EX-99.C.VII 7 x75053taexv99wcwvii.htm EXHIBIT 99.C.VII EX-99.C.VII
Exhibit (c)(vii)
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Project Milos Contingent Value Rights August 2008

 


 

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Table of Contents 1. Overview of Contingent Value Rights 2. Potential Applications to Rocket 3. CVR Case Study: Fresenius / APP Pharmaceuticals 2

 


 

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Overview of Contingent Value Rights Contingent Value Rights Overview ??A Contingent Value Right (“CVR”) is a type of right given to shareholders of an acquired company that provides for incremental value to any traditional cash or stock consideration paid at closing, if a specified event occurs/does not occur f A contingent value right is similar to an (a) earnout, since it is dependent on the achievement of a predetermined benchmark and can reduce upfront value otherwise paid by an acquirer and (b) option because it establishes a value threshold and matu rity date relating to a given event’s occurrence f Specified CVR payment triggers can include favorable events, such as the achievement of a particular level of EBITDA, stock price appreciation, or cash flows, or recovery on a specific asset (such as a litigation claim) or unfavorable events, such as a post-transaction stock price decline or an adverse result in litigation ??CVRs provide a mechanism by which the seller can share in the risk or upside with the acquirer of a certain event occurring/not occurring and are typically used in situations involving targets with significant uncertainty f Requires acquirer to determine a valuation formula for the uncertain asset or event, and the point at which seller or acquiror will bear the risk of underperformance (i.e. the CVR has no value) f Ultimate performance of the uncertain asset(s) or events would be defined during a given m easurement period, which tend to be multi-year periods ??CVRs can take many forms — including a right to a cash payment or additional shares, depending on the outcome resulting from the uncertain assets f For example, whereas Fresenius’ $5.6 billion acquisition of APP Pharmaceuticals contemplates a contingent cash payment of up to $6.00 per share, OSI Pharmaceuticals’ $54.1 million acquisition of Cell Pathways contemplated a CVR payment of 0.04 OSI shares in the event of a filing of a new drug application for certain therapeutics ??CVRs can either be a separate security that trades in the market or a contract right that is not transferable 3

 


 

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Overview of Contingent Value Rights Selected Precedent CVR Transactions CVRs Based on Target Operating Performance / Other CVRs Based on Target Operating Performance / Other (In millions, except per share amounts. USD unless otherwise specified) Transaction EV / Initial Merger Consideration Final Merger Consideration CVR CVR Ann. Date Target Acquiror CVR Form CVR Notes Value Sales (Excl. CVR) (Excl. CVR) Maturity Payment(1) 07/07/08 APP Pharmaceuticals Fresenius SE $5,625.9 9.6x $23.00 cash per target share Not closed Cash 3 years Variable CVR payment of up to $6/share based on APP’s EBITDA performance 01/24/05 Seminis Monsanto Co 1,525.0 3.3x $10.52 cash per target share Same as initial Cash 3 years Variable Net sales performance-based payment of up to $125 mm 08/21/00 PepsiAmericas Whitman Corp 674.7 1.1x Election to receive (1) $3.80 cash; (2) Same as initial Stock 2 years Variable CVR payment of up to 0.1092 shares of Whitman stock if $3.80 in Whitman stock; or (3) $2.80 PepsiAmericas meets certain EBITDA levels. Additionally, in Whitman stock plus a CVR per target shareholders electing contingent payments can target share purchase an aggregate of 1.7 million Whitman shares at $14.61 per share 03/06/00 Liposome Co Elan Corp 600.9 7.7x 0.385 Elan ADS per target share Same as initial Cash 1 — 2 years Variable CVR payment of up to a total of $98mm ($2.16/CVR), based on (a) the approv al of Evacet for sale in the EU and (b) Evacet reaching certain sales milestones outside the US 11/02/00 telecom technologies Sonus Networks 589.5 22.4x 0.096 shares of Sonus stock per Same as initial Stock 2 years Variable Up to an additional 4.2 million shares of Sonus stock if telecom target share technologies achieves certain specified technical and product shipment related milestones 09/18/85 Hybritech Inc Eli Lilly & Co 385.2 7.4x $22 cash or convertible notes and $4 $29 cash per target share Cash 10 years Variable CVRs to receive cash payments of up to $22/CVR, based on warr ants per target share Hybritech’s operating results through 1995 02/24/98 Somatogen Baxter International 244.7 n.m. 0.1685 shares of Baxter stock per Same as initial Cash 9 years Variable CVR payment of up to $2.00 per CVR based on sales of future-target share generation products 05/12/05 Salmedix Cephalon 201.0 n.m. $160 million cash Same as initial Cash n.a. Variable Up to $40 million payment upon the achievement of certain regulatory milestones 12/12/06 Valera Indevus 168.0 7.5x 0.962 6 — 1.1766 shares of Indevus 1.1337 shares of Indevus stock per Stock 3 -5 years Fixed CVRs convertible into Indevus common stock upon FDA Pharmaceuticals Pharmaceuticals stock per target share target share approval of various products. Conversion based on formula regarding average Indevus stock price 06/23/97 Sphere Drake Fairfax Financial 138.0 0.4x $7.50 cash or stock per target share Same as initial Cash 10 years Fixed CVR payment of $4.50 per CVR, subject to reserve adequacy, Holdings Ho ldings reinsurance recoverables and indemnities 04/03/06 Predix EPIX 115.8 n.m. 1.248509 shares of EPIX stock per Same as initial Cash or 2 years Fixed $35 million payment upon the achievement of certain clinical or Pharmaceuticals Pharmaceuticals target share Stock strategic milestones 06/29/03 Information Investor Group 85.8 0.2x $3.30 cash per target share Same as initial Cash n.a. Variable CVRs to receive payment of 60% of any proceeds won in an Resources antitrust suit against ACNielsen and others 10/01/01 Medicis Ascent Pediatrics 74.1 9.8x Approximately $60 million cash Same as initial Cash 5 years Variable Up to an additional $10 million per year for each of the first five years following closing, if certain sales threshold milestones on Ascent products are achieved 02/10/03 Cell Pathways Inc OSI Pharmaceuticals 54.1 47.2x 0.0567 OSI shares per target share Same as initi al Stock 5 years Fixed CVR payment of 0.04 OSI shares in the event of a filing of a new drug application for Aptosyn or CP461 07/31/08 British Energy Electricite de France n.a. n.a. 765p cash or 700p cash plus CVR Not closed Unknown Unknown Unknown Media speculates that CVR payment based on the price of (EDF) per target share electricity and quantity of power generated = Healthcare Target Source: Thomson Financial, Factiva, SEC filings, breakingviews.com Note: Includes completed or pending deals over $50 million transaction value in which CVRs were used as consideration to the selling shareholders as well as other selected relevant transactions (1) CVR payment indicates whether the CVR payment is fixed (the holder receives the entire CVR or nothing) or variable (the payment varies, typically with a 4 defined maximum payment based on partial or full achievement of a certain stock price, EBITDA or other threshold)

 


 

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Overview of Contingent Value Rights Selected Precedent CVR Transactions CVRs Based on Post-Transaction Stock Price Performance CVRs Based on Post-Transaction Stock Price Performance (In millions, except per share amounts. USD unless otherwise specified) Transaction EV / Initial Merger Consideration Final Merger Consideration CVR CVR Ann. Date Target Acquiror CVR Form CVR Notes Value Sales (Excl. CVR) (Excl. CVR) Maturity Payment(1) 05/18/98 Generale de Banque Fortis AG $12,298.5 1.5x 2.33 Fortis shares per target share 2.33 Fortis shares and Euro 136.71 Cash 3 years Variable CVR payment based on future Fortis B share performance, SA cash per target share subject to a EUR 12.39 per CVR cap 07/17/00 Pillsbury Co (Diageo General Mills 10,528.7 1.7x 141 mm General Mills shares and 134 mm General Mills shares, $3.6 Cash 1 yr. post Variable Up to $642 million to be repaid to General Mills at the first PLC) assume $5.1 billion in debt billion cash, and assume $234.3 close anniversary of closing, depending on General Mills’ stock price million in debt at the time (2) 09/09/93 Paramount Viacom Inc 9,481.3 2.4x 0.1 Class A Viacom shares, 0.9 $107 cash per share tender offer for Cash or 3 years Variable CVR to receive payment if Viacom’s stock did not reach a Communications Class B Viacom shares and $9.10 51.3% of target, followed by 0.93065 Stock certain price level within three years of the merger. Th e CVR cash per target share Class B Viacom shares, $17.50 was added after the initial agreement as part of a revised offer Viacom 8% subordinated note, 0.5 3-year warrant to purchase 1.0 Class B Viacom at $60 and 0.3 5-year warrant to purchase Class B Viacom at $70 per share in merger 01/07/94 Blockbuster Viacom Inc 8,227.2 6.6x 0.08 Class A Viacom shares and Same as initial Stock 1 year Variable CVR payment of up to 0.13829 of a share of Viacom Class B Entertainment 0.60615 Class B Viacom Shares per Common Stock, based on various pre-determined Viacom target share Class B trading price thresholds 07/17/89 Marion Laboratories Dow Chemical Co 6,209.0 12.7x $38.00 cash per target share in Same as initial Cash 2 years Variable CVR holders to receive from Dow, a t maturity, the amount by tender offer, followed by stock for which $45.77 exceeds the average trading value of Marion stock exchange with Merrell Dow Merrell Dow for the 90-day period prior to the maturity date (subject to a $15.77 cap) (3) 11/17/97 AGF Allianz AG 5,118.0 0.7x FFr 320 cash per target share Same as initial Cash 2.5 years Variable If AGF’s share price is FFr320 or less at maturity, shareholders will have the option to put their AGF shares together with the CVR at FFr360 to All ianz. If AGF’s share price is above FFr320 and below FFr360 at maturity, holders of the CVR will receive the difference between FFr360 and the share price (4) 01/18/90 Rorer Group Rhone-Poulenc SA 3,476.0 4.3x Package of Rhone-Poulenc stock Package of Rhone-Poulenc stock Cash 2-4 years N.A. CVR receives payment if share price of the combined and cash worth $73 per target share and cash worth $78 per target share company has not reached a preset level when the CVR expires (2-4 years after issuance) 05/05/98 Royale Belge SA AXA-UAP SA 3,137.8 1.4x 5 AXA-UAP shares and BEF21,513 Same as initial Cash 3 years Variable CVR payment of 5x the positive difference between FRF800 cash per 3 target shares and the average opening price of AXA-UAP shares during the 40 trading days up to July 31, 2001, subject to a FRF200/CVR cap 05/12/08 Complete Energy GSC Acquisition Co 1,392.2 n.a. $440 million GSC shares, $50 million Not closed Stock 5 years Fixed 10 mm shares if acquiror st ock price reaches pre-determined Holding mezzanine note targets 11/20/00 Equant NV France Telecom SA 1,000.0 6.2x Equant acq. France Telecom’s Global Same as initial Cash 3 years Variab le CVR payment of up to EUR 15 per CVR if Equant’s stock price One for $300 mm cash and 80.6 mm is below EUR 60 in 3 years Equant shares. Next, France Telecom acquired Sita Foundation’s stake in Equant for 1.0 France Telecom share for 2.2 Equant shares Source: Thomson Financial, Factiva, SEC filings, breakingviews.com Note: Includes completed or pending deals over $50 million transaction value in which CVRs were used as consideration to the selling shareholders as well as other selected relevant transactions (1) CVR payment indicates whether the CVR payment is fixed (the holder receives the entire CVR or nothing) or variable (the payment varies, typically with a = Healthcare Target defined maximum payment based on partial or full achievement of a certain stock price, EBITDA or other threshold) (2) Represen ts “reverse” CVR — i.e. transaction provides downside protection for the acquirer, General Mills, in addition to Diageo, depending on General Mills’ post-transaction stock price (3) Pursuant to the transaction, Dow Chemical would acquire approximately 67% of Marion Laboratories, and combine it with Dow’s subsidiary Merrell Dow Pharmaceuticals, and Dow Chemical and Merrell Dow common stock would trade publicly 5 (4) Pursuant to Allianz’s proposal, AGF shareholders coul d elect cash consideration or a CVR with downside protection (put right)

 


 

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Overview of Contingent Value Rights Selected Precedent CVR Transactions CVRs Based on Post-Transaction Stock Price Performance CVRs Based on Post-Transaction Stock Price Performance (In millions, except per share amounts. USD unless otherwise specified) Transaction EV / Initial Merger Consideration Final Merger Consideration CVR CVR Ann. Date Target Acquiror CVR Form CVR Notes Value Sales (Excl. CVR) (Excl. CVR) Maturity Payment(1) 11/21/06 RIA Envia Euronet Worldwide $490.0 n.a. $380 million in cash, $110 million in Same as initial Cash or 18 months Variable If Euronet stock does not appreciate at least 20% by maturity, Euronet stock, and stock appreciation Stock Euronet will pay to CVR holders the shortfall in cash or rights Euronet stock, subject to $20mm cap 11/21/94 Abex Inc MacAndrews & 226.1 0.5x 0.25 Mafco shares and 1.00 Power Same as initial Cash 3 years Variable CVR payment of up to $3/CVR from Mafc o if the combined Forbes Control share per target share trading price of the shares of the two publicly traded entities does not meet certain performance objectives within three years (2) 06/01/04 ACLARA Biosciences ViroLogic Inc 149.9 n.m. 1.7 ViroLogic shares per target share Same as initial Cash or 1 year Variable Initially, potential CVR cash payment of up to $0.50 per CVR, Inc Stock depending on Virologic’s stock price 12 months following merger closing. Revised upward to $0.88 per CVR 07/27/08 KKR Private Equity Kohlberg Kravis n.a. n.a. Stock for stock exchange, 21% of Not closed Stock 3 years Fixed CVR provides an additional 6% ownership if, after three years, Investors Roberts equity in the combined company KKR units trade below a specified threshold Source: Thomson Financial, Factiva, SEC filings, breakingviews.com Note: Includes completed or pending deals over $50 million transaction value in which CVRs were used as consideration to the selling shareholders as well as other = Healthcare Target selected relevant transactions (1) CVR payment indicates whether the CVR payment is fixed (the holder receives the entire CVR or nothing) or variable (the payment varies, typically with a defined maximum payment based on partial or full achievement of a certain stock price, EBITDA or other threshold) (2) Pursuant to MacAndrews & Forbes’ proposal, the resulting company, Mafco Consolidated Group, Inc., will be 80% owned by MacAndrews and Forbes. Abex 6 shareholders will own 20% of Mafco Consolidated and 100% of the stock of a new publicly traded company containing Abex’s NWL Aerospace division

 


 

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Overview of Contingent Value Rights Selected Recent CVR Trading Performance Target vs. CVR Share Price — CVR Based on Operating Performance Transaction & Target Share Price CVR Price Ann. Date Cell Pathways(1) OSI Pharmaceuticals CVR(2) $4.00 $4.00 Announcement $3.50 $3.50 $3.00 $3.00 02/10/03 — OSI $2.50 $2.50 Acquiring $2.00 $2.00 Cell Pathways $1.50 $1.50 for $54.1 $1.00 $1.00 million $0.50 $0.50 $0.00 $0.00 4/12/2004 1/12/2005 10/12/2005 7/12/2006 4/12/2007 1/12/2008 12/10/02 1/10/03 2/10/03 3/10/03 4/10/03 5/10/03 6/10/03 CVR Market Price Maximum CVR Price Target Share Price Implied Price Excl. CVR Implied Price Incl. Full CVR Value Hybritech Eli Lilly CVR $60.00 $25.00 Announcement $50.00 $20.00 09/18/85 — Eli $40.00 Lilly $15.00 Acquiring $30.00 Hybritech for $10.00 $20.00 $385.2 million $5.00 $10.00 $0.00 $0.00 6/18/85 9/18/85 12/18/85 3/18/86 4/14/1986 4/14/1988 4/14/1990 4/14/1992 4/14/1994 CVR Market Price Maximum CVR Price Target Share Price Implied Price Excl. CVR Implied Price Incl. Full CVR Value Source: FactSet, Bloomberg (1) OSI Pharmaceuticals / Cell Pathways acquisition was a stock-for-stock transaction. Based on OSI’s stock price of $13.99 the day before the offer, the offer valued Cell Pathways at $0.84 per share (excluding the CVR value) 7 (2) OSI Pharmaceuticals offered a CVR with the potential to convert into 0.4 shares in the event of a FDA filing

 


 

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Overview of Contingent Value Rights Selected Recent CVR Trading Performance Target vs. CVR Share Price — CVR Based on Stock Price Performance Transaction & Target Share Price CVR Price Ann. Date ACLARA Biosciences Virologic CVR(1) $6.00 $1.00 Announcement $0.90 $5.00 06/01/04 — $0.80 Virologic $4.00 $0.70 Acquiring $0.60 ACLARA $3.00 $0.50 Biosciences $0.40 $2.00 for $149.9 $0.30 million $1.00 $0.20 $0.10 $0.00 2/28/04 5/28/04 8/28/04 11/28/04 $0.00 10/11/2004 1/11/2005 4/11/2005 7/11/2005 10/11/2005 1/11/2006 Target Share Price Implied Price Excl. CVR Implied Price Incl. Full CVR Value CVR Market Price Maximum CVR Price Equant NV France Telecom CVR $60.00 € 16.00 Announcement € 14.00 11/20/00 — $50.00 France € 12.00 $40.00 Telecom’s € 10.00 Acquisition of $30.00 € 8.00 Equity Stake $20.00 € 6.00 in Equant NV € 4.00 for $1.0 $10.00 billion € 2.00 $0.00 8/20/00 11/20/00 2/20/01 5/20/01 € 0.00 7/3/01 10/3/01 1/3/02 4/3/02 7/3/02 10/3/02 Target Share Price Implied Price Excl. CVR Implied Price Incl. Full CVR Value CVR Market Price Maximum CVR Price Source: FactSet, Bloomberg (1) ACLARA shareholders received 1.7 CVRs per share, with a maximum cash payment of $0.50 per CVR. The CVR agreement was amended 10/19/04 to 8 increase the per CVR cash payment to $0.88

 


 

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Table of Contents 1. Overview of Contingent Value Rights 2. Potential Applications to Rocket 3. CVR Case Study: Fresenius / APP Pharmaceuticals 9

 


 

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Potential Applications to Rocket Contingent Value Rights Potential Applications to Rocket / Milos Transaction ??Wall Street expects significant upside to Milos stock if positive clinical trial results are released Given the uncertainty in 2008. However, analysts also note that downside news would not be revealed until 2009 regarding the Avastin adjuvant colorectal cancer test results (expected to be “The key event that could drive stock upside is data from the ongoing phase 3 trial of Avastin in the adjuvant (early stage) colon cancer setting. Data are due sometime released in November 2008), between late 2008 and 2009. Although the outcome is difficult to predict, our Rocket could theoretically bias is positive. If Avastin works in the adjuvant setting, we estimate there is use a CVR as incremental to at least $30 of stock upside (~40%). We expect investors will price in not only cash consideration payable uptake in adjuvant colon cancer, but some probability Avastin will work in this setting in order to transfer some in lung and breast cancer as well. If the trial is negative in late 2009, we suspect the risk to selling Milos P/E will contract at that time to 14x-16x EP S estimates... if the trial is negative, shareholders data will almost certainly not be released before late 2009, which means investors are protected from bad news this year” A CVR would also allow Milos shareholders to share Deutsche Bank, June 18, 2008 in the upside associated with a favorable test result ??Pricing a Milos CVR would require the following: f Attempt to quantify the incremental equity value to Milos associated with positive test results in November f Determining which portion — if any — of the incremental equity value created by favorable adjuvant study results has already been incorporated into the Milos unaffected stock price on which the $89 offer was based - The remaining equity value would represent the incremental value to be derived from a positive test result, and would imply a maximum CVR value per share f If a CVR structure is deemed appropriate, selecting the initial CVR value per share to offer to Milos, within the broader context of the price negotiations 10

 


 

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Potential Applications to Rocket Merits and Considerations Although a CVR could Merits Considerations theoretically address the uncertainty associated with ??If the adjuvant data does not read ??Relatively short duration for trigger limits the Avastin adjuvant clinical out, the risk will have been utility of CVR trials and expedite the price transferred to Milos shareholders in f Since significant interim test results are negotiation, the relatively the form of a worthless CVR expected to be released prior to transaction short time frame between closing (or even be fore shareholder vote), CVRs may never be issued negotiations and November 2008 test results and ??If Rocket is unwilling / unable to price f Precedent CVRs typically exhibit longer maturities (~3 years) complexity of a CVR may uncertainty of clinical trial result, limit its utility to Rocket in CVR provides mechanism for this situation ??CVRs typically exhibit variable minority Milos equity holders to compensation characteristics The November 2008 test share in upside with Rocket does not necessarily dictate f Binary nature of Avastin adjuvant trials whether the test is ultimately likely makes this impractical successful ??May allow process to move more quickly, as price negotiations could ??Increases complexity of negotiations and More likely the most efficient pro forma capital structure structure would be a binary occur prior to release of Avastin outcome that would simply adjuvant results in November change the offer price based ??Need to avoid creating a security that on a specific result would require Rocket or Milos to become a U.S. reporting company 11

 


 

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Table of Contents 1. Overview of Contingent Value Rights 2. Potential Applications to Rocket 3. CVR Case Study: Fresenius / APP Pharmaceuticals 12

 


 

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CVR Case Study: Fresenius / APP Pharmaceuticals Case Study Fresenius Kabi / APP Pharmaceuticals On July 7, 2008, APP Summary of Financial Terms Situation Overview Pharmaceuticals and ??Under the terms of the agreement, Fresenius will acquire the ??APP is a fully-integrated pharmaceutical company that Fresenius announced they outstanding common stock of APP for $23.00 in cash per develops, manufactures, and markets injectable entered into a definitive share plus a CVR that could deliver up to an additional $970 pharmaceutical products with a primary focus on the merger agreement, with mm in value, or $6.00 per share in cash, if the financial oncology, anti-infective, anesthetic/analgesic s and critical results of APP meet certain targets (payable in Q2 2011) care markets consideration including a ??Fresenius will also assume all of APP’s outstanding net debt ??In 2007, APP generated Heparin sales of approximately CVR. APP currently has a ($938 million). In aggregate, the consideration for the $40 mm, supplying 50% of the total US market monopoly in the US Heparin acquisition of APP, including the CVR, could be up to $5.6 ??In January 2008, Baxter, the only other supplier of b illion Heparin, detected an unusual increase in allergic market ??Based on the cash purchase price of $23.00 per share, the reactions associated with the product and voluntarily transaction values the fully diluted equity capital of APP at withdrew from the market APP’s financial results approximately $3.7 billion; and with the CVR, if fully realized, ??Subsequently, APP had a monopoly position and doubled during the next 1-3 years are at a value of $4.7 billion the price, claiming the i ncrease was linked to higher crude subject to significant ??Goldman, Sachs & Co. and Lazard Freres & Co. advised oil costs Heparin market uncertainty APP; Deutsche Bank advised Fresenius ??APP’s financial results during the next 1-3 years are subject to significant Heparin market uncertainty Accordingly, the CVR structure was used to share APP Pharmaceuticals Stock Price Graph (April 1, 2008 — August 1, 2008) this risk with APP Price ($) Volume (mm) shareholders $26 5 APP Pharmaceuticals APP 4.5 The cash consideration of $24 prov ides update on Pharmaceuticals issues related to launches 4 $22 enhanced labeling $23.00 per share and APP appoints Heparin Crisis and 3.5 Thomas Silberg Actions to ensure f or Heparin potential for total value of $20 Sodium Injection 3 as the new CEO uninterrupted saf e supply $29.00 per share represents $18 and Richard 2.5 a premium of 29% and 63%, Tajax as the new CFO $16 2 respectively, over the 1.5 $14 Fresenius agrees company’s one day stock to acquire APP Pharmaceuticals 1 $12 price 0.5 $10 0 Apr-08 May -08 Jun-08 Aug-08 13 Source: Factiva, Mergermarket, Capital IQ, Company filings

 


 

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CVR Case Study: Fresenius / APP Pharmaceuticals APP Pharmaceuticals Stock Price Performance APP Pharmaceutical’s stock Three Year Stock Price Performance price traded between $12- Share Price Volume (mm) $20 during the past two $35 9 years Abraxis BioScience APP’s stock last traded at announces APP receiv es licensing 8 $29 per share on October 5, FDA approv al f or agreement with $30 Ampicillin and Biocon f or the $29.00 bid with full CVR 2005, which was 1,006 days Sulbactam f or injection commercialization prior to the July 7, 2008 of Abraxane 7 transaction announcement APP Pharmaceuticals $25 to be acquired by Fresenius 6 Abraxis reports record 2005 Abraxis BioScience $23.00 bid Sales and Net separated into two Income and independent publicly 5 receiv es FDA traded companies: Post 7/7/08 Announcement $20 approv al f or APP Carboplatin injection Pharmaceuticals Indexed Share Price Performance (hospital based 4 business) and 140% Abraxis (proprietary 135% based business) 130% $15 3 125% American 120% Pharmaceutical 115% Partners to merge with 2 parent company , 110% $10 American Bioscience, 105% to create Abraxis 100% Bioscience (now known 1 95% as APP Pharmaceuticals) 90% 7/4/08 7/10/08 7/16/08 7/22/08 7/28/08 8/4/08 $5 0 APP Fresenius S&P 500 Aug-05 Dec-05 May-06 Sep-06 Feb-07 Jun-07 Nov-07 Mar-08 Aug-08 Source: FactSet 14 Note: Relative share price since announcement

 


 

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CVR Case Study: Fresenius / APP Pharmaceuticals Case Study Fresenius Kabi / APP Pharmaceuticals Pre-CVR Transaction Value Summary of Key Deal Terms Summary Terms of CVR Agreement ($ in millions) In addition to the purchase price, other key deal terms ??CVRs are expected to trade on the Nasdaq Pre CVR Value / Share $23.00 include the following: FD Shares Outstanding 161.6 ??In connection with the merger, an FSE acquisition Pre CVR Equity Value $3,717.9 ??Conditions entity (“Holdco”) and a mutually acceptable trustee Plus Net Debt 937.9 will enter into a CVR agreement, governing the f The transaction was conditioned upon the following, terms of the CVRs Pre CVR Enterprise Value $4,655.8 among others: f Approval of the CVRs for listing (subject to notice of ??The CVR payment under the CVR indenture will be One Day Premium 29.1% issuance) for trading on Nasdaq (or such other equal to (a) 2.5 times the excess of Holdco’s One Week Premium 37.6% exchanges, electronic trading networks or other One Month Premium suitable trading platforms as agreed by FSE and APP) aggregate Adjusted EBITDA (as defined in the CVR 64.6% No material adverse effect to APP occurring after the indenture) over $1.2677 billion for the 3-year period f date of the merger agreement beginning January 1, 2008, through December 31, Post-CVR Transaction Value f HSR clearance 2010 divided by (b) the number of CVRs issued in f Effectiveness of a registration statement on form S-4 the merger ($ in millions) An information statement/prospectus having been sent f Post CVR Value / Share $29.00 or given to APP’s stockholders and 20 calendar days ??Accordingly, the value of the CVR payment, which FD Shares Outstanding 161.6 having elapsed thereafter matures on June 30, in 2011, is based on the Post CVR Equity Value $4,687.8 f The merger agreement is not subject to any financing combined EBITDA for APP in 2008, 2009 and 2010 Plus Net Debt 937.9 condition; press released stated that the agreement contained customary representations, warranties and ??The maximum payment per CVR is capped at Post CVR Enterprise Value $5,625.7 interim covenants $6.00 per share One Day Premium 62.7% ??Breakup Fee ??Any amounts due under the CVRs are expressly One Week Premium 73.4% subordinated to certain senior obligations of f The merger agreement prohibits APP from soliciting One Month Premium 107.6% or encouraging a competing proposal ($140mm Holdco, which include the debt incurred to finance breakup fee payable by APP for accepting a superior the merger transaction and other credit facilities proposal) and obligations of Holdco 15 Source: Company filings, Capital IQ, Analyst research