As filed with the Securities and Exchange Commission on April 5, 2004
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
UNDER SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
HEMOSOL INC.
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(Name of the Issuer)
HEMOSOL INC.
MDS INC.
MDS LABORATORY SERVICES INC.
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(Names of Persons Filing Statement)
COMMON SHARES
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(Title of Class of Securities)
42369K102
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(CUSIP Number of Class of Securities)
PETER E. BRENT BRADLEY G. LEGGE
LEE D. HARTWELL MDS INC. MDS LABORATORY SERVICES INC.
HEMOSOL INC. 100 INTERNATIONAL BOULEVARD 100 INTERNATIONAL BOULEVARD
2585 MEADOWPINE BOULEVARD TORONTO, ONTARIO TORONTO, ONTARIO
MISSISSAUGA, ONTARIO CANADA M9W 6J6 CANADA M9W 6J6
CANADA L5N 8H9 416-675-6777 416-675-6777
905-286-6200
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(Name, Address and Telephone Numbers of Person Authorized to
Receive Notices and Communications on Behalf of the Persons Filing Statement)
Copy of communications to:
JEFFREY NADLER, ESQ. CHRISTOPHER W. MORGAN, ESQ.
WEIL, GOTSHAL & MANGES LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
767 FIFTH AVENUE 222 BAY STREET, SUITE 1750
NEW YORK, NEW YORK 10153 TORONTO, ONTARIO
212-310-8000 CANADA M5K 1J5
416-777-4700
This Statement is filed in connection with:
a. / / The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange
Act of 1934.
b. / / The filing of a registration statement under the Securities Act of 1933.
c. / / A tender offer.
d. /X/ None of the above.
Check the following box if the soliciting material or information statement
referred to in checking box (a) are preliminary copies: / /
Check the following box if the filing is a final amendment reporting the results
of the transaction: /_/
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
- ---------------------------------------- ---------------------------------------
$3,576,473.81 $716.00
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* Estimated solely for purposes of computing the filing fee. The transaction
valuation was based on the product of (i) the 7% equity interest in Hemosol
being acquired by MDS pursuant to the Arrangement described herein (equal to
3,930,191 shares based on 56,145,582 Hemosol common shares outstanding as of
March 10, 2004, and (ii) $0.91, the average of the high and low prices reported
for Hemosol common shares on the Nasdaq National Market on March 16, 2004.
** The amount of the filing fee, calculated in accordance with Rule 0-11(b) of
the Securities Exchange Act of 1934, equals 1/50 of 1% of the transaction
valuation.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $716.00 Form or Registration No.: Rule 13E-3
Transaction Statement on Schedule 13E-3
Filing Party: Hemosol Inc., MDS Inc.
and MDS Laboratory Services Inc. Date Filed: March 19, 2004
This Amendment No. 1 ("Amendment No. 1") is being filed by (i)
Hemosol Inc. ("Hemosol"), a corporation existing under the Business Corporations
Act (Ontario), as amended (the "OBCA"), (ii) MDS Inc. ("MDS"), a corporation
existing under the OBCA, and (iii) MDS Laboratory Services Inc. ("MDS Subco"
and, together with Hemosol and MDS, the "Filing Persons"), a corporation
existing under the OBCA and a wholly-owned subsidiary of MDS, and amends the
Rule 13e-3 Transaction Statement on Schedule 13E-3 (as so amended, the
"Transaction Statement") filed pursuant to Section 13(e) of the Securities
Exchange Act of 1934, as amended, by the Filing Persons on March 19, 2004. The
information contained in this Amendment No. 1 is intended to amend and
supplement, but, unless otherwise stated, does not restate or replace, the
information contained in the Rule 13e-3 Transaction Statement on Schedule 13E-3
filed by the Filing Persons on March 19, 2004 (including the exhibits thereto).
Accordingly, you are encouraged to read the information contained in this
Amendment No. 1 in conjunction with the information contained in the Rule 13e-3
Transaction Statement on Schedule 13E-3 filed by the Filing Persons on March 19,
2004 (including the exhibits thereto).
The Transaction Statement relates to a proposed arrangement involving
Hemosol, its securityholders and MDS, upon the terms and conditions provided for
in the Arrangement Agreement, attached as Exhibit (d)(i) to the Rule 13e-3
Transaction Statement on Schedule 13E-3 filed by the Filing Persons on March 19,
2004.
Any capitalized terms used in this Amendment No. 1 that are not
defined in this Amendment No. 1 shall be as defined in the Notice of Annual and
Special Meeting and Management Information Circular of Hemosol Inc. (excluding
the Auditors' Consent set forth on page 124 thereto, the "Management Information
Circular") attached as Exhibit (a)(3)(i) to the Rule 13e-3 Transaction Statement
on Schedule 13E-3 filed by the Filing Persons on March 19, 2004.
The information contained or incorporated by reference in this
Amendment No. 1 concerning MDS and MDS Subco, their respective directors,
officers and affiliates or the Labs Business is based solely upon information
provided to Hemosol by MDS or upon publicly available information. With respect
to this information, the Hemosol Board has relied exclusively upon MDS, without
independent verification by Hemosol. With respect to any statements made in this
Amendment No. 1 by either MDS or MDS Subco which relate to Hemosol, its
directors, officers and affiliates (other than MDS and MDS Subco and their
directors and officers), MDS and MDS Subco have relied exclusively upon Hemosol,
without independent verification.
The following sections of the Management Information Circular are
supplemented and amended as follows and each such section, as so supplemented or
amended, is incorporated into the Transaction Statement, so that any references
to such sections in the Rule 13e-3 Transaction Statement on Schedule 13E-3 filed
by the Filing Persons on March 19, 2004 shall refer to such section as
supplemented or amended hereby.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
BACKGROUND TO THE ARRANGEMENT" IS SUPPLEMENTED BY THE FOLLOWING:
The range of $10 to $15 million referred to in the Letter of
Understanding was a non-binding indicative range based on the understanding of
Hemosol and MDS on October 31, 2003. The final cash payment amount of $16
million referred to in the Arrangement Agreement was negotiated by Hemosol and
MDS in light of the quantum of Tax Losses after further due diligence and the
involvement of the Independent Committee in the negotiation process.
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THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
RECOMMENDATION OF THE INDEPENDENT COMMITTEE" IS SUPPLEMENTED BY THE FOLLOWING:
The Independent Committee adopted the Fairness Opinion, including the
analyses and major assumptions incorporated therein.
The Independent Committee determined that the following factors were
not relevant in the circumstances for the following reasons:
o Net book value of the Hemosol Shares and the liquidation value
of Hemosol. In assessing the value of the approximate 7% limited
partnership interest in the Blood Products Partnership, the
Hemosol Board, based on advice from KPMG, determined that a
discounted cash flow analysis and a market capitalization
analysis was most relevant. A public market analysis was also
considered, but not employed since it was determined that there
were no public companies comparable to the Blood Products
Business. In light of the fact that the value of the Blood
Products Partnership was being determined on a going concern
basis, the net book value of Hemosol and the liquidation value
of Hemosol was considered to be not relevant in the
circumstances.
o Purchase prices previously paid by MDS or its affiliates for
Hemosol Shares. The purchase prices previously paid by MDS or
its affiliate for Hemosol Shares was considered to be not
relevant in the circumstances in light of the timing of such
purchases and the determination of the value of the Blood
Products Partnership on a going concern basis as discussed
above.
o Substance of the PwC Draft Report. Although the analysis in the
PwC Draft Report was discussed by Hemosol and MDS, and portions
of the PwC Draft Report were made available to KPMG during the
negotiation process, the PwC Draft Report was not made available
to the Independent Committee during the negotiation process and
the Independent Committee did not consider the PwC Draft Report
to be relevant to its determinations, as the PwC Draft Report
was prepared by PwC to assist management of MDS during the
negotiation process.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
RECOMMENDATION OF THE HEMOSOL BOARD" IS SUPPLEMENTED BY THE FOLLOWING:
Hemosol believes that the Arrangement is procedurally fair to Non-MDS
Securityholders for the following reasons:
o the Independent Committee (comprised of three directors none of
whom is related to MDS or its affiliates or an employee of
Hemosol) was formed for the purpose of evaluating the
Arrangement and oversaw the negotiation of the terms of the
Arrangement;
o the members of the Independent Committee and the Hemosol Board
are experienced and sophisticated in business and financial
matters and were well informed about the business, operations
and prospects of Hemosol;
o the principal terms of the Arrangement were established through
arm's length negotiation between MDS and the Independent
Committee and the management of Hemosol (none of whom is related
to MDS or its affiliates by virtue of being a director, officer
or employee of MDS), and during such negotiation the interests
of Non-MDS Securityholders were represented by the Independent
Committee and the management of Hemosol and their legal and
financial advisors;
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o the Independent Committee retained KPMG as its financial advisor
to assist the Independent Committee in evaluating the
Arrangement;
o KPMG has reviewed the Arrangement and advised the Independent
Committee that it believes that the Arrangement is fair, from a
financial point of view, to Non-MDS Securityholders, as
described in "Special Factors - KPMG Fairness Opinion";
o the Independent Committee and the Hemosol Board have each
concluded that the Arrangement is in the best interests of
Hemosol and is fair, from a financial point of view, to Non-MDS
Securityholders, and the Hemosol Board has recommended that the
Securityholders vote in favour of the Arrangement, as described
in this section and in "Special Factors - Recommendation of the
Independent Committee";
o the Arrangement can only be completed if approved by the Court,
and the Court will determine the fairness of the Arrangement;
and
o in order for the Arrangement to be approved, at least two-thirds
of the votes cast on the Arrangement Resolution by
Securityholders, and at least a majority of the votes cast
thereon by the Minority Shareholders, must be voted in favour of
the Arrangement Resolution.
The majority of directors who are not employees of Hemosol did not
retain an unaffiliated representative to act solely on behalf of unaffiliated
security holders for purposes of negotiating the terms of the Rule 13e-3
transaction and/or preparing a report concerning the fairness of the
transaction. However, the Board of Directors of Hemosol did form an Independent
Committee for the purposes set forth in the Management Information Circular
under "Special Factors - Background to the Arrangement."
The Hemosol Board adopted the Fairness Opinion, including the
analyses and major assumptions incorporated therein.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
RECOMMENDATION OF THE HEMOSOL BOARD" IS AMENDED AS FOLLOWS:
The first sentence of the third paragraph is hereby deleted and
replaced by the following: The discussion of the information and factors
considered and evaluated by the Hemosol Board is not intended to be exhaustive,
but does include all material factors considered by the Hemosol Board.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
KPMG FAIRNESS OPINION" IS SUPPLEMENTED BY THE FOLLOWING:
KPMG will be paid a fee of $110,000 for its services as financial
advisor to the Independent Committee in connection with the Arrangement,
including for the provision of the KPMG Fairness Opinion.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
KPMG FAIRNESS OPINION - VALUATION OF BLOOD PRODUCTS BUSINESS" IS SUPPLEMENTED BY
THE FOLLOWING:
The discount rate in the range of 30% to 35% was based on KPMG's
experience and assessment as to the rate of return which an investor would
require given the projections for the Blood Products Business. In particular,
KPMG considered the significant risk which would exist with achieving the
significant growth and profitability reflected in the projections given, amongst
other things, the fact that: (i) full implementation of the strategic alliance
with ProMetic is subject to the execution of definitive agreements; (ii) the
Cascade technology has not been implemented at the commercial scale envisioned
by the ProMetic MOU; (iii) the bulk of the profitability will begin to be earned
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after several years of significant losses and capital expenditures; and (iv) the
fact the Blood Products Business has no commercial operating history.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
MANAGEMENT PROJECTIONS" IS AMENDED AS FOLLOWS:
The second sentence of the fifth paragraph is hereby deleted.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
REASONS WHY MDS AND MDS SUBCO CONSIDER THE ARRANGEMENT TO BE FAIR TO NON-MDS
SECURITYHOLDERS" IS SUPPLEMENTED BY THE FOLLOWING:
MDS and MDS Subco determined that the following factors were not
relevant in the circumstances for the following reasons:
o Current or historical market prices of Hemosol Shares. The
current or historical market price of Hemosol Shares was
considered to be not relevant given the historical volatility of
the trading price of such shares and given that the price of
Hemosol Shares was not relevant to the primary subject matter of
the transaction, being the Tax Losses.
o Net book value of Hemosol Shares and going concern or
liquidation value of Hemosol. Each of these valuation methods
relates, directly or indirectly, to the underlying value of
Hemosol, the business of which is to be transferred to the Blood
Products Partnership. None of these valuation methods was
therefore considered relevant to the primary subject matter of
the transaction, being the Tax Losses, which is significantly
greater in value to Non-MDS Securityholders than the relatively
minor equity interest that MDS would indirectly receive in the
Blood Products Business as a result of Labco's limited
partnership interest in the Blood Products Partnership.
o Purchase prices previously paid by MDS or affiliates for Hemosol
Shares. The purchase price previously paid by MDS or affiliates
for Hemosol Shares was not relevant given the time periods in
which such purchases occurred and the general historical
volatility of the trading price of such shares and given that
the price of Hemosol Shares was not relevant to the primary
subject matter of the transaction, being the Tax Losses.
o Substance of the KPMG Fairness Opinion. The KPMG Fairness
Opinion was not made available to MDS or MDS Subco during the
negotiation process as it was prepared by KPMG to assist the
Independent Committee during the negotiation process and in
determining that the Arrangement is fair, from a financial point
of view, to Non-MDS Securityholders.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "SPECIAL FACTORS -
DRAFT REPORT OF PRICEWATERHOUSECOOPERSLLP" IS SUPPLEMENTED BY THE FOLLOWING:
PWC will be paid a fee of approximately $375,000 for its services as
financial advisor to MDS in connection with the Arrangement.
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THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "INCOME TAX
CONSIDERATIONS - CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS" IS AMENDED
AS FOLLOWS:
The term "Certain" is hereby deleted from the subheading and replaced
with "Material."
The first sentence of the first paragraph is hereby deleted and
replaced with the following: In the opinion of DWPV, the following are fair
summaries of the material Canadian federal income tax consequences of the
Arrangement generally applicable to the holders of the Hemosol Shares and
Hemosol Warrants.
THE INFORMATION IN THE MANAGEMENT INFORMATION CIRCULAR UNDER "INCOME TAX
CONSIDERATIONS - CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS" IS
AMENDED AS FOLLOWS:
The term "Certain" is hereby deleted from the subheading and replaced
with "Material."
The first sentence of the first paragraph is hereby deleted and
replaced with the following: The following discussion summarizes the material
U.S. federal income tax consequences of the Arrangement applicable to holders of
Hemosol shares that are U.S. holders.
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SIGNATURE
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.
Dated: April 5, 2004
HEMOSOL INC.
By: /s/ LEE D. HARTWELL
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Name: Lee D. Hartwell
Title: President, Chief Executive Officer
and Chief Financial Officer
MDS INC.
By: /s/ PETER E. BRENT
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Name: Peter E. Brent
Title: Senior Vice-President General Counsel
and Corporate Secretary
MDS LABORATORY SERVICES INC.
By: /s/ BRADLEY G. LEGGE
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Name: Bradley G. Legge
Title: Director
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