KCI Announces Agreement to Be Acquired by Consortium

Posted: 15th July 2011 11:18

KCI Announces Agreement to Be Acquired by Consortium Including Apax Partners, CPPIB and PSP Investments in Transaction Valued at $6.3 Billion.

Kinetic Concepts, Inc. (NYSE: KCI) announced that it has entered into a definitive merger agreement under which a consortium comprised of funds advised by Apax Partners, together with controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, will acquire KCI for $68.50 per share in cash in a transaction valued at $6.3 billion (including KCI’s outstanding debt).

This per share acquisition price represents a premium of approximately 21 percent to the one-month historical average stock price of $56.49 through July 5, 2011 (one day prior to press speculation of a transaction) and a premium of 52 percent to the 12-month historical average stock price of $45.01 through July 5, 2011.

The board of directors of KCI has unanimously approved the merger agreement and recommended that KCI’s shareholders adopt the agreement with the consortium. A special meeting of KCI’s shareholders will be held as soon as practicable after the filing of a definitive proxy statement with the U.S. Securities and Exchange Commission (SEC) and subsequent mailing to shareholders. The mailing of the proxy statement is expected to take place following the expiration of a 40-day ‘go-shop’ period, during which KCI is permitted to encourage and solicit alternative proposals from third parties.

The agreement will bring together KCI’s clinical expertise, commercial capabilities and global reach with a seasoned group of investors that has expertise in global markets and a proven track record in healthcare sector investments.

“This consortium is a group of well-respected investors whose interest in KCI represents an endorsement of our market leadership, differentiated products and services and consistently strong performance,” said Cathy Burzik, KCI president and CEO. “We’re proud of what we’ve achieved in the marketplace and will continue making the right investments in people, product innovation and commercial capabilities that help the medical community deliver superior outcomes to patients.”

“We are highly impressed by the culture of innovation at KCI and are excited to work with a business that produces solutions that dramatically improve the lives of many people around the world,” said Buddy Gumina, partner and co-head of the Apax Healthcare team. “Over the years, we have reviewed multiple investments in the medical devices and products industry, having originally identified it as a key growth sector within our overall healthcare investment practice. Based on this experience, we possess a deep understanding of KCI’s business and the markets in which the company operates. We are delighted to have the opportunity to partner with CPPIB and PSP Investments to support the company’s continued growth.”

James R. Leininger, founder of KCI and chairman emeritus, and certain shareholder parties related to or affiliated with him, which collectively hold approximately 11% of the company’s outstanding shares, have entered into a voting agreement with the consortium under which those shareholders have agreed to vote their shares in favor of the transaction.

The consortium has secured committed debt financing from Morgan Stanley & Co. LLC, BofA Merrill Lynch and Credit Suisse AG. These funds, in addition to equity financing from funds advised by Apax Partners, CPPIB and PSP Investments, will finance the cash consideration to KCI’s shareholders.

J.P. Morgan Securities, LLC is acting as financial advisor to KCI. Skadden, Arps, Slate, Meagher & Flom LLP and Cox Smith Matthews Incorporated are acting as legal advisors to KCI.

Morgan Stanley & Co. LLC is acting as financial advisor to the consortium. Simpson Thacher & Bartlett LLP is acting as legal advisor to the consortium. Kirkland & Ellis LLP is acting as legal advisor on the financing to the consortium. Epstein Becker is acting as healthcare regulatory counsel to the consortium.

The transaction is subject to certain closing conditions, including the approval of KCI’s shareholders, regulatory approvals and the satisfaction of other customary closing conditions but is not subject to any condition with regard to the financing of the transaction. The transaction is currently expected to close in the second half of 2011.

KCI will be submitting a current report on form 8-K with the U.S. Securities and Exchange Commission containing a summary of terms and conditions of the proposed acquisition.


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