with the Securities and Exchange
Commission (
SEC
) on May 10, 2011 and mailed to AMSs stockholders on or about May 11,
2011 (the
Proxy Statement
), and should be read in conjunction with the disclosures
contained in the Proxy Statement, which in turn should be read in its entirety. To the extent that
information in this Current Report on Form 8-K differs from or updates information contained in the
Proxy Statement, the information in this Current Report on Form 8-K shall supersede or supplement
the information in the Proxy Statement. Nothing in this Current Report on Form 8-K, the memorandum
of understanding or any stipulation of settlement shall be deemed an admission of the legal
necessity or materiality of any of the disclosures set forth herein. Capitalized terms used
herein, but not otherwise defined, shall have the meanings ascribed to such terms in the Proxy
Statement.
The following additional disclosures supplement the existing disclosures contained under the
caption Background of the Merger beginning on page 18 of the Proxy Statement:
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In late 2009, Endo sent AMS a written indication of interest in acquiring AMS at a
price of $23.00 per share of AMS common stock in a mix of approximately 75% cash and
25% stock, subject to a 60-day exclusivity period and certain other conditions. This
written indication of interest also stated that Endo was prepared to work with AMS to
ensure that key members of the AMS team would be fully motivated to contribute to the
future success of the combined company in the event that Endo acquired AMS.
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In July 2010, AMSs board of directors held a regular meeting in Minnesota. At this
meeting, AMSs management and board of directors discussed the Companys long range
strategic plan, its cash and debt balances, the expected repayment of its senior
secured credit facility, its capital structure, potential investment opportunities,
potential new products, the possibility of redeeming its 3
1
/
4
% Convertible Senior
Subordinated Notes due 2036 and various other strategic alternatives.
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In 2010, AMS repaid its outstanding term loan balance of $125.3 million on its
senior secured credit facility, as previously disclosed in AMSs public filings with
the SEC.
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In a presentation to AMSs board of directors on February 1, 2011, J.P. Morgan
included a preliminary list of potential buyers that were prioritized based on, among
other things, such parties historical acquisition activity, the Companys strategic
fit within such parties businesses, and such parties ability to complete a
transaction. After discussions with AMSs board of directors, management and counsel
to the Company regarding competitive dynamics, regulatory considerations and execution
risk with respect to such parties, the Company and J.P. Morgan refined the
prioritization, including moving two potential buyers from Tier 1 to Tier 2 in the
prioritization, and this revised list was included in J.P. Morgans March 1
presentation to AMSs board of directors.
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On February 16, 2011, upon the recommendation of AMSs management and with the
support of AMSs board of directors, AMS entered into an engagement letter that was
negotiated by AMSs management for J.P. Morgan to act as financial advisor for a
potential sale of the Company. The Company did not formally interview potential
financial advisors, and instead chose J.P. Morgan based on its experience working with
the Company and its reputation and experience in the industry.
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On February 25, 2011, AMSs board of directors held a special telephonic meeting and
determined not to engage in discussions with other potential purchasers until
discussions with Endo had developed further because the board of directors had not yet
determined that further discussions with Endo would be likely to lead to a sale of the
Company.
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On March 28, 2011, a medical device manufacturer, which is referred to in the Proxy
Statement as Bidder B, contacted J.P. Morgan and expressed a potential interest in
acquiring AMS. Bidder B had not previously been reviewed with AMSs board of directors
as a potential strategic partner for the Company.
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On April 5, 2011, Endo informed Mr. Bihl that Endo would like him to enter into a
new employment agreement with Endo in the event that Endo and AMS entered into a
definitive merger agreement, and asked Mr. Bihl for permission to send him a draft
employment agreement as soon as possible. Mr. Bihl responded that he would not
entertain any employment offers until Endo and AMS had reached agreement on the key
terms of the potential merger, including the price that Endo would pay to acquire AMS.
Mr. Bihl further indicated that if and when the key terms had been agreed upon, he
would be willing to work with Endo to negotiate a mutually acceptable employment
agreement that would be executed concurrent with a definitive merger agreement. Mr.
Bihl informed AMSs lead independent director, Albert Jay Graf, about Endos
communications to him regarding his potential employment. In addition, in the evening
of April 7, 2011, during a special telephonic meeting of the board of directors, Mr.
Bihl informed the full board of these communications. On April 8, 2011, after AMS and
Endo had reached agreement on the price of $30.00 per share of common stock in cash and
the key terms and conditions of the merger agreement, Endo provided Mr. Bihl with an
initial draft of a proposed employment agreement between Mr. Bihl and Endo that would
take effect upon completion of the merger. The draft employment agreement included a
proposal, upon completion of the merger, to grant Mr. Bihl restricted shares of Endo
common stock and an option to purchase additional shares of Endo common stock which
would vest over time.
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The following additional disclosures supplement the existing disclosures contained under the
caption Opinion of J.P. Morgan Securities LLC beginning on page 26 of the Proxy Statement:
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J.P. Morgan calculated the Companys equity value per share implied by certain
reference ranges of multiples, which were based on the ranges of multiples calculated
in the chart above for comparable companies but adjusted to take into account
differences between the Company and the comparable companies and such other factors as
J.P. Morgan deemed appropriate, including but not limited to revenue and earnings per
share growth, based upon J.P. Morgans experience and expertise in conducting similar
types of analyses as well as its experience and understanding of the industry and the
Company.
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J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining
the fully diluted equity value per share of the Companys common stock. J.P. Morgan
calculated the unlevered free cash flows that the Company is expected to generate
during fiscal years 2011 through 2020, based upon financial projections prepared by the
management of the Company which included the Financial Forecasts for the years 2011 to
2015. J.P. Morgan then calculated the terminal value of the Company as of December 31,
2020 by applying, based upon J.P. Morgans judgment and professional experience in
conducting similar types of analyses, a range of perpetual growth rates from 2.5% to
3.5%. The unlevered free cash flows from April 8, 2011 through December 31, 2020 and
the range of terminal asset values were then discounted to present values using a range
of discount rates from 10.0% to 11.0% and added together in order to derive the implied
Firm Value of the Company. The discount rate range was determined by J.P. Morgan, based
upon its judgment and professional experience in conducting similar types of analyses,
after its analysis of the weighted average cost of capital of the company, and applied
using the midyear convention for discounting. In calculating the estimated diluted
equity value per share, J.P. Morgan adjusted the firm value for the Companys excess
cash and total debt as of December 31, 2010 and divided by the fully diluted shares
outstanding of the Company. Based on the foregoing, the analysis indicated an implied
equity value per share of the common stock of $25.00 to $30.75 per share. All values
presented were rounded to the nearest $0.25. In each case, J.P. Morgan compared implied
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equity values per share to the per share consideration of $30.00 in cash to be paid to
the holders of the Companys common stock in the merger and the $22.33 per share closing
price of the common stock as of April 8, 2011.
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During the two years preceding the date of J.P. Morgans fairness opinion, J.P.
Morgan and its affiliates have had commercial or investment banking relationships with
the Company and Endo, for which J.P. Morgan and its affiliates have received customary
compensation. Such services during such period have included acting as joint
bookrunning manager on Endos $400,000,000 senior notes offering in November 2010 and
acting as joint bookrunners and joint lead arrangers on Endos $400,000,000 Term Loan A
and $500,000,000 Revolving Credit Facility in November 2010, for which J.P. Morgan and
its affiliates received fees not exceeding more than $10,000,000 in the aggregate.
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The following additional disclosures supplement the existing disclosures contained under the
caption Certain Financial Forecasts beginning on page 31 of the Proxy Statement:
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As part of its annual strategic planning process, AMS prepares certain limited
internal financial analyses and forecasts regarding AMSs possible future operations
for a five year period. These analyses and forecasts are subject to the input and
oversight of AMSs Chief Financial Officer and Chief Executive Officer, and are
approved by AMSs board of directors. The analyses and forecasts that are referred to
in the Proxy Statement as the Financial Forecasts were prepared with the same input,
oversight and approval.
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The financial projections below were based on the Financial Forecasts and were
utilized by J.P. Morgan as part of its discounted cash flow analysis. These financial
projections were not provided to Endo or any person other than J.P. Morgan and AMSs
board of directors. All amounts are expressed in millions of dollars.
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2011
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2012
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2013
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2014
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2015
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2016
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2017
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2018
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2019
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2020
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Total Revenue
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$
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587
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$
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646
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$
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721
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$
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807
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$
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907
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$
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998
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$
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1,078
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$
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1,142
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$
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1,188
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$
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1,224
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Gross profit
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491
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537
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600
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673
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758
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834
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900
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955
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993
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1,023
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Operating expenses
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318
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354
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394
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436
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488
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535
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577
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611
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635
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635
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Earnings before
interest, taxes,
depreciation and
amortization
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195
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204
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229
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259
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294
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324
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349
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369
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383
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412
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Free cash flow
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$
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111
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$
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121
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$
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144
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$
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158
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$
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186
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$
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206
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$
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225
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$
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240
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$
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252
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$
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273
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The financial projections in the table above were not prepared in the ordinary course and
were not subject to the same input, oversight or approval processes that were used to
create the Financial Forecasts. Although presented with numerical specificity, the
financial projections are not actual facts and reflect numerous assumptions, estimates
and judgments as to future events. The assumptions and estimates underlying the financial
projections may not be realized and are inherently subject to significant business,
economic and competitive uncertainties and contingencies. The assumptions and estimates
used to create the financial projections involve judgments made with respect to, among
other things, future pricing, cost of goods sold, selling and marketing expenses,
research and development spending, impending U.S. healthcare tax, AMSs costs of
financing, AMSs senior secured credit facility, AMSs convertible notes, prevailing
interest rates and income tax rates, many of which are difficult to predict and some of
which are outside of AMSs control. The financial projections also reflect assumptions as
to certain business decisions that do not reflect any of the effects of the merger or any
other changes that may in the future affect AMS or AMSs assets, business, operations,
properties, policies, corporate structure, capitalization and management as a result of
the merger or otherwise. Accordingly, there can be no assurance that the assumptions and
estimates used to prepare the financial projections will prove to be accurate, and actual
results may materially differ.
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The inclusion of the financial projections in this Current Report on Form 8-K should not
be regarded as an indication that AMS, Endo or any of their respective advisors or
representatives considered or consider the financial projections to be an accurate
prediction of future events, and the financial projections should not be relied upon as
such. None of AMS, Endo or any of their respective advisors or representatives has made
or makes any representation regarding the information contained in the financial
projections, and except as may be required by applicable securities laws, none of them
intend to update or otherwise revise or reconcile the financial projections to reflect
circumstances existing after the date such financial projections were generated or to
reflect the occurrence of future events even in the event that any or all of the
assumptions underlying the financial projections are shown to be in error.
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AMS stockholders are cautioned not to place undue reliance on the financial projections
included in this Current Report on
Form 8-K
, and such projected financial information
should not be regarded as an indication that AMS, AMSs board of directors, J.P. Morgan,
Endo or any other person considered, or now considers, them to be reliable predictions of
future results, and they should not be relied upon as such.
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The financial projections should be read together with the historical financial
statements of AMS, which have been filed with the SEC, and the other information
regarding AMS contained in the Proxy Statement. None of the financial projections were
prepared with a view toward public disclosure, nor were they prepared with a view toward
compliance with the published guidelines of the SEC or the guidelines established by the
American Institute of Certified Public Accountants for preparation and presentation of
prospective financial information. Neither AMSs independent auditors, nor any other
independent accountants (including, without limitation, Endos), have compiled, examined,
or performed any procedures with respect to the prospective financial information
contained herein, nor have they expressed any opinion or any other form of assurance on
such information or its achievability, and assume no responsibility for, and disclaim any
association with, the prospective financial information. The report of AMS independent
registered public accounting firm included in AMS Annual Report on Form 10-K for the
year ended January 1, 2011 relates to AMS historical financial information. It does not
extend to the financial projections and should not be read to do so.
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Forward Looking Statements
This Current Report on Form 8-K contains forward-looking statements regarding, among other things,
the proposed business combination between Endo and AMS, the Merger Litigation and its potential
settlement and financial projections relating to AMSs future total revenue, gross profit,
operating expenses, earnings before interest, taxes, depreciation and amortization and free cash
flows. Statements including words such as believe, expect, anticipate, intend, estimate,
plan, will, may, potential, guidance or similar expressions are forward-looking
statements. Because these statements reflect AMSs current views, expectations and beliefs
concerning future events, these forward-looking statements involve risks and uncertainties.
Investors should note that many factors could affect the proposed business combination of AMS and
Endo, future financial results and could cause actual results to differ materially from those
expressed in forward-looking statements contained in this Current Report on Form 8-K. These factors
include, but are not limited to: the risk that the acquisition will not close; the risk that the
memorandum of understanding settling the Merger Litigation will not be approved by the court; and
other risks and uncertainties, including those detailed from time to time in AMSs periodic reports
filed with the SEC, including current reports on Form 8-K, quarterly reports on Form 10-Q and
annual reports on Form 10-K, particularly the discussion under the caption RISK FACTORS in its
quarterly report on Form 10-Q for the quarter ended April 2, 2011 and its annual report on Form
10-K for the year ended January 1, 2011, which have been filed with the SEC. The forward-looking
statements in this Current Report on Form 8-K are qualified by these risk factors. These are
factors that, individually or in the aggregate, could cause AMSs actual results to differ
materially from expected and historical results. AMS assumes no obligation to publicly update any
forward-looking statements, whether as a result of new information, future developments or
otherwise.
Additional Information and Where to Find It
AMS has filed with the SEC, and sent to its stockholders, a proxy statement in connection with
the proposed merger with Endo. The proxy statement contains important information about the
proposed merger and related matters. AMS STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT
CAREFULLY. AMS stockholders can obtain free copies of the proxy statement and other documents filed
with the SEC by AMS through the web site maintained by the SEC at www.sec.gov. In addition,
security holders can obtain free copies of the proxy statement from AMS by contacting Investor
Relations by telephone at (952) 930-6000, or by mail at American Medical Systems Holdings, Inc.,
10700 Bren Road West, Minnetonka, Minnesota 55343, Attention: Investor Relations Department, or by
going to AMSs Investor Relations page on its corporate web site at www.americanmedicalsystems.com.
AMS, its directors and executive officers, and Mackenzie Partners, Inc. may be deemed to be
participants in the solicitation of proxies from the stockholders of AMS in connection with the
proposed merger. Information regarding the interests of these directors and executive officers in
the transaction described herein is included in the proxy statement described above. Additional
information regarding these directors and executive officers is included in AMSs proxy statement
for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on March 30, 2011.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: June 2, 2011
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AMERICAN MEDICAL SYSTEMS HOLDINGS, INC.
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By:
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/s/ Mark A. Heggestad
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Mark A. Heggestad
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Executive Vice President and Chief Financial Officer
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