Item 1.01
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Entry into a Material Definitive Agreement
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Merger Agreement
The Merger
On May 3, 2016, IMS
Health Holdings, Inc. (
IMS Health
), a Delaware corporation, entered into an Agreement and Plan of Merger (the
Merger Agreement
) with Quintiles Transnational Holdings Inc., a North Carolina corporation
(
Quintiles
).
Subject to the terms and conditions of the Merger Agreement, IMS Health will merge with and into
Quintiles (the
Merger
), with Quintiles continuing as the surviving corporation following the Merger. In connection with the Merger, immediately prior to the effective time of the Merger (the
Effective Time
),
Quintiles will convert from a North Carolina corporation to a Delaware corporation pursuant to a Plan of Conversion (the
Conversion
). As of the Effective Time, Quintiles will change its name to Quintiles IMS Holdings,
Inc.
At the Effective Time, each share of common stock (
IMS Health Common Stock
), par value $0.01 per share, of
IMS Health issued and outstanding immediately prior to the Effective Time (other than shares held by IMS Health, Quintiles, or any subsidiaries of IMS Health or Quintiles), shall thereupon be converted into the right to receive 0.3840 validly
issued, fully paid and non-assessable shares of common stock (
Quintiles Common Stock
), par value $0.01 per share, of Quintiles (the
Merger Consideration
).
Concurrently with the execution of the Merger Agreement, IMS Health and certain shareholders of Quintiles, including Dr. Dennis B.
Gillings, CBE (
Dr. Gillings
), and certain affiliates of Bain Capital Investors, LLC (
Bain Capital
) and TPG Global, LLC (the
TPG-Q Funds
and each of the foregoing, a
Quintiles
Shareholder
), who own approximately 10.7%, 8.3% and 6.0% of Quintiles Common Stock, respectively, each entered into a Voting Agreement with IMS Health (each, an
IMS Voting Agreement
) pursuant to which, among other
things, each Quintiles Shareholder agreed to support the transactions contemplated by the Merger Agreement (the
Transactions
), including the Merger, by voting the portion of their shares of Quintiles Common Stock over which they
have the voting power to vote in favor of the Transactions.
Concurrently with the execution of the Merger Agreement, Quintiles and
certain shareholders of IMS Health, including certain affiliates of TPG Global, LLC (the
TPG-I Funds
), CPP Investment Board Private Holdings Inc. (
CPPIB
) and Leonard Green & Partners, L.P
(
LGP
and each of the foregoing, an
IMS Shareholder
), who own approximately 33.7%, 14.2% and 5.8% of IMS Health Common Stock, respectively, each entered into a Voting Agreement with Quintiles (each, a
Quintiles Voting Agreement
) pursuant to which, among other things, each IMS Shareholder agreed to support the Transactions, including the Merger, by voting the portion of their shares of IMS Health Common Stock over which they
have the voting power to vote in favor of the Transactions.
Conditions to the Merger
Each of IMS Healths and Quintiles obligation to consummate the Merger is subject to a number of conditions, including, among
others, the following, as further described in the Merger Agreement: (i) approval of the Transactions by (A) the holders of a majority of the votes entitled to be cast thereon by the holders of shares of Quintiles Common Stock and
(B) the holders of a
majority of the outstanding shares of IMS Health Common Stock, (ii) effectiveness of the registration statement relating to the transaction, (iii) absence of specified adverse laws or
orders, (iv) expiration of the waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt and effectiveness of specified consents of, or filings with government entities,
(v) the Quintiles shares to be issued in the Merger being approved for listing on the New York Stock Exchange, (vi) the representations and warranties of the other party being true and correct, subject to the materiality standards
contained in the Merger Agreement, (vii) the effectiveness of the Gillings Lock-Up Agreement, the Ari Bousbib Lock-Up Agreement and the Shareholders Agreement (each, as defined below), (viii) the Conversion having occurred,
(ix) receipt by both parties of a tax opinion from each of their respective legal counsel, (x) material compliance by the other party with its covenants and (xi) no material adverse effect having occurred with respect to the other
party since the signing of the Merger Agreement.
Representations and Warranties; Covenants
The Merger Agreement contains customary representations, warranties and covenants by IMS Health and Quintiles. The Merger Agreement also
contains customary pre-closing covenants, including the obligation of IMS Health and Quintiles to conduct their respective businesses in the ordinary course consistent with past practice and to refrain from taking specified actions without the
consent of the other party. Each of IMS Health and Quintiles has agreed not to solicit any offer or proposal for specified alternative transactions, or, subject to certain exceptions relating to the receipt of unsolicited offers that may be deemed
to be superior proposals (as defined in the Merger Agreement), to participate in discussions or engage in negotiations regarding such an offer or proposal with, or furnish any nonpublic information regarding such an offer or proposal to,
any person that has made such an offer or proposal.
Pursuant to the Merger Agreement, at the closing, the board of directors (the
Board
) of the combined company (the
Surviving Company
) will be composed of twelve (12) directors of which six (6) shall be designated by IMS Health and six (6) shall be designated by Quintiles. In
addition, at the closing, Ari Bousbib, Chairman and Chief Executive Officer of IMS Health, will be appointed as Chairman and Chief Executive Officer of the Surviving Company, Thomas Pike, Chief Executive Officer of Quintiles, will be appointed as
Vice Chairman and Dr. Gillings will be appointed as Lead Director.
Termination and Termination Fee
The Merger Agreement contains certain customary termination rights, including, among others, (a) the right of either IMS Health or
Quintiles to terminate the Merger Agreement if IMS Health or Quintiles shareholders fail to approve the Transactions, (b) the right of either IMS Health or Quintiles to terminate the Merger Agreement if (A) the board of directors of
the other party changes its recommendation to approve the Transactions or (B) the other party materially breaches the no-shop provision, (c) the right of either IMS Health or Quintiles to terminate the Merger Agreement if, prior to the
receipt of such partys shareholder approval, such partys board of directors changes its recommendation to approve the Transactions in order to accept a superior proposal and such party enters into a definitive agreement for such superior
proposal and pays the termination fee to the other party (the
Fiduciary Out
) and (d) the right of either IMS Health or Quintiles to terminate the Merger Agreement if the Merger has not occurred by March 31, 2017 (the
Outside Date
).
Quintiles would pay a termination fee of $250 million if (A) the Merger Agreement is
terminated by IMS Health as a result of a change of recommendation by the Quintiles board of directors or a material breach by Quintiles of the no-shop provision (B) Quintiles terminates the Merger Agreement pursuant to the Fiduciary Out or
(C)(1) the Merger Agreement is terminated by either Quintiles or IMS Health for failure to close by the Outside Date or because Quintiles shareholder approval is not obtained or by IMS Health due to a breach by Quintiles which would result in a
failure to meet the closing conditions described above and such breach is not curable prior to the Outside Date, (2) a competing proposal was publicly disclosed and not publicly, irrevocably withdrawn prior to the date of the Quintiles
shareholder meeting and (3) Quintiles enters into a definitive agreement for a competing proposal within twelve (12) months following such termination and such competing proposal is consummated. In addition, Quintiles must pay any and all
out-of-pocket fees and expenses of IMS Health up to $15 million if the Merger Agreement is terminated by IMS Health or Quintiles because Quintiles shareholder approval is not obtained or IMS Health terminates the Merger Agreement due to a breach by
Quintiles which would result in a failure to meet the closing conditions described above and such breach is not curable prior to the Outside Date (the amount specified in the foregoing sentence will be credited against the amount in the previous
sentence, if subsequently payable). IMS Health must pay a termination fee of $250 million or out-of-pocket fees and expenses up to $15 million in reciprocal circumstances.
Shareholders Agreement and Lock-Up Agreements
Under that certain shareholders agreement (the
Shareholders Agreement
) with investment entities controlled by the TPG-I
Funds, the TPG-Q Funds (together with the TPG-I funds,
TPG
), Bain Capital, Dr. Gillings, CPPIB and LGP, the Quintiles Shareholders (except for Dr. Gillings and certain of his affiliates, the
Dr. Gillings
Shareholders
) and IMS Shareholders (together, the
Shareholders
) are required to take all necessary action to cause the Board to include individuals designated by the Shareholders in the slate of nominees recommended by
the Board for election by the Surviving Companys shareholders. At the Effective Time, the initial composition of the Board shall consist of:
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Quintiles Chief Executive Officer (as of immediately prior to the Effective Time);
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a director of Quintiles (as of immediately prior to the Effective Time) to be designated by Bain Capital;
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three independent directors of Quintiles to be designated by Quintiles;
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IMS Healths Chief Executive Officer (as of immediately prior to the Effective Time);
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a director of IMS Health (as of immediately prior to the Effective Time) to be designated by CPPIB;
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a director of IMS Health (as of immediately prior to the Effective Time) to be designated by LGP;
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two directors, each of whom shall be a director of IMS Health or Quintiles (in each case, as of immediately prior to the Effective Time), to be designated by TPG; and
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an independent director of IMS Health to be designated by IMS Health prior to the Effective Time.
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The Shareholders have certain nomination rights to the Board as follows:
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For so long as TPG owns 12% or more of the issued and outstanding shares of common stock of the Surviving Company (the
Shares
), it shall be entitled to designate two individuals for nomination to the
Board; provided, that upon the earlier to occur of (i) the seven-year anniversary of the Effective Time and (ii) the date on which TPG owns less than 12%, but 5% or more of the Shares, it shall be entitled to designate one individual for
nomination to the Board.
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CPPIB shall be entitled to designate one individual for nomination to the Board until the earlier to occur of (i) the day after the Surviving Companys 2018 annual meeting of shareholders and (ii) CPPIB
owning less than 2.5% of the Shares.
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LGP shall be entitled to designate one individual for nomination to the Board until the earlier to occur of (i) the day after the Surviving Companys 2018 annual meeting of shareholders and (ii) LGP
owning less than 2.5% of the Shares.
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Bain Capital shall be entitled to designate one individual for nomination to the Board until the earlier to occur of (i) the day after the Surviving Companys 2018 annual meeting of shareholders and
(ii) Bain Capital owning less than 2.5% of the Shares.
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In addition, Dr. Gillings will be entitled to serve as a
director on the Board until the day after the Companys 2021 annual meeting of shareholders, for so long as the Dr. Gillings Shareholders own 2.5% or more of the Shares.
The Shareholders Agreement also provides that the Shareholders (other than the Dr. Gillings Shareholders) agree to not, and to cause
their respective affiliates not to, directly or indirectly, transfer their Shares until the date that is 90 days following the Effective Time (the
Initial Lock-up Period
). Subject to the foregoing, the Shareholders agree to not,
and to cause their respective affiliates not to, subject to certain exceptions, directly or indirectly transfer (i) in any calendar quarter, more than 1% of the outstanding Shares or (ii) any Shares (including derivative securities related
to the Shares) to any person or entity that, to such Shareholders knowledge, would, together with its affiliates, beneficially own 10% or more of the total voting power of the Shares following such transfer (the
Lock-up
Provisions
).
Pursuant to the registration rights provisions of the Shareholders Agreement, the Shareholders and the
Dr. Gillings Shareholders have demand registration rights, including shelf registration rights, in respect of any Shares held by them, subject to certain conditions. In
addition, in the event that the Surviving Company registers Shares for sale to the public, the Surviving Company will be required to give notice of such registration to the Shareholders and the
Dr. Gillings Shareholders, and, subject to certain limitations, include Shares held by them in such registration. The Shareholders Agreement includes customary indemnification provisions in favor of the Shareholders and the Dr. Gillings
Shareholders, any person who is or might be deemed a control person (within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended) and related parties against certain losses and liabilities
(including reasonable costs of investigation and legal expenses) arising out of or based upon any filing or other disclosure made by the Surviving Company under the securities laws relating to any such registration.
Under the Shareholders Agreement, any Shareholder or Dr. Gillings Shareholder may withdraw from the agreement at any time such
shareholder ceases to beneficially own more than 5% of the outstanding Shares and, upon withdrawal, the provisions of the agreement shall automatically terminate with respect to such shareholder, except for the provisions relating to the Initial
Lock-up Period and the registration rights indemnification, in each case which shall survive any such termination.
Concurrently with the
execution of the Shareholders Agreement, the Dr. Gillings Shareholders entered into a Lock-Up Agreement with Quintiles (the
Gillings Lock-Up Agreement
), pursuant to which the Dr. Gillings Shareholders agreed not to,
during the period beginning at the Effective Time and ending on the date that is 90 calendar days after the closing date of the Merger, without the written consent of Quintiles, directly or indirectly transfer any Shares, and agreed to be bound by
the Lock-Up Provisions.
Concurrently with the execution of the Shareholders Agreement, Mr. Bousbib entered into a Lock-Up Agreement
with Quintiles (the
Ari Bousbib Lock-Up Agreement
), pursuant to which Mr. Bousbib agreed not to, during the period beginning at the Effective Time and ending on the date that is 90 calendar days after the closing date of the
Merger, without the written consent of Quintiles, directly or indirectly transfer any Shares.
Commitment Letter
Concurrently with the execution of the Merger Agreement, IMS Health entered into a commitment letter (the
Commitment Letter
)
dated as of May 3, 2016, with Goldman Sachs Bank USA (
GS Bank
) and JPMorgan Chase Bank, N.A. (
JPM Bank
, and together with GS Bank, the
Lenders
), in which the Lenders committed to provide
IMS Health with senior secured incremental credit facilities in an aggregate principal amount of up to $1,250,000,000 (such aggregate principal amount to be allocated between a senior secured term loan A facility in an aggregate principal
amount of up to $400,000,000 and a senior secured term loan B facility in an aggregate principal amount of up to $850,000,000), the proceeds of which will be used to refinance at the Effective Time the indebtedness outstanding under the
existing Credit Agreement, dated as of May 12, 2015, by and among Quintiles Transnational Corp., as Borrower, the lenders party thereto, JPM Bank as Administrative Agent, Swing Line Lender and L/C Issuer, Morgan Stanley Senior Funding, Inc., as
Swing Line Lender and L/C Issuer and Barclays Bank PLC, as L/C Issuer. The Lenders obligations under the Commitment Letter are subject to certain conditions, including consummation of the Merger in accordance with the terms and conditions of
the Merger Agreement and other customary closing conditions.
IMS Health may, at its option, replace some or all of the senior secured incremental credit
facilities prior to the consummation of the Merger with financing comprised of the proceeds of a private placement or public offering of senior secured and/or unsecured notes, which would reduce the commitments of the Lenders on a dollar-for-dollar
basis as provided in the Commitment Letter. There can be no assurance that the debt financing will be completed.
The foregoing
description of the Merger, the Merger Agreement, each of the IMS Voting Agreements and the Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, the IMS Voting Agreements and the
Commitment Letter, which are filed as Exhibits 2.1, 10.1, 10.2, 10.3 and 10.4 hereto, respectively, and each of which is incorporated herein by reference. A copy of the Merger Agreement and each of the IMS Voting Agreements has been included to
provide shareholders with information regarding their terms and is not intended to provide any factual information about IMS Health or Quintiles. The foregoing description of the Shareholders Agreement does not purport to be complete and is
qualified in its entirety by reference to the Shareholders Agreement, which is filed as Exhibit 10.4 to the Current Report on Form 8-K, filed by Quintiles with the SEC on May 3, 2016.
The Merger Agreement contains representations and warranties by IMS Health and Quintiles with respect to matters as of specified dates. The
representations and warranties reflect negotiations between the parties to the Merger Agreement and are not intended as statements of fact to be relied upon by IMS Healths shareholders; in certain cases, merely represent risk-allocation
decisions among the parties; have been modified or qualified by certain confidential disclosures that were made between the parties in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger
Agreement itself; may no longer be true as of a given date; and may apply standards of materiality in a way that is different from what may be viewed as material by shareholders. As such, the representations and warranties are solely for the benefit
of the parties to the Merger Agreement and may be limited or modified by a variety of factors, including: subsequent events, information included in public filings, disclosures made during negotiations, correspondence between the parties and
disclosure schedules to the Merger Agreement. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time and you should not rely on them as statements of fact.
Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in IMS Healths public disclosures.