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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Amer Medical Sys Hldgs (MM) | NASDAQ:AMMD | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 29.98 | 0 | 01:00:00 |
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
þ | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
þ | No fee required. | |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
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o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
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| In late 2009, Endo sent AMS a written indication of interest in acquiring AMS at a price of $23.00 per share of AMS common stock in a mix of approximately 75% cash and 25% stock, subject to a 60-day exclusivity period and certain other conditions. This written indication of interest also stated that Endo was prepared to work with AMS to ensure that key members of the AMS team would be fully motivated to contribute to the future success of the combined company in the event that Endo acquired AMS. | ||
| In July 2010, AMSs board of directors held a regular meeting in Minnesota. At this meeting, AMSs management and board of directors discussed the Companys long range strategic plan, its cash and debt balances, the expected repayment of its senior secured credit facility, its capital structure, potential investment opportunities, potential new products, the possibility of redeeming its 3 1 / 4 % Convertible Senior Subordinated Notes due 2036 and various other strategic alternatives. | ||
| In 2010, AMS repaid its outstanding term loan balance of $125.3 million on its senior secured credit facility, as previously disclosed in AMSs public filings with the SEC. | ||
| In a presentation to AMSs board of directors on February 1, 2011, J.P. Morgan included a preliminary list of potential buyers that were prioritized based on, among other things, such parties historical acquisition activity, the Companys strategic fit within such parties businesses, and such parties ability to complete a transaction. After discussions with AMSs board of directors, management and counsel to the Company regarding competitive dynamics, regulatory considerations and execution risk with respect to such parties, the Company and J.P. Morgan refined the prioritization, including moving two potential buyers from Tier 1 to Tier 2 in the prioritization, and this revised list was included in J.P. Morgans March 1 presentation to AMSs board of directors. | ||
| On February 16, 2011, upon the recommendation of AMSs management and with the support of AMSs board of directors, AMS entered into an engagement letter that was negotiated by AMSs management for J.P. Morgan to act as financial advisor for a potential sale of the Company. The Company did not formally interview potential financial advisors, and instead chose J.P. Morgan based on its experience working with the Company and its reputation and experience in the industry. | ||
| On February 25, 2011, AMSs board of directors held a special telephonic meeting and determined not to engage in discussions with other potential purchasers until discussions with Endo had developed further because the board of directors had not yet determined that further discussions with Endo would be likely to lead to a sale of the Company. | ||
| On March 28, 2011, a medical device manufacturer, which is referred to in the Proxy Statement as Bidder B, contacted J.P. Morgan and expressed a potential interest in acquiring AMS. Bidder B had not previously been reviewed with AMSs board of directors as a potential strategic partner for the Company. | ||
| On April 5, 2011, Endo informed Mr. Bihl that Endo would like him to enter into a new |
employment agreement with Endo in the event that Endo and AMS entered into a definitive merger agreement, and asked Mr. Bihl for permission to send him a draft employment agreement as soon as possible. Mr. Bihl responded that he would not entertain any employment offers until Endo and AMS had reached agreement on the key terms of the potential merger, including the price that Endo would pay to acquire AMS. Mr. Bihl further indicated that if and when the key terms had been agreed upon, he would be willing to work with Endo to negotiate a mutually acceptable employment agreement that would be executed concurrent with a definitive merger agreement. Mr. Bihl informed AMSs lead independent director, Albert Jay Graf, about Endos communications to him regarding his potential employment. In addition, in the evening of April 7, 2011, during a special telephonic meeting of the board of directors, Mr. Bihl informed the full board of these communications. On April 8, 2011, after AMS and Endo had reached agreement on the price of $30.00 per share of common stock in cash and the key terms and conditions of the merger agreement, Endo provided Mr. Bihl with an initial draft of a proposed employment agreement between Mr. Bihl and Endo that would take effect upon completion of the merger. The draft employment agreement included a proposal, upon completion of the merger, to grant Mr. Bihl restricted shares of Endo common stock and an option to purchase additional shares of Endo common stock which would vest over time. |
| J.P. Morgan calculated the Companys equity value per share implied by certain reference ranges of multiples, which were based on the ranges of multiples calculated in the chart above for comparable companies but adjusted to take into account differences between the Company and the comparable companies and such other factors as J.P. Morgan deemed appropriate, including but not limited to revenue and earnings per share growth, based upon J.P. Morgans experience and expertise in conducting similar types of analyses as well as its experience and understanding of the industry and the Company. | ||
| J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share of the Companys common stock. J.P. Morgan calculated the unlevered free cash flows that the Company is expected to generate during fiscal years 2011 through 2020, based upon financial projections prepared by the management of the Company which included the Financial Forecasts for the years 2011 to 2015. J.P. Morgan then calculated the terminal value of the Company as of December 31, 2020 by applying, based upon J.P. Morgans judgment and professional experience in conducting similar types of analyses, a range of perpetual growth rates from 2.5% to 3.5%. The unlevered free cash flows from April 8, 2011 through December 31, 2020 and the range of terminal asset values were then discounted to present values using a range of discount rates from 10.0% to 11.0% and added together in order to derive the implied Firm Value of the Company. The discount rate range was determined by J.P. Morgan, based upon its judgment and professional experience in conducting similar types of analyses, after its analysis of the weighted average cost of capital of the company, and applied using the midyear convention for discounting. In calculating the estimated diluted equity value per share, J.P. Morgan adjusted the firm value for the Companys excess cash and total debt as of December 31, 2010 and divided by the fully diluted shares outstanding of the Company. Based on the foregoing, the analysis indicated an implied equity value per share of the common stock of $25.00 to $30.75 per share. All values presented were rounded to the nearest $0.25. In each case, J.P. Morgan compared implied equity values per share to the per share consideration of $30.00 in cash to be paid to the holders of the Companys common stock in the merger and the $22.33 per |
share closing price of the common stock as of April 8, 2011. | |||
| During the two years preceding the date of J.P. Morgans fairness opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with the Company and Endo, for which J.P. Morgan and its affiliates have received customary compensation. Such services during such period have included acting as joint bookrunning manager on Endos $400,000,000 senior notes offering in November 2010 and acting as joint bookrunners and joint lead arrangers on Endos $400,000,000 Term Loan A and $500,000,000 Revolving Credit Facility in November 2010, for which J.P. Morgan and its affiliates received fees not exceeding more than $10,000,000 in the aggregate. |
| As part of its annual strategic planning process, AMS prepares certain limited internal financial analyses and forecasts regarding AMSs possible future operations for a five year period. These analyses and forecasts are subject to the input and oversight of AMSs Chief Financial Officer and Chief Executive Officer, and are approved by AMSs board of directors. The analyses and forecasts that are referred to in the Proxy Statement as the Financial Forecasts were prepared with the same input, oversight and approval. | ||
| The financial projections below were based on the Financial Forecasts and were utilized by J.P. Morgan as part of its discounted cash flow analysis. These financial projections were not provided to Endo or any person other than J.P. Morgan and AMSs board of directors. All amounts are expressed in millions of dollars. |
2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||
Total Revenue
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$ | 587 | $ | 646 | $ | 721 | $ | 807 | $ | 907 | $ | 998 | $ | 1,078 | $ | 1,142 | $ | 1,188 | $ | 1,224 | ||||||||||||||||||||
Gross profit
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491 | 537 | 600 | 673 | 758 | 834 | 900 | 955 | 993 | 1,023 | ||||||||||||||||||||||||||||||
Operating expenses
|
318 | 354 | 394 | 436 | 488 | 535 | 577 | 611 | 635 | 635 | ||||||||||||||||||||||||||||||
Earnings before
interest, taxes,
depreciation and
amortization
|
195 | 204 | 229 | 259 | 294 | 324 | 349 | 369 | 383 | 412 | ||||||||||||||||||||||||||||||
Free cash flow
|
$ | 111 | $ | 121 | $ | 144 | $ | 158 | $ | 186 | $ | 206 | $ | 225 | $ | 240 | $ | 252 | $ | 273 |
1 Year American Medical Systems Chart |
1 Month American Medical Systems Chart |
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