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): July 19, 2011
KINETIC CONCEPTS, INC.
(Exact name of registrant as specified in its charter)
| Texas | 001-09913 | 74-1891727 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 8023 Vantage Drive San Antonio, Texas |
78230 | (210) 524-9000 | ||
| (Address of principal executive offices) |
(Zip Code) | (Registrant’s telephone number, including area code) | ||
N/A
(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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 Other Events.
On July 19, 2011, Kinetic Concepts, Inc. (the “Company”) distributed a set of Frequently Asked Questions relating to the proposed acquisition of the Company by a consortium comprised of investment funds advised by Apax Partners, and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board (the “Merger”). The Frequently Asked Questions, dated July 19, 2011, are attached hereto and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are filed with this Form 8-K:
| Exhibit |
Description | |
| Exhibit 99.1 | Frequently Asked Questions, dated July 19, 2011 | |
Additional Information and Where to Find It
This filing may be deemed to be solicitation material in respect of the proposed acquisition of the Company by investment funds advised by Apax Partners, and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board. In connection with the proposed acquisition, the Company plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The definitive proxy statement will be mailed to shareholders of the Company. Investors and security holders may obtain a free copy of the proxy statement when it becomes available, and other documents filed by the Company with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it becomes available, and the Company’s other filings with the SEC may also be obtained from the Company by directing a request to Kinetic Concepts, Inc., Attention: Investor Relations, 8023 Vantage Drive, San Antonio, TX 78230, or by calling 210-255-6157.
Participants in Solicitation
The Company and its directors, executive officers and other members of its management and employees may be deemed to be soliciting proxies from the Company’s shareholders in favor of the proposed acquisition. Information regarding the Company’s directors and executive officers is available in its 2010 Annual Report on Form 10-K filed with the SEC on March 1, 2011 and definitive proxy statement relating to its 2011 Annual Meeting of Shareholders filed with the SEC on April 15, 2011. Shareholders may obtain additional information regarding the interests of the Company and its directors and executive officers in the proposed acquisition, which may be different than those of the Company’s shareholders generally, by reading the proxy statement and other relevant documents filed with the SEC when they become available.
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Cautionary Statement Regarding Forward-Looking Statements
This filing contains forward-looking statements, which may be identified by words such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “should,” “seeks,” “future,” “continue,” or the negative of such terms, or other comparable terminology. Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors that could cause actual results to differ materially include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; (2) the outcome of any legal proceedings that may be instituted against the Company and others following announcement of the Merger Agreement; (3) the inability to complete the Merger due to the failure to satisfy the conditions to the Merger, including obtaining the approval of at least two-thirds of the Company’s shareholders, the expiration of the waiting period under the Hart–Scott–Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of other required regulatory approvals; (4) risks that the proposed transaction disrupts current plans and operations and potential difficulties in employee retention as a result of the Merger; (5) the ability to recognize the benefits of the Merger; (6) legislative, regulatory and economic developments; and (7) other factors described in the Company’s filings with the SEC. Many of the factors that will determine the outcome of the subject matter of this filing are beyond the Company’s and the consortium’s ability to control or predict. The Company can give no assurance that the conditions to the Merger will be satisfied. Except as required by law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. The Company is not responsible for updating the information contained in this filing beyond the published date, or for changes made to this filing by wire services or Internet service providers.
* * * * *
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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.
| KINETIC CONCEPTS, INC. (Registrant) | ||||
| Date: July 19, 2011 |
||||
| By: | /s/ Martin J. Landon | |||
| Name: | Martin J. Landon | |||
| Title: | Executive Vice President and Chief Financial Officer | |||
EXHIBIT INDEX
| Exhibit |
Description | |
| Exhibit 99.1 | Frequently Asked Questions, dated July 19, 2011 | |
Exhibit 99.1
| Q: | Is the deal with Apax a merger or an acquisition? |
Technically, Apax is acquiring KCI, but it’s more important to understand that, for now, regardless of what the deal is “called,” we are only changing our ownership base and capital structure and not how our business operates. Apax is a private equity firm that has ownership in many companies (i.e. “portfolio companies”) and for reasons related to contracts, taxes, liability and other issues, they do not wish to combine KCI directly with these companies. Rather, Apax will establish a new subsidiary and “merge” it into KCI. This subsidiary has no operations or purpose other than to merge with KCI.
Unlike a strategic acquisition where one company buys another and merges its operations, departments and people, a private equity firm does not have operations, departments or people to merge into another company, but rather makes acquisitions for the primary purpose of gaining a return on their investment.
| Q: | How will this deal affect our R&D spending? What about the projects currently underway? |
Innovation is—and will continue to be—the cornerstone of KCI. In fact, one of the primary reasons Apax was so attracted to KCI is because of our core competence of using innovation to change the clinical practice of medicine. Our strategic plan is fueled by development and commercialization of R&D initiatives and when Apax reviewed that plan they developed a real appreciation for our strategy. With that in mind, we would fully expect to continue our focus and investment in R&D.
| Q: | What are the tax implications of going private? |
For KCI and Apax, there shouldn’t be any implications directly as a result of the deal and our current tax structure should remain intact. The corporate taxes/rates that KCI pays today would not change as a result of becoming a privately-held company.
For shareholders, however, there will be tax implications. They will have to pay taxes on the gains they realize on the stock they purchased or were granted. Employees who hold shares, restricted shares and/or options may want to consult their tax advisor for additional information.
| Q: | What exactly is a private equity group? |
A private equity (PE) group is a firm which uses equity capital and debt capital to acquire companies specifically for the purpose of earning a financial return. The group typically has multiple funds that are somewhat similar to mutual funds that you might invest in; however, investors in these funds are university endowments, pension funds, wealthy individuals and others. In addition to using the money in their funds for acquisitions, PE groups also raise debt capital through the acquired company from banks and other investors — also known as “levering up.” Once an investment is made, a PE firm will then work with the management team to efficiently run the company, use cash flow generated to pay down debt (just as we did in our 1997 LBO and also following our 2008 acquisition of LifeCell), leverage relationships with other portfolio companies in the PE group’s portfolio (such as Apollo hospitals in India), and eventually exit the investment either through an initial public offering (as we did in 2004) or a sale.
| Q: | How will the debt from the deal affect us as a company going forward? |
The debt from the transaction is very similar to incurring debt on your credit card and carrying a monthly balance –you pay monthly interest charges and in time you repay the debt you originally incurred. In our case, and just as we do today with our debt obligations, we will cover interest expense from operating profits generated and then use our free cash flow (cash flow left after covering all of our operational and investment needs) to make debt reduction payments.
| Q: | Can you clarify what exactly will NOT change under the “One-year agreement” that Cathy mentioned? |
As mentioned in last week’s Town Hall, the consortium has agreed to maintain compensation and health and welfare benefit programs that are in aggregate at least as favorable as KCI’s existing compensation and benefit plans for at least one year, should the transaction close. However, it’s important to remember that benefits can be periodically changed in the ordinary course of business by the Compensation Committee of the Board of Directors and the Management Benefits Committee.
| Q: | Will this deal have any impact on how AIB is calculated for 2011? |
There are no plans at this time to modify how the AIB will be calculated for 2011.
| Q: | Is there a hiring freeze? |
There is no hiring freeze currently in effect and our recruiters and hiring managers are still busy searching for the best talent to fill current openings.
| Q: | Can employees currently enrolled in the ESPP change their contribution levels during this period? |
If you are a “designated insider” as defined by the KCI Insider Trading Policy, you are prohibited from changing your ESPP percentage election during a blackout period (the second quarter blackout period runs through July 28, 2011). After that date, designated insiders must obtain pre-clearance before they may change their ESPP elections. Non-designated insiders can change their election at any time without prior approval.
Additional Information about the Merger and Where to Find It
This communication may be deemed to be solicitation material in respect of the proposed acquisition of Kinetic Concepts, Inc. (“KCI”) by a consortium comprised of funds advised by Apax Partners, L.P. and Apax Partners LLP, together with controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board. KCI plans to file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS OF KCI ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The definitive proxy statement will be mailed to shareholders of KCI. Investors and security holders may obtain a free copy of the proxy statement when it becomes available, and other documents filed by KCI with the SEC, at the SEC’s web site at http://www.sec.gov. Free copies of the proxy statement, when it becomes available, and KCI’s other filings with the SEC may also be obtained from KCI by directing a request to Kinetic Concepts, Inc., Attention: Investor Relations, 8023 Vantage Drive, San Antonio, TX 78230-4726, or by calling 210-255-6157.
KCI and its directors, executive officers and other members of its management and employees may be deemed to be soliciting proxies from KCI’s shareholders in favor of the proposed acquisition. Information regarding KCI’s directors and executive officers is available in its 2010 Annual Report on Form 10-K filed with the SEC on March 1, 2011, and definitive proxy statement relating to its 2011 Annual Meeting of Shareholders filed with the SEC on April 15, 2011. Shareholders may obtain additional information regarding the interests of KCI and its directors and executive officers in the proposed acquisition, which may be different than those of KCI’s shareholders generally, by reading the proxy statement and other relevant documents filed with the SEC when they become available.