UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
SCHEDULE 14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
ev3 Inc.
(Name of Subject Company)
ev3 Inc.
(Names of Person(s) Filing Statement)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
26928A200
(CUSIP Number of Class of Securities)
Kevin M. Klemz
Senior Vice President, Secretary and Chief Legal Officer
ev3 Inc.
3033 Campus Drive
Plymouth, Minnesota 55441
(763) 398-7000
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
Copies To:
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Bruce A. Machmeier, Esq.
Amy E. Culbert, Esq.
Patrick J. Pazderka, Esq.
Oppenheimer Wolff & Donnelly LLP
45 South Seventh Street, Suite 3300
Minneapolis, Minnesota 55402-1509
(612) 607-7000
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Steven J. Gartner, Esq.
Adam M. Turteltaub, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Street
New York, New York 10019
(212) 728-8000
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Check the box if the filing relates solely to preliminary communications made before
the commencement of a tender offer.
This Amendment No. 3 (the “Amendment No. 3”) to Schedule 14D-9 amends and supplements the
Schedule 14D-9 filed with the Securities and Exchange Commission on June 11, 2010 (as amended from
time to time, the “Schedule 14D-9”) by ev3 Inc., a Delaware corporation (“ev3”). The Schedule
14D-9 relates to the cash tender offer by COV Delaware Corporation (“Purchaser”), a Delaware
corporation and wholly-owned subsidiary of Covidien Group S.a.r.l., a Luxembourg company
(“Parent”), to purchase all outstanding shares of ev3’s common stock, par value $0.01 per share
(the “Shares”) at a purchase price of $22.50 per Share, in cash, without interest, subject to any
withholding of any federal, state, local and foreign taxes, and other assessments of any nature
whatsoever imposed by a taxing authority (the “Offer Price”). The tender offer is disclosed in the
Tender Offer Statement on Schedule TO (together with the exhibits thereto and as amended and
supplemented from time to time, the “Schedule TO”), filed by Purchaser and Parent with the
Securities and Exchange Commission (the “SEC”) on June 11, 2010, and is subject to the terms and
conditions set forth in the Offer to Purchase dated June 11, 2010 (and as amended and supplemented
from time to time, the “Offer to Purchase”), and in the related Letter of Transmittal (the “Letter
of Transmittal” which together with the Offer to Purchase constitutes the “Offer”). Copies of the
Offer to Purchase and Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B) to the
Schedule 14D-9, respectively.
The information in the Schedule 14D-9 is incorporated into this Amendment No. 3 by reference
to all of the applicable items in the Schedule 14D-9, except that such information is hereby
amended and supplemented to the extent specifically provided herein. This Amendment No. 3 is being
filed in connection with ev3’s entry into a Memorandum of Understanding regarding the settlement of
purported class action lawsuits (see “Item 8. Additional Information — Memorandum of
Understanding” below) and the entry into Amendment No. 1 to the Merger Agreement, dated as of July
6, 2010, by and among Parent, Purchaser and ev3.
Item 3.
Past Contacts, Transactions, Negotiations and Agreements
“Item 3. Past Contacts, Transactions, Negotiations and Agreements — Arrangements with
Current Directors and Executive Officers of ev3 — Employment Agreements Following the Merger” of
the Schedule 14D-9 is hereby amended and restated in its entirety as follows (with additions in
italics):
“As of the date of this
Amendment No. 3 to the
Schedule 14D-9, Parent and Purchaser have
informed ev3 that no members of ev3’s current management have entered into any agreement,
arrangement or understanding with Parent, Purchaser or their affiliates regarding employment with
the Surviving Corporation. Parent has informed ev3 that it currently intends to retain certain
members of ev3’s management team following the Effective Time. As part of these retention efforts,
Parent may enter into employment or consultancy compensation, severance or other employee or
consultant benefits arrangements with ev3’s executive officers and certain other key employees;
however, there can be no assurance that any parties will reach an agreement. These matters are
subject to negotiation and discussion and no terms or conditions have been finalized. Any new
arrangements are currently expected to be entered into at or prior to the Effective Time and would
not become effective until the Effective Time.
Parent, Purchaser and their affiliates have
informed ev3 that they do not intend to enter into any agreement, arrangement or understanding with
ev3’s non-employee directors regarding employment or consulting arrangements with the Surviving
Corporation.
”
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“Item 3. Past Contacts, Transactions, Negotiations and Agreements” of the Schedule 14D-9 is
hereby amended and supplemented by adding the following after the paragraph with the heading
“Section 16 Matters”:
“
Relationship with Warburg Pincus Entities
As of March 29, 2010, Warburg Pincus beneficially owned approximately 24% of our outstanding
common stock. Elizabeth H. Weatherman, one of our directors, is a Managing Director of Warburg
Pincus LLC and a member of the firm’s Executive Management Group. As described in more detail
below under the heading “—Holders Agreement,” Ms. Weatherman was elected to our board of directors
as a board designee of Warburg Pincus and the Vertical Funds, as was Richard B. Emmitt, another one
of our directors. Four of our current directors are executives of one or more portfolio companies
of Warburg Pincus.
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John K. Bakewell is Executive Vice President and Chief Financial Officer of RegionalCare
Hospital Partners, Inc. a privately-held company, acquirer and operator of acute care hospitals in
non-urban markets.
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Douglas W. Kohrs is President and Chief Executive Officer of Tornier B.V., a privately-held
global orthopedic company.
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Daniel J. Levangie is President and Chief Executive Officer of Keystone Dental, Inc., a
privately-held dental implant medical device company, and a Managing Partner of Constitution
Medical Investors, Inc., a Boston-based private investment firm focused on healthcare
sector-related acquisitions.
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John L. Miclot is an Executive in Residence at Warburg Pincus
LLC.”
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“Item 3. Past Contacts, Transactions, Negotiations and Agreements — Arrangements with Parent
and Purchaser — Tender and Voting Agreement” of the Schedule 14D-9 is hereby amended and restated
in its entirety as follows (with additions in italics):
“
Tender and Voting Agreement
In connection with the Merger Agreement, Parent and Purchaser entered into a Tender and Voting
Agreement with certain entities affiliated with Warburg Pincus Equity Partners, L.P.
(the “Warburg
Stockholders”)
pursuant to which, among other things, such stockholders have agreed to tender (and
deliver any certificates evidencing) a number of Shares in the aggregate equal to approximately 24%
of the outstanding Shares as of the date of the Tender and Voting Agreement, or cause such Shares
to be tendered, into the Offer promptly following the commencement of the Offer, and in any event
no later than the five business days following the commencement of the Offer,
provided that the
Warburg Stockholders may withdraw any Shares tendered pursuant to the Tender and Voting Agreement
at any time following the termination or expiration of the Offer without Purchaser purchasing all
Shares tendered pursuant to the Offer in accordance with its terms. However, the Warburg
Stockholders are not required, for purposes of the Tender and Voting Agreement, to tender any
Shares if that tender would cause any Warburg Stockholder to incur liability under
Section 16(b)
of
the Exchange Act. The Warburg Stockholders have irrevocably appointed Parent as proxy for the
Warburg Stockholders to vote 22,674,168 Shares as to which the Warburg Stockholders have voting
power and in the Warburg Stockholders’ name, place and stead, at any annual, special or other
meeting or action of the stockholders of ev3, as applicable, or at any adjournment thereof, whether
before or after the time Purchaser first accepts any Shares for payment pursuant to the Offer,
solely for the adoption of the Merger Agreement and the approval of the Merger. The Warburg
Stockholders have also granted Parent
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an irrevocable option (the “Purchase Option”) to purchase all
right, title and interest of the Warburg Stockholders in and to 22,674,168 Shares held by the
Warburg Stockholders with a price per share equal to the Offer Price. Parent may exercise the
Purchase Option in whole, but not in part, if, but only if, (a) Purchaser has acquired Shares
pursuant to the Offer and (b) the Warburg Stockholders have failed to tender into the Offer at
least the 22,674,168 Shares or have withdrawn the tender of a number of Shares equal to or greater
than 22,674,168 in breach of the Tender and Voting Agreement. Parent
may exercise
the Purchase Option at any time within the 60 days following the date when such Purchase
Option becomes exercisable.
During the term of the Tender and Voting Agreement, except as otherwise provided therein, the
Warburg Stockholders agree not to directly or indirectly, sell, transfer, assign, pledge,
hypothecate, tender, encumber or otherwise dispose of or limit its right to vote in any manner any
of the 27,151,570 Shares held by the Warburg Stockholders, or agree to do any of the foregoing; or
take any action which would have the effect of preventing or disabling the Warburg Stockholders
from performing their obligations under the Tender and Voting Agreement.
The Tender and Voting Agreement, and all rights and obligations of Purchaser, Parent and the
Warburg Stockholders will terminate on the earlier of: (i) Effective Time, (ii) December 31, 2010,
(iii) the date of any modification, waiver, change or amendment to the Merger Agreement in a manner
that reduces the amount or changes the form of consideration payable thereunder to the Warburg
Stockholders, and (iv) the termination of the Merger Agreement pursuant to the termination
provisions thereof.
This summary description of the Tender and Voting Agreement does not purport
to be complete and is qualified in its entirety by reference to the Tender and Voting Agreement, a
copy of which is filed as Exhibit (e)(3) to this Schedule 14D-9 and incorporated herein by
reference.”
Item 4.
The Solicitation or Recommendation
“Item 4. The Solicitation or Recommendation — Background and Reasons for the Recommendation
— Background of the Transaction” of the Schedule 14D-9 is hereby amended as follows:
The sixth full paragraph on page 19 is hereby amended and restated in its entirety as follows
(with additions in italics):
“On February 10, 2010, the ev3 Board held a regular meeting during which the directors
discussed numerous business development opportunities in each of ev3’s two business segments,
peripheral vascular and neurovascular. The potential business development opportunities discussed
included acquisitions of certain tuck-in products or technologies that might optimize or extend
ev3’s product portfolio and more transformational acquisitions. The ev3 Board directed ev3’s
management to continue its exploration of potential acquisitions. In order to assist ev3’s
management in exploring any particular potential acquisition or other business development
opportunities that might arise between regular board meetings, the ev3 Board formed a special
committee consisting of Mr. Levangie, Mr. Palmisano and Ms. Weatherman.
The ev3 Board selected
these three individuals based on their collective knowledge of the company and expertise in
strategic alternatives and mergers and acquisitions transactions. The ev3 Board did not have the
opinion or concern that Mr. Levangie, Mr. Palmisano and Ms. Weatherman had conflicts of interest
with regard to the strategic alternatives then under consideration by ev3.
The ev3 Board also
determined that prior to seriously pursuing a transformational acquisition that might in the
short-term materially affect ev3’s operating results and financial condition, ev3 should determine
whether any other strategic alternatives were available, including a possible sale of the company
,
divestitures of certain products and assets, or partnerships and joint ventures with potential
competitors
. The ev3 Board asked ev3’s management to engage J.P. Morgan Securities Inc.
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(“JPMorgan”) to gauge whether any third parties might be interested in a business combination with
ev3 either before or after the completion by ev3 of one or more acquisitions, one of which might be
a transformational acquisition.”
The last full paragraph on page 19 is hereby amended and restated in its entirety as follows
(with additions in italics):
“During the next five weeks, at the direction of the ev3 Board, representatives of JPMorgan
contacted nine companies that JPMorgan and
the
ev3
Board, based on, among other things, the ev3
Board’s experience and knowledge of the ev3’s industry competitors,
believed to have a good
strategic fit with ev3, a complementary product portfolio or leveragable sales, marketing or
distribution capabilities, that could afford to acquire ev3 and that might be interested in
exploring a potential business combination with ev3, including Covidien.”
The last paragraph beginning at the end of page 19 is hereby amended and restated in its
entirety as follows (with additions in italics):
“On March 16, 2010, the ev3 Board held a special telephonic meeting, also attended by members
of ev3’s senior management and representatives of JPMorgan, the purpose of which was to update the
ev3 Board on the business development activities being pursued by ev3’s management and the results
of JPMorgan’s contacts with companies that might potentially be interested in acquiring ev3. A
representative of JPMorgan summarized the discussions with the nine companies contacted by JPMorgan
and indicated that of the nine companies that JPMorgan contacted, four did not move forward in the
process and declined pursuing a potential strategic transaction
. The representatives of JPMorgan
provided a process update and preliminary financial analyses for one of two acquisitions ev3 was
evaluating. The ev3 Board discussed with JPMorgan the anticipated level of interest in ev3 from
financial buyers. Factors discussed included the type of analysis that a financial buyer would
engage in as it considered acquiring ev3, including the anticipated purchase price as a multiple of
ev3’s historical and projected EBITDA, the amount of debt that would be available to fund the
purchase price, the cost of capital and the amount of equity contribution that would be required.
Following this discussion, the ev3 Board concluded that the process should move forward without
approaching potential financial buyers,
based in part on (i) ev3’s need for confidentiality in the
process, (ii) the likelihood that strategic buyers would be in a position to make an offer on terms
more attractive to ev3’s shareholders than financial buyers, (iii) the uncertainty created by the
significant debt and capital requirements faced by potential financial buyers and (iv) the ev3
Board’s belief, based in part on advice from JP Morgan, that the synergies between ev3 and a
strategic buyer would likely lead to a higher price
. The ev3 Board discussed continuing as a
stand-alone entity and consummating one or more acquisitions, and compared this strategy with
accepting an acquisition proposal from a third party. The ev3 Board directed JPMorgan to continue
discussions with the four companies that had indicated a possible interest in acquiring ev3 and any
other companies that express an interest in acquiring ev3. The ev3 Board also directed ev3’s
management to continue discussions regarding two potential acquisition targets.”
The seventh full paragraph on page 21 is hereby amended and restated in its entirety as
follows (with additions in italics):
“On April 22, 2010, the ev3 Board held a regular meeting, also attended by members of ev3’s
senior management and representatives of JPMorgan. Mr. Palmisano provided an update on the status
of the strategic alternatives process and the two potential acquisition transactions that ev3’s
management was also pursuing. A representative of JPMorgan reported that ev3 had received a
written preliminary, non-binding indication of interest from Covidien but that it had not received
any other indications of interest. The representative of JPMorgan summarized recent discussions
with Covidien, Company A,
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Company B and Company C and reviewed JPMorgan’s process for determining
whether other third parties might have an interest in acquiring ev3. Representatives of JPMorgan
also informed the ev3 Board that Company A had indicated that it was not interested in pursuing a
business combination with ev3. The ev3 Board weighed continuing as a stand-alone entity and
continuing to pursue one or more acquisitions
, including the inherent risks and costs associated with financing and integrating
acquired companies,
compared to being acquired by Covidien or another third party.
Those risks
include the risks in executing ev3’s strategic plan, changes in the financial markets and in our
industry, and the projected growth of the company compared to the potential premium provided to
stockholders by Covidien or other strategic acquirors
. Mr. Klemz reviewed the fiduciary duties of
the ev3 Board in connection with their consideration of the various strategic alternatives.
Based
on the sole indication of interest from Covidien and the risks associated with operating ev3 as a
stand-alone entity, as described below,
the ev3 Board decided to continue the process of soliciting
the interest of other third parties in acquiring ev3 and directed JPMorgan to contact Company B and
another one of the nine original companies contacted in February (such company referred to as
Company D) again
, because those two companies had yet to conduct more thorough diligence of ev3
.
The ev3 Board expanded the authority of the special committee to review and evaluate a possible
business combination, negotiate with the other party and its advisors and other representatives
regarding the potential structure and terms of a possible transaction and make a recommendation to
the full ev3 Board concerning a possible transaction.
The ev3 Board did not have the opinion or
any concern that the members of the special committee had conflicts of interest with regard to a
potential transaction with Covidien.
The ev3 Board directed JPMorgan to contact Covidien’s
financial advisor, Morgan Stanley, and state that if Covidien wanted to continue to participate in
the process it would need to increase its bid to over $21.00 per Share and agree to a standstill
provision.”
The first full paragraph on page 24 is hereby amended and restated in its entirety as follows
(with additions in italics):
“On May 31, 2010, the ev3 Board convened a special telephonic meeting with ev3’s senior
management, and representatives of Willkie, Oppenheimer, JPMorgan and Piper Jaffray. All of the
directors were present. Before the ev3 Board convened, the directors received various materials
relating to their review of the proposed transaction, including a copy of the final draft of the
Merger Agreement, a memorandum summarizing the material terms of the Merger Agreement and changes
from the draft first distributed to Covidien, draft proposed resolutions approving the transaction
to be considered by the ev3 Board and presentations by JPMorgan and Piper Jaffray. Representatives
of Willkie reviewed again the fiduciary duties of the ev3 Board in connection with their
consideration of a potential transaction with Covidien and gave an update of the status of
negotiation of the Merger Agreement and the resolution of the issues discussed at the May 28, 2010
ev3 Board meeting. Representatives of each of JPMorgan and Piper Jaffray reviewed with the ev3
Board their respective financial analyses of the proposed merger. At the conclusion of each of
their respective presentations, each of JPMorgan and Piper Jaffray rendered to the ev3 Board its
oral opinion (each of which opinions was subsequently confirmed in writing) as described under “ —
Opinions of Financial Advisors to the ev3 Board” to the effect that, as of the date of their
respective opinions, and subject to and based on the factors, assumptions, limitations and
qualifications set forth in each opinion, the consideration to be paid to the holders of Shares
(other than Purchaser and any of its affiliates) pursuant to the Offer or the Merger, as
applicable, was fair, from a financial point of view, to such holders. The full text of each of
the written opinions of each of JPMorgan and Piper Jaffray, which sets forth the assumptions and
limitations, matters considered and procedures followed with respect to its respective opinion, is
attached to this Schedule 14D-9 as Annex A and B, respectively. Representatives of Oppenheimer
reviewed resolutions approving the Offer, Merger and the Merger Agreement and the related
agreements with the ev3 Board. In the course of its deliberations, the ev3 Board considered a
number of factors, including those described more fully below under “Reasons for the Recommendation
of the ev3 Board.”
The ev3 Board further determined that the interests of the entities affiliated
with Warburg Pincus that would be party to the Tender and Voting
Agreement were
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fully aligned with
the interests of all stockholders of ev3.
The ev3 Board also discussed certain of the risks and
other countervailing factors related to entering into the Merger Agreement that previously had been
identified and discussed by ev3’s senior management and the ev3 Board, which are also described
more fully below under “Reasons for the Recommendation of the ev3 Board.” Following this
discussion, the ev3 Board unanimously: (i) determined that the Offer and the Merger are advisable, fair
to and in the best interests of ev3 and its stockholders; (ii) approved the Merger Agreement, the
Offer, the Merger and the other transactions contemplated by the Merger Agreement; and (iii)
recommended that the ev3 stockholders accept the Offer and tender their Shares in the Offer and, if
required by applicable law, vote for the adoption of the Merger Agreement and thereby approve the
Merger and the other transactions contemplated by the Merger Agreement.”
“Item 4. The Solicitation or Recommendation — Background and Reasons for the Recommendation
— Background of the Transaction” of the Schedule 14D-9 is hereby amended and supplemented by
adding the following after the last paragraph:
“On July 6, 2010, the ev3 Board convened a special telephonic meeting with ev3’s senior
management and representatives of Willkie and Oppenheimer. All of the directors were present.
Before the ev3 Board convened, the directors received various materials relating to their review of
the proposed Amendment No. 1 to the Merger Agreement (the “Amendment”), including a draft of the of
the proposed amendment, a draft of a promissory note that may be issued as payment for the Top-Up
Option Shares (the “Promissory Note”), a copy of the Memorandum of Understanding, dated July 2,
2010, relating to the settlement of the litigation (the “Memorandum of Understanding”) and a draft
of the proposed resolutions approving the Amendment and the terms of the Promissory Note.
Representatives of Willkie again reviewed the fiduciary duties of the ev3 Board in connection with
their consideration of the Amendment. Representatives of Oppenheimer then gave a summary of the
Memorandum of Understanding and summarized the terms of the Amendment, which includes, among other
things, (i) a statement that the par value of any Top-Up Option Shares will be paid in cash, (ii) a
statement of the terms of the Promissory Note, as agreed to by the ev3 Board, (iii) a clarification
of how Shares tendered pursuant to guaranteed delivery procedures that have not yet been delivered
in settlement or satisfaction of such guarantee are treated for purposes of the Top-Up Option, and
(iv) a prohibition on amending certain provisions of the Merger Agreement in a manner that
adversely affects the rights of other ev3 stockholders after the Purchaser becomes the majority
stockholder. This summary of the Amendment is qualified in its entirety by reference to Amendment
No. 1 to the Merger Agreement, which is filed as Exhibit (e)(17) hereto and is incorporated herein
by reference.
Representatives of Oppenheimer then gave a summary of the principal terms of the Promissory
which include that (i) the principal balance will be determined by Parent, Purchaser and ev3, (ii)
simple interest accrues on the unpaid principal balance at a per annum rate of 3%, (iii) the
principal balance and accrued interest is payable upon demand by ev3, (iv) the accrued interest
will be paid at the maturity of the Promissory Note or upon the prepayment in full of the
Promissory Note, and (v) the Promissory Note may be prepaid in whole or in part at any time,
without penalty or prior notice. The unpaid principal balance and accrued interest becomes
immediately due and payable in the event that (i) Purchaser fails to make any payment of interest
and such failure continues for a period of 30 days or (ii) Purchaser files or has filed against it
any petition under any bankruptcy or insolvency law or for the appointment of a receiver or makes a
general assignment for the benefit of creditors. The Promissory Note will be governed by Delaware
law and in the event that the Purchaser defaults under the Promissory Note, the Purchaser will pay
all reasonable costs of collection, including reasonable attorneys’ fees.
Following a discussion of the terms of the Amendment and the Promissory Note, the ev3 Board
unanimously approved the Amendment and the terms of the Promissory Note.”
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“Item 4. The Solicitation or Recommendation — Background and Reasons for the Recommendation
— Reasons for the Recommendation of the ev3 Board” of the Schedule 14D-9 is hereby amended as
follows:
The disclosure under the heading “Tender and Voting Agreement” on page 27 is hereby amended
and supplemented by adding the following after the last bullet point:
“
•
The ev3 Board’s belief that the interests of the entities affiliated with Warburg Pincus
that would be party to the Tender and Voting Agreement were aligned with the interests of all
stockholders of ev3.”
“Item 4. The Solicitation or Recommendation — Opinions of Financial Advisors to the ev3
Board — JPMorgan” of the Schedule 14D-9 is hereby amended as follows:
The third full paragraph on page 32 is hereby amended and restated in its entirety as follows
(with additions in italics):
“
Public Trading Multiples
. Using publicly available information, JPMorgan compared selected
financial data of ev3 with similar data for selected publicly traded
healthcare
companies engaged
in businesses which JPMorgan judged to be analogous to ev3. The companies selected by JPMorgan
were the following:
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Align Technology, Inc.
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American Medical Systems Holdings, Inc.
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Edwards Lifesciences Corporation
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Integra LifeSciences Holdings Corporation
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Masimo Corporation
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NuVasive, Inc.
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ResMed Inc.
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Thoratec Corporation
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Volcano Corporation”
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The second full paragraph on page 33 is hereby amended and restated in its entirety as follows
(with additions in italics):
“Based on the results of this analysis and other factors which it considered appropriate,
including but not limited to, revenue growth and operating margins,
JPMorgan applied a Firm
Value/2010 Revenue multiple range of 2.75x to 4.35x to ev3’s 2010 Revenue, a Firm Value/2011 EBITDA
multiple range of 10.0x to 17.5x to ev3’s 2011 EBITDA and a 2011 P/E multiple range of 20.0x to
30.0x to ev3’s 2011 EPS and then calculated ev3’s implied equity value per share. In performing
these calculations, JPMorgan used two sets of financial forecasts: (i) “Street,” based on consensus
estimates of Wall Street analysts; and (ii) “Management,” based on projections provided by ev3. In
both sets of forecasts, as well as those of the selected companies, EBITDA and EPS excluded
projected expense related to contingent consideration and extraordinary items. In the Management
forecasts, EPS was adjusted using a 10% tax rate after utilization of NOLs.”
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The second full paragraph on page 34 is hereby amended and restated in its entirety as follows
(with additions in italics):
“Based on the results of this analysis and other factors that JPMorgan considered appropriate,
i
ncluding but not limited to, revenue growth and operating margins,
JPMorgan applied a Firm
Value/LTM Revenue multiple range of 2.40x to 5.75x to ev3’s LTM Revenue, a Firm Value/FTM Revenue
multiple range of 2.25x to 4.85x to ev3’s FTM Revenue, and a Firm Value/LTM EBITDA multiple range
of 15.5x to 28.5x to ev3’s LTM EBITDA from the “Street” financial projections described above.”
The fifth full paragraph on page 34 is hereby amended and restated in its entirety as follows
(with additions in italics):
“
Discounted Cash Flow Analysis
. JPMorgan conducted a discounted cash flow analysis for the
purpose of determining the fully diluted equity value per Share. JPMorgan calculated the unlevered
free cash flows that ev3 is expected to generate during calendar years 2010 through 2019, based
upon management projections. For purposes of this analysis, unlevered free cash flows were
calculated from management projections as operating income
(provided herein as Operating Income in
the Projected Financial Information on page 47)
, less taxes assuming a 36% tax rate through 2012
and a 33% tax rate thereafter, plus depreciation and amortization expense, including non-cash
contingent consideration accounting expense related to the Chestnut Medical acquisition milestone
payment, less capital expenditures, less change in net working capital (excluding cash and cash
equivalents), less an assumed $75 million contingent payment to Chestnut Medical in 2011. JPMorgan
then calculated the terminal value assuming a constant operating margin as of December 31, 2019 by
applying, based upon JPMorgan’s judgment and experience, a range of perpetual revenue growth rates
from 2.0% to 4.0%. JPMorgan also calculated projected annual tax savings during calendar years
2010 through 2019 based on projected annual usage of net operating loss (“NOL”) carryfowards to
offset projected tax liabilities. The unlevered free cash flows from March 31, 2010 through
December 31, 2019, the range of terminal values and the projected annual tax savings were then
discounted to present values using a range of discount rates from 10.5% to 12.0% and added together
in order to derive the implied firm value of ev3. The discount rate range was chosen by JPMorgan
based upon
, among other things,
an analysis of the weighted-average cost of capital of ev3
conducted by JPMorgan
assuming a range of betas of 1.2 to 1.3 and a range of equity risk premiums
of 5.5% to 6.5%
and applied using the mid-year convention for discounting. In calculating the
estimated diluted equity value per share, JPMorgan adjusted the calculated firm value for ev3’s
cash and total debt as of March 31, 2010 and divided by the fully diluted shares outstanding of
ev3. Based on the foregoing, this analysis indicated an implied equity value per Share of $18.50
to $25.60. All values presented were rounded to the nearest $0.05. In each case, JPMorgan compared
implied equity values per share to the per share consideration of $22.50 in cash to be paid to the
holders of Shares in the Offer and Merger and the $18.92 per share closing price of the Shares as
of May 28, 2010.”
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“Item 4. The Solicitation or Recommendation — Opinions of Financial Advisors to the ev3
Board — Piper Jaffray” of the Schedule 14D-9 is hereby amended as follows:
The fifth full paragraph on page 37 is hereby amended and restated in its entirety as follows
(with additions in italics):
“
Financial Analyses
Selected Public Companies Analysis.
Piper Jaffray reviewed selected historical financial data of ev3 and estimated financial data
of ev3 that were prepared by ev3’s management as its internal forecasts for calendar years 2010 and
2011 and compared them to corresponding financial data, where applicable, for (i) public companies
in the medical device industry with a primary focus on vascular products and (ii) public companies
in the medical device industry which Piper Jaffray believed were comparable to ev3’s financial
profile. Piper Jaffray selected companies based on information obtained by searching SEC filings,
public company disclosures, press releases, industry and popular press reports, databases and other
sources and by applying the following criteria
, which Piper Jaffray believed would be
representative of the characteristics of comparative companies to ev3
:
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•
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for public medical device companies with a primary focus on vascular products:
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•
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companies with last twelve months (“LTM”) revenue of greater than
$100 million; and
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•
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companies with EVs greater than $500 million and less than $10
billion.
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•
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for public medical device companies which Piper Jaffray believed were comparable to
ev3’s financial profile:
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•
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companies with EVs greater than $500 million and less than $10
billion;
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•
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companies with LTM revenue of greater than $100 million;
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•
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companies with LTM gross margin greater than 50%; and
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•
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companies with revenue growth greater than 0% for 2009 and
projected 2010 and 2011 revenue growth greater than 10%.”
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The first full paragraph on page 40 is hereby amended and restated in its entirety as follows
(with additions in italics):
“
Selected M&A Transaction Analysis
Piper Jaffray reviewed (i) merger and acquisition transactions involving target companies in
the medical device industry with a primary focus on vascular products that it deemed comparable to
ev3 and (ii) merger and acquisition transactions involving target companies in the medical device
industry and which Piper Jaffray believed were comparable to ev3’s financial profile. Piper
Jaffray selected these transactions based on information obtained by searching SEC filings, public
company disclosures, press releases, industry and popular press reports, databases and other
sources and by applying the following criteria
, which Piper Jaffray believed would be the relevant
factors to identifying transactions most comparable to the Offer and the Merger
:
9
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•
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for transactions involving target companies in the medical device industry with a
primary focus on vascular products:
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•
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transactions that were announced after January 1, 2005; and
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•
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targets with transaction EVs greater than $200 million and less
than $10 billion.
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•
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for transactions involving target companies in the medical device industry which
Piper Jaffray believed were comparable to ev3’s financial profile:
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•
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transactions that were announced after January 1, 2005;
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•
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targets with forward twelve months (FTM) revenue growth between
10-30%;
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•
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targets with transaction EVs greater than $500 million and less
than $10 billion; and
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•
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targets with LTM revenue greater than $100 million.”
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The last paragraph beginning at the end of page 42 is hereby amended and restated in its
entirety as follows (with additions in italics):
“
Premiums Paid Analysis
Piper Jaffray reviewed publicly available information for selected completed or pending M&A
transactions to determine the premiums paid in the transactions over recent trading prices of the
target companies prior to announcement of the transaction. Piper Jaffray selected these
transactions from the Securities Data Corporation database where the target was a public medical
device company and applied, among others, the following criteria
, which Piper Jaffray believed
would be the relevant factors to identifying transactions most comparable to the Offer and the
Merger
:
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•
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merger and acquisition transactions between a public company target and an acquirer
seeking to purchase more than 85% of shares;
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•
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transactions announced since January 1, 2005;
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•
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EV greater than $50 million;
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•
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for transactions involving multiple bids, the premium was calculated using the
final bid as compared to the target’s 1-week and 4-week stock price at the time of the
initial offer; and
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•
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no negative premiums for 1-day, 1-week, and 4-week premiums.”
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Item 8.
Other Information
“Item 8. Other Information” of the Schedule 14D-9 is hereby amended and supplemented by
adding the following at the end of the first paragraph under the heading “Appraisal Rights”:
“For the avoidance of doubt, the Company, Parent and Purchaser have acknowledged and agreed
that, in any appraisal proceeding described herein, the fair value of the Shares subject to the
appraisal proceeding shall be determined in accordance with the DGCL without regard to the Top-Up
Option, any Shares issued upon exercise of the Top-Up Option or the Promissory Note.”
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“Item 8. Other Information” of the Schedule 14D-9 is hereby amended and supplemented by
adding the following after the last paragraph under the heading “Litigation”:
“
Memorandum of Understanding
On July 2, 2010, the parties to the Stevenson Action, Young Action, Bergland Action and Keilty
Action (collectively, the “Minnesota Court Actions”) and the Olson Action (together, with the
Minnesota Court Actions, the “Court Actions”) executed a
Memorandum of Understanding (the “Memorandum of Understanding”) reflecting their agreement to settle the claims asserted in the
Court Actions, subject to, among other things, confirmation from plaintiffs’ counsel following
confirmatory discovery, that the proposed settlement is fair, adequate and reasonable; the
execution of a stipulation of settlement; and approval by the Chancery Court of the State of
Delaware. The Memorandum of Understanding includes (i) certification of a settlement class
consisting of all record and beneficial holders of Shares at any time from May 31, 2010 through and
including the date of the closing of the Merger; (ii) certain supplemental disclosures to the
Schedule 14D-9 that are set forth in this Amendment No. 3, (iii) certain amendments to the Merger
Agreement described herein under “Item 4. The Solicitation or Recommendation — Background and
Reasons for the Recommendation — Background of the Transaction”; (iv) an agreement that the Top-Up
Option, any Top-Up Shares and the Promissory Note will not be considered in the determination of
fair value in any appraisal action commenced in connection with the Merger; (v) a release of all
claims by class members against all defendants arising from the Offer and subsequent Merger; (vi)
orders or judgments of dismissal with prejudice in all cases comprising the Court Actions; (vii)
non-duplicative attorneys fees that may be awarded or approved by the Chancery Court of the State
of Delaware and/or the District Court for the State of Minnesota, Hennepin County; and (viii)
further terms, all as detailed in the Memorandum of Understanding.
The Memorandum of Understanding provides that ev3 and its directors, Parent, Purchaser and
other defendants deny, and continue to deny, that they have committed or aided and abetted in the
commission of any unlawful or wrongful acts alleged in the Court Actions, and expressly maintain
that they diligently and scrupulously complied with any fiduciary duties and all other legal
duties, and are entering into the Memorandum of Understanding solely because it will eliminate the burden and
expense of further litigation.
This summary of the Memorandum of Understanding does not purport to be a complete description
of the terms and conditions thereof and is qualified in its entirety by reference to the Memorandum
of Understanding, which is filed as Exhibit (a)(5)(J) hereto and is incorporated herein by
reference.”
Item 9.
Exhibits
Item 9 (“Exhibits”) of the Schedule 14D-9 is hereby amended and supplemented by inserting the
following exhibit thereto:
“(a)(5)(I) ev3 Press Release dated July 6, 2010 (incorporated herein by reference to Exhibit
99.1 of the Current Report on Form 8-K filed by ev3 on July 6, 2010).
(a)(5)(J) Memorandum of Understanding, dated July 2, 2010, among the parties to the Delaware
Action and Minnesota Actions.
(e)(17) Amendment No. 1, dated July 6, 2010, to Agreement and Plan of Merger, by and among
Covidien Group S.a.r.l., COV Delaware Corporation and ev3 Inc.”
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
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ev3 Inc.
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By:
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/s/ Kevin M. Klemz
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Kevin M. Klemz
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Senior Vice President, Secretary and
Chief Legal Officer
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Dated: July 6, 2010
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