-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MVHbPsAtSpJ1+zWDnyWo2JkjQk2bsIXQ0kDAkP8nY20WNEo/W/coxCEljcadPNRR d0v/azApdqDzB3MKrQXOfw== 0000912057-96-023773.txt : 19961029 0000912057-96-023773.hdr.sgml : 19961029 ACCESSION NUMBER: 0000912057-96-023773 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19961028 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CIRCON CORP CENTRAL INDEX KEY: 0000719727 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 953079904 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-36096 FILM NUMBER: 96648236 BUSINESS ADDRESS: STREET 1: 6500 HOLLISTER AVE CITY: SANTA BARBARA STATE: CA ZIP: 93111 BUSINESS PHONE: 8059670404 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CIRCON CORP CENTRAL INDEX KEY: 0000719727 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 953079904 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 6500 HOLLISTER AVE CITY: SANTA BARBARA STATE: CA ZIP: 93111 BUSINESS PHONE: 8059670404 SC 14D9/A 1 CIRCON AMENDMENT #8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14D-9/A (Amendment No. 8) Solicitation/Recommendation Statement Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 CIRCON CORPORATION (Name of Subject Company) CIRCON CORPORATION (Name of Person(s) Filing Statement) Common Stock, $.01 par value (Title of Class of Securities) 172736 10 0 (CUSIP Number of Class of Securities) RICHARD A. AUHLL President and Chief Executive Officer Circon Corporation 6500 Hollister Avenue Santa Barbara, California 93117 (805) 685-5100 (Name, address and telephone number of person authorized to receive notice and communications on behalf of person(s) filing statement) Copy to: LARRY W. SONSINI, ESQ. Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 (415) 493-9300 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Amendment No. 8 supplements the Schedule 14D-9 of Circon Corporation, a Delaware corporation (the "Company"), filed with the Securities and Exchange Commission ("SEC") on August 15, 1996, and as subsequently amended, relating to a Tender Offer Statement on Schedule 14D-1, dated August 2, 1996 (the "Schedule 14D-1"), filed with the SEC by USS Acquisition Corp. (the "Purchaser"), a Delaware corporation and wholly-owned subsidiary of United States Surgical Corporation, a Delaware corporation ("USS"), relating to an offer the ("Offer") by Purchaser to purchase all outstanding Shares at a price of $18.00 per Share, net to the seller in cash, without interest thereon. ITEM 4. THE SOLICITATION OR RECOMMENDATION (a) On August 1, 1996, Leon C. Hirsch, President and Chief Executive Officer of USS, advised Richard A. Auhll, President and Chief Executive Officer of the Company, that USS was commencing the Offer the next day. Neither Mr. Auhll, nor any other member of the Company's senior management or Board of Directors had any other prior notice of the Offer, nor were they aware of USS's intention to make the Offer. On August 5, 1996, the Company's Board of Directors (the "Board") convened a meeting, where the Board, with the assistance of senior management and Wilson Sonsini Goodrich & Rosati ("WSGR"), reviewed the Company's financial performance and the Offer, including its terms and conditions. The Board also discussed potential defensive measures in response to the Offer, including the implementation of a Stockholders Rights Plan. In addition, the Board decided to retain Bear, Stearns & Co. Inc. ("Bear Stearns") to serve as financial advisors to the Company and assist the Board in considering and analyzing the Offer. On August 8, 1996, the Board convened an additional meeting, where the Board continued its analysis of the Offer and the implementation of a Stockholders Rights Plan. The Board also reviewed the Company's financial performance, business strategy and strategic plan. The Board instructed management and the Company's financial advisors to continue examining the Company's strategic plan and to provide the Board with further analyses at the next Board meeting. On August 13, 1996, the Board held an additional meeting to finalize its review of the Offer and to make a recommendation in response to the Offer. In addition, the Board determined that the implementation of a Stockholders Rights Plan would be in the best interests of the Company and its stockholders. The Board unanimously approved the Stockholders Rights Plan previously furnished to the Board and instructed management to implement the Plan. At the August 13, 1996 meeting, the Board determined that the best means for providing value to its stockholders is for the Company to continue to pursue its strategic plan and not to be put up for sale at this time. The Board unanimously concluded that the Offer is inadequate and not in the best interests of the Company and its stockholders. In particular, the Board determined that the Company's strategic plan offers the potential for greater long-term benefits for the Company's stockholders than the Offer based on, among other things, greater opportunities for business expansion, revenue and earnings growth, as well as benefits following the full integration of the business of Cabot Medical Corporation ("Cabot") into the Company. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE OFFER. A copy of a letter to stockholders communicating the Board's recommendation and a form of press release announcing such recommendation are filed as Exhibits 5 and 6 hereto, respectively, and are incorporated herein by reference. (b) In reaching the conclusions referred to in Item 4(a), the Board of Directors took into account numerous factors, including but not limited to the following: (i) The Board's familiarity with the business, financial condition, prospects and current business strategy of the Company, the nature of the business in which the Company operates and the Board's belief that the Offer does not reflect the long-term values inherent in the Company. In this regard, the Board particularly considered the following: ITEM 4. THE SOLICITATION OR RECOMMENDATION (CONTINUED) - The Company's reputation as a provider of quality products and services and its position in its industry as a technological leader and innovator. - The market share of the Company in the urology and gynecology markets and new products planned for introduction in the future. - The expected growth rates of the markets for urological and gynecological products and the product position of the Company in such markets. - The Company's long-term sales plan, including the effects of products under development and enhancements to current products. - The cost savings and growth impact of the Cabot acquisition which the Company expects to realize, including cost savings from programs already in process and those that are currently planned. - The historical trading price of the Company's Common Stock, including the Board's belief, based in part on the factors referred to above, that the trading price for the Company's Common Stock immediately prior to commencement of the Offer did not reflect the long-term value inherent in the Company. In this regard, the Board noted that the Offer represented a 23% discount from the highest closing price of the Common Stock during the 12-month period preceding the Offer. - The risks inherent in achieving the Company's business plan. (ii) The Company's prospects for future growth and profitability, based on the Company's strategic plan, the various strategic initiatives which have been implemented and investments that have been made over the past several years, including the acquisition of Cabot, and other opportunities that will be available in the future, the availability in the future of certain new products and enhancements to current products in various stages of development, and current conditions in the businesses in which the Company operates. (iii) The opinion of Bear Stearns to the effect that the consideration offered pursuant to the Offer is inadequate from a financial point of view to the stockholders of the Company (excluding USS and its affiliates). A copy of the written opinion of Bear Stearns which sets forth the assumptions made, matters considered and basis for their review is filed as Exhibit 7 hereto and incorporated herein by reference. (iv) The Board's commitment to protecting the best interests of the Company's stockholders. (v) The disruptive effect of the Offer on the Company's employees, suppliers and customers. (vi) The numerous conditions to which the Offer is subject. The Offer is conditioned upon, among other things, the acquisition of Shares pursuant to the Offer and the proposed merger following the Offer having been approved pursuant to Section 203 of the Delaware General Corporation Law ("Section 203") or the Purchaser being satisfied in its sole discretion that Section 203 is otherwise inapplicable to the acquisition of Shares pursuant to the Offer and the proposed merger. In light of the Board's decision discussed above, the Board has determined to take no action which would render Section 203 so inapplicable. In view of the wide variety of factors considered in connection with its evaluation of the Offer, the Board did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors considered in reaching its respective determinations. On August 30, 1996, USS announced that the expiration of the Offer had been extended to September 30, 1996. That day, the Company issued a press release relating to USS's announcement. A 2 ITEM 4. THE SOLICITATION OR RECOMMENDATION (CONTINUED) copy of this press release is filed as Exhibit 20 to this statement. Also on that day, the Company circulated a letter to its employees regarding the Offer, a copy of which is filed as Exhibit 21 to this statement. On October 1, 1996, USS announced that the expiration of the Offer had been extended to December 13, 1996. On October 2, 1996, the Company issued a press release relating to USS's announcement. A copy of this press release is filed as Exhibit 24 to this statement. On October 25, 1996, the Company sent a letter to its stockholders regarding the Offer and the Company's financial results for the third quarter of 1996. A copy of this letter is filed as Exhibit 25 to this statement. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1(F) The "Board Compensation," "Remuneration of Officers," "Report of the Compensation Committee" and "Compensation Committee Interlocks and Insider Participation" sections of the Proxy Exhibit 2(F) Article Ninth of Certificate of Incorporation, as amended Exhibit 3(F) Article V of the Bylaws Exhibit 4(F) Form of Indemnification Agreement Exhibit 5*(F) Letter to Stockholders regarding Board's Recommendation Exhibit 6(F) Press Release Announcing Board's Recommendation Exhibit 7(F) Opinion of Bear, Stearns & Co. Inc. Exhibit 8*(F) Summary of Stockholders Rights Plan Exhibit 9(F) Press Release of the Company dated August 5, 1996 Exhibit 10(F) Letter to Employees Regarding the Offer Exhibit 11(F) Complaint of William Steiner against the Company, its Directors and certain of its officers, filed on or about August 15, 1996 Exhibit 12(F) Complaint of Charles Miller against the Company, its Directors and certain of its officers, filed on or about August 15, 1996 Exhibit 13(F) Complaint of F. Richard Manson against the Company, its Directors and certain of its officers, filed on or about August 15, 1996 Exhibit 14(F) Press Release of the Company dated August 19, 1996 Exhibit 15(F) Management Retention Plan Exhibit 16(F) Sales Force Retention Plan Exhibit 17(F) Managers, Professionals and Key Contributors Retention Plan Exhibit 18(F) Press Release of the Company dated August 27, 1996 Exhibit 19(F) Letter to Employees Regarding the Retention Plans Exhibit 20(F) Press Release of the Company dated August 30, 1996 Exhibit 21(F) Letter to Employees Regarding the Offer Exhibit 22(F) Complaint of USS against the Company and its Directors, filed on or about September 17, 1996 Exhibit 23(F) Press Release of the Company dated September 18, 1996 Exhibit 24(F) Press Release of the Company dated October 2, 1996 Exhibit 25 Letter to Stockholders regarding the Offer and the Company's financial results for the third quarter of 1996
- ------------------------ * Included in copy mailed to stockholders (F) Previously filed 3 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: October 25, 1996 CIRCON CORPORATION By: /s/ Richard A. Auhll Richard A. Auhll PRESIDENT AND CHIEF EXECUTIVE OFFICER
4 EX-25 2 EXHIBIT 25 EXHIBIT 25 October 25,1996 Fellow Circon Shareholder: I am writing to update you on recent developments at Circon and to let you know that we are proceeding with our strategic plan to build value for Circon shareholders. POSITIVE FINANCIAL RESULTS This morning we reported our financial results for the third quarter of 1996. Sales for the U.S. sales force in the third quarter were $30 million, up 5% from the second quarter 1996 and the highest of any quarter since the merger with Cabot in August of 1995. Total sales for the third quarter were $38.4, up 3.5% from the previous quarter but down 9% from the all time high third quarter in 1995. Operating income for the third quarter was $2.4 million, up 145% from the second quarter. Earnings per share from operations, excluding certain unusual non-recurring charges related to the hostile tender offer, were $0.07 for the third quarter compared to break-even earnings from operations for the second quarter. We are very pleased with the sequential growth of our sales on a quarter to quarter basis and believe this is indicative of an improving trend. Management is focused on the goal of continuing this growth into the fourth quarter and 1997. THE RE-ORIENTATION OF OUR SALES FORCE IS PROCEEDING The merger of Circon and Cabot created the opportunity for each member of our combined sales force to sell more products to fewer customers in a smaller territory and thereby, over time, to become significantly more productive. This required a substantial and time-consuming reorganization and retraining of our sales force. Sales declined during the post-merger period, but now are increasing. We have focused on our sales force issues and developed strategies to get back on track. With our positive third quarter results, we are now seeing the early signs of recovery as the sales force becomes better oriented to its new environment. NEW PRODUCTS AND NEW MARKETS Research and development has always been a priority at Circon. We intend to remain at the forefront of technological development for minimally invasive surgery. Third quarter R&D expenditures were up 11% over 1995 and were 8% of sales. In the next several months, we will be introducing an ultrasonic lithotripter, a urodynamic system (OM-4), a microlaparoscopy system, a flexible ureteroscope, a small-diameter (2.4 mm) diagnostic hysteroscope, and a number of other new or improved endoscopes, laparoscopes, light sources, instruments and disposable products. I am enclosing a gynecology new product leaflet, distributed at the recent American Association of Gynecological Laparoscopy meeting in Chicago, where our products were well received. Many other new and innovative products are in our pipeline for introduction in the latter part of next year. Technological leadership is central to our future growth and profitability, and we have high hopes for our new products. We also continue to add new customers and expand our direct sales efforts. We recently concluded a multi-year agreement to supply endoscopic equipment to Tenet Healthcare. Tenet is the second largest proprietary healthcare company in the U.S. with 342 hospitals and acute care facilities. Last month we established a subsidiary and a direct sales force in France to help grow our international sales. Page 1 WE ARE CONTINUING TO MANAGE OUR COSTS Cost savings not only contribute directly to the bottom line, they help us to be price-competitive in the very cost-conscious healthcare marketplace. We are committed to continual re-evaluation of all aspects of our cost structure. This month, we will complete the closure of our Langhorne, Pennsylvania, facility, which will generate significant savings in 1997 and beyond. We also expect to benefit in 1997 from several other cost reduction initiatives many of which are already underway. THE BOARD UNANIMOUSLY REJECTED THE OFFER IN FAVOR OF THE COMPANY'S PLAN As you are aware, in August the Board of Directors of Circon unanimously rejected U.S. Surgical's unsolicited offer and urged shareholders not to tender their shares. The Board recognized that U.S. Surgical is trying to take advantage of a dip in Circon's stock price to capture the value and potential of Circon for themselves. After thoroughly studying the offer and consulting with advisors, the Board determined that the best means for providing value to Circon shareholders is to pursue its strategic plan and not to put the Company up for sale. Since that time, U.S. Surgical has twice extended its offer, and commenced litigation in an effort to force us to sell them the Company for a price that is clearly inadequate. We are not intimidated by their tactics and are confident the court will side with us on these issues. We sent you a Solicitation/Recommendation Statement (Schedule 14D-9) in August which describes the considerations that went into the Board of Director's decision to reject the offer. If you did not receive this, or would like another copy, please call Nancy Leonard at (805)685-5100. I urge you to carefully consider the 14D-9 and the following factors: - The major market share held by Circon in the urology and gynecology markets and the significant growth rates that an independent market research group is predicting for those markets in the years ahead. - The cost savings and growth impact of the Cabot merger which the Company expects to realize from programs already in progress and planned for the coming year. - The demonstrated ability of Circon's management team to generate value through strategic acquisitions like the Cabot merger. For example, in 1986 Circon acquired ACMI, a struggling company nearly five times Circon's size, and proceeded to achieve major synergies and stock price appreciation for its shareholders. - The historical trading price of the Company stock. The offer of $18.00 per share is actually a 23% discount from the highest closing price of the stock during the nine month period preceding the offer. - The investment banking firm of Bear Stearns, experts in these matters, concluded that the financial consideration offered by U.S. Surgical is inadequate from a financial point of view to the Circon shareholders. Page 2 CIRCON'S STRATEGIC VALUE In addition, the Board recognizes the unique strategic position of Circon. Circon is one of the few companies in the world designing, manufacturing, and marketing high performance endoscopic systems to multiple medical specialties on a global basis. Through an unrelenting dedication to building the best quality products available, Circon, according to independent market reports, has captured the largest share of the U.S. urology endoscope market and established itself as a leading supplier of advanced gynecology products in the U.S. and abroad. The addition of the Cabot product line allows us immediate penetration of the urological stent, laparoscopic suction-irrigation and related markets. Circon has the largest urology/gynecology sales force in the U.S. and a sizable installed base that provide a solid platform for us to expand existing product lines and enter new markets. DO NOT BE MISLED BY U.S. SURGICAL U.S. Surgical still only owns 1,000,100 shares or roughly 7.9% of Circon. By comparison, I am the largest Circon shareholder owning roughly 11% of the Company. U.S. Surgical has not actually purchased the "tendered shares" and can withdraw its offer prior to acceptance and payment of the shares at any time. In addition, we never said that we would reap the benefits of the Cabot merger overnight as U.S. Surgical has suggested. Mergers take time. The good news is that the hardest part is behind us and we are now poised to capitalize on the synergies and other opportunities available to us as a result of the merger and the implementation of our strategic plan. If the Board accepted this offer, Circon shareholders would be "cashed-out" and deprived of this value. IN CONCLUSION Circon has a strategic plan that is working. Our prospects remain excellent as we evolve into a more powerful and efficient organization. Our Board has concluded that our shareholders will benefit far more from the realization of our plan than if we accept U.S. Surgical's opportunistic offer. Judge for yourself. Review the fundamentals underlying our strategic plan that appear on the first four pages of our 1995 Annual Report and keep a close eye on our quarterly financial reports. I appreciate the support we have received from our shareholders and urge those others of you who have tendered shares to U.S. Surgical to consider withdrawing the shares. By rejecting the opportunistic offer of U.S. Surgical, we have the best chance of truly maximizing the value of an investment in Circon. Give the Circon team time to finish the job it began last year. I think you will be glad that you did. Sincerely, CIRCON CORPORATION RICHARD A. AUHLL President Chairman of the Board Page 3 -----END PRIVACY-ENHANCED MESSAGE-----