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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
REN CORPORATION--USA
(Name of Subject Company)
REN CORPORATION--USA
(Name of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
COMMON STOCK--759656 10 1
(CUSIP Number of Class of Securities)
------------------------
RALPH Z. LEVY, JR.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
REN CORPORATION--USA
6820 CHARLOTTE PIKE
NASHVILLE, TENNESSEE 37209
(615) 353-4200
(Name, address and telephone number of person
authorized to receive notices and communications on
behalf of the person(s) filing statement)
------------------------
COPY TO:
SCOTT J. DAVIS
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603-3441
(312) 782-0600
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is REN Corporation--USA, a Tennessee
corporation (the "Company"), and the address of the principal executive offices
of the Company is 6820 Charlotte Pike, Nashville, Tennessee 37209. The title of
the class of equity securities to which this statement relates is the common
stock, no par value (the "Common Stock") of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by REN Acquisition Corp., a
Tennessee corporation ("Purchaser"), a wholly owned subsidiary of COBE
Laboratories, Inc., a Colorado corporation ("COBE"), which is an indirect wholly
owned subsidiary of Gambro AB, a Swedish corporation ("Gambro"), disclosed in a
Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated September
19, 1995, to purchase all outstanding shares of Common Stock (the "Shares") at
$20.00, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated September 19, 1995 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with the
Offer to Purchase and any amendments or supplements thereto, collectively
constitute the "Offer"). According to the Schedule 14D-1, the address of the
principal executive offices of the Purchaser is 1185 Oak Street, Lakewood,
Colorado 80215.
The Offer is being made by the Purchaser pursuant to an Agreement and Plan
of Merger, dated as of September 12, 1995 (the "Merger Agreement") among the
Company, Purchaser, COBE and Gambro. The Merger Agreement is filed as an exhibit
to this statement and is incorporated herein by reference. A copy of the press
release issued by the Company on September 13, 1995 is filed as an exhibit to
this statement and is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person filing
this statement, is set forth above under Item 1.
(b)(1) In considering the recommendation of the Board with respect to the
Offer and the Merger and the fairness of the consideration to be paid under the
Offer and in the Merger, shareholders of the Company should be aware that
certain officers and directors of the Company have interests in the Offer and
the Merger, including those referred to below that present them with potential
conflicts of interest. The Special Committee (as defined below) and the Board of
Directors of the Company (the "Board") were aware of these potential conflicts
prior to the execution of the Merger Agreement.
Under the Stock Purchase Agreements (as defined below), so long as COBE owns
a majority of the Shares, COBE may designate a majority of the members of the
Board. Accordingly, as a result of COBE's ownership of approximately 53% of the
Shares, COBE has designated three members of the Board, namely, Jan Gustavsson,
Herbert S. Lawson and Mats Wahlstrom. At present, the Company's Board consists
of six members.
Mr. Gustavsson was elected to the Board in April 1993. Since March 1993, Mr.
Gustavsson has served as Chief Financial Officer of Gambro. Since November,
1993, Mr. Gustavsson has been a member of the Board of Directors of COBE.
Mr. Lawson was elected to the Board in October 1992. Since July 1992, Mr.
Lawson has served as Vice President and Treasurer of COBE.
Mr. Wahlstrom was elected to the Board in May 1991 and currently serves as
Chairman of the Board. Between 1985 and 1993, Mr. Wahlstrom served as the Chief
Financial Officer of Gambro and since March 1993 has served as Executive Vice
President of Gambro. Since June 1990, Mr. Wahlstrom
2
has been a member of the Board of Directors of COBE and has served as Executive
Vice President of COBE. Since May 1991, Mr. Wahlstrom has also served as
President of COBE.
Mr. Lawrence J. Centella was elected to the Board in October 1992 and has
served as the President and Chief Executive Officer of the Company since July
1993. From July 1990 to July 1993, Mr. Centella was the President of COBE Renal
Care, Inc., a subsidiary of COBE, and from April 1989 to June, 1990, Mr.
Centella was the President of Gambro-Hospital, Inc., a subsidiary of Gambro.
Pursuant to the Employment Agreement dated as of July 14, 1993 between Mr.
Centella and the Company, the Company agreed to employ Mr. Centella as its
President and Chief Executive Officer from the date thereof until December 31,
1996. Furthermore, the Company has the option of extending the term of the
agreement for an additional three years. The Company shall (i) pay Mr. Centella
a base salary of $250,000 per year, (ii) enter into a qualified deferred
compensation agreement, effective from January 1, 1994, to defer $9,000 of the
base salary for 1994 for 10 years, and (iii) commencing with the Company's 1994
fiscal year, pay Mr. Centella certain performance related bonuses. The Company
also agreed to grant Mr. Centella Options to purchase up to 200,000 Shares in
certain circumstances.
Compensation of Directors; Consultation Agreement; Special Committee Fee. As
Chairman of the Board, Mr. Wahlstrom receives annual compensation of $40,000 per
year. All other directors of the Company currently receive $20,000 per annum for
serving as a member of the Board. In addition, each member of the Board receives
$2,500 for each meeting of the Board attended in person and $1,000 for each
committee meeting attended in person. The committees of the Board consist of an
Audit Committee, composed of Messrs. Lawson and Gustavsson and Drs. Jacobs and
Kokko; a Compensation Committee, composed of Mr. Lawson and Drs. Jacobs and
Kokko; and an Executive Committee, composed of Dr. Kokko and Messrs. Centella,
Lawson and Wahlstrom. Directors are entitled to participate in the Company's
Stock Option Plan.
Dr. Kokko was elected to the Board in July 1993 and is a member of the
Special Committee. Pursuant to a letter dated as of September 14, 1992
(approximately three years prior to the date Dr. Kokko was appointed to serve on
the Special Committee), from the Company to Dr. Kokko, Dr. Kokko was retained by
the Company as a consultant and, in accordance with such letter, currently
receives $4,000 per month from the Company for services rendered to the Company
as a consultant.
Each member of the Special Committee, Drs. Kokko and Jacobs, will be paid a
fee of $30,000 by the Company for their services as members of the Special
Committee. In addition, each member of the Special Committee will be reimbursed
by the Company for any expenses attributable to service in the capacity as a
member of the Special Committee in addition to their regular compensation for
serving as a director of the Company.
Beneficial Ownership of Common Stock. The following table sets forth certain
information, as of September 13, 1995, regarding the ownership of Common Stock
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock, each director of the Company, the Chief
Executive Officer of the Company, and the four most highly compensated officers
of the Company, and all executive officers and directors of the Company as a
group:
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------------------------------------------------- ----------------------- ----------------
REN Acquisition Corp.(1).................................. 10,036,221 53.0%
1185 Oak Street
Lakewood, CO 80215
Lawrence J. Centella(2)................................... 207,138 *
Jan Gustavsson(3)......................................... 10,036,221 53.0%
Magistratsvagen 16 Box 10101
S-220 10 Lund, Sweden
M. Stephen Harrison(4).................................... 39,507 *
3
AMOUNT AND NATURE
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------------------------------------------------- ----------------------- ----------------
J. Kenneth Jacobs, M.D.(5)................................ 91,100 *
Juha P. Kokko, M.D., Ph.D.(6)............................. 15,000 *
Herbert S. Lawson(7)...................................... 10,037,721 53.1%
Ralph Z. Levy, Jr.(8)..................................... 10,105,727 *
Lowell F. Martin(9)....................................... 21,705 *
Mats Wahlstrom(7)......................................... 10,038,721 53.1%
1185 Oak Street
Lakewood, CO 80215
Bradley S. Wear(11)....................................... 95,459 *
All Officers and Directors as a Group (13 Persons)........ 10,135,416 53.6%
------------
* Less than one percent.
(1) REN Acquisition Corp. is a direct wholly owned subsidiary of COBE. COBE is
a direct wholly owned subsidiary of Gambro GmbH, a German corporation,
which is a direct wholly owned subsidiary of Gambro AB, a Swedish
corporation. Shares representing approximately 58.5% of the total voting
power of Gambro AB are held by Incentive AB, a Swedish corporation.
(2) Includes 200,000 options to purchase Shares and 356 Options granted
pursuant to the ESPP.
(3) Includes 10,036,221 Shares owned by REN Acquisition Corp. Mr. Gustavsson is
an employee of Gambro AB. Mr. Gustavsson disclaims any beneficial ownership
of such Shares.
(4) Includes 37,500 Options to purchase common stock of the Company.
(5) Includes 15,000 Options to purchase common stock of the Company.
(6) Includes 15,000 Options to purchase common stock of the Company.
(7) Includes 10,036,221 Shares owned by REN Acquisition Corp., of which Messrs.
Lawson and Wahlstrom, who are directors of the Company, are directors.
Messrs. Lawson and Wahlstrom disclaim any beneficial ownership of such
shares.
(8) Includes 10,036,221 Shares owned by REN Acquisition Corp., of which Mr.
Levy is a director. Mr. Levy disclaims any beneficial ownership of such
Shares. Includes 67,500 options to purchase common stock of the Company and
227 Options to purchase common stock of the Company granted pursuant to the
ESPP.
(9) Includes 20,000 Options to purchase common stock of the Company and 199
Options to purchase common stock of the Company granted pursuant to the
ESPP.
(10) Includes 95,000 Options to purchase common stock of the Company.
(b)(2) Pursuant to three stock purchase agreements described below
(collectively, the "Stock Purchase Agreements") between COBE and the Company,
COBE purchased from the Company a total of 9,337,399 shares of Common Stock,
representing approximately 51.1% of the Shares. The Stock Purchase Agreements
referred to in the preceding sentence are (i) the Stock Purchase Agreement,
dated as of May 11, 1991, as amended through April 26, 1994, (ii) the Stock
Purchase Agreement, dated as of February 9, 1992, as amended through March 17,
1992 and (iii) the Stock Purchase Agreement, dated as of July 2, 1992, as
amended through September 15, 1992. In addition, pursuant to Letter Agreements
dated as of July 14, 1993, COBE acquired 204,020 Shares from Elizabeth G.
Tannenbaum, individually and as custodian and trustee, and 489,280 Shares from
Jerome S. Tannenbaum, M.D., the Company's former Chairman, President and Chief
Executive Officer, in privately negotiated transactions at a price of $16 per
Share, or an aggregate purchase price of $11,092,800. Of this amount, $9,092,800
was paid in cash and $2 million was paid by a promissory note to Dr. Tannenbaum.
COBE currently owns 10,036,221 Shares, representing approximately 53% of the
total outstanding Shares.
The Stock Purchase Agreements provide that, subject to certain exceptions,
during the time period specified therein, COBE shall not directly or indirectly
acquire or agree, offer, seek or propose to
4
acquire, or cause to be acquired, ownership of any securities of the Company,
unless specifically requested to do so in writing in advance by the Board (the
"Standstill Provision").
On July 13, 1995, the boards of directors of Gambro and COBE approved an
acquisition of all of the Shares which COBE did not already own at $18.00 per
Share and authorized Mr. Mats Wahlstrom, who is the Chairman of the Board and
also the President of COBE, to present a proposal for an acquisition on those
terms to the Board.
Later on July 13, 1995, the Board held a meeting at which Mr. Wahlstrom
informed the Board that COBE was interested in purchasing all of the remaining
Shares that COBE did not already own. Mr. Wahlstrom expressed that COBE believed
that COBE and the Company must grow, by acquisition or otherwise, to compete
effectively in the healthcare industry and that this growth could be achieved
more effectively if the Company becomes a wholly-owned subsidiary.
Mr. Wahlstrom discussed the terms on which COBE was willing to make a
proposal and explained that the Standstill Provision prevented COBE from making
a proposal to acquire Shares unless the Board requested it to do so in writing.
Mr. Wahlstrom also stated that, if the Board were to invite COBE to make such a
proposal, a special committee of independent directors to represent the
interests of stockholders other than COBE or its affiliates should be
established and that that committee should consist of Dr. J. Kenneth Jacobs and
Dr. Juha P. Kokko, who are not affiliated with COBE or Gambro.
The Board unanimously determined to waive the Standstill Provision for the
limited purpose of allowing COBE to deliver a proposal to the Company on the
terms discussed by Mr. Wahlstrom. However, the Standstill Provision continued to
prohibit COBE or its affiliates from actually acquiring Shares without a further
waiver. The Board then established a special committee (the "Special
Committee"), consisting of Dr. Jacobs and Dr. Kokko, for the purpose of
considering, negotiating and submitting a recommendation to the Board concerning
the terms of the proposal to be made by COBE.
The Company then delivered the following letter to COBE:
July 13, 1995
COBE Laboratories, Inc.
1185 Oak Street
Lakewood, Colorado 80215
Attention: Mats Wahlstrom
Re: Request for Proposal to Acquire Common Stock
Gentlemen:
As of the date hereof and pursuant to Section 5.11 of the Stock Purchase
Agreement dated as of May 24, 1991 between REN Corporation--USA (the
"Corporation") and COBE Laboratories, Inc. ("COBE"), as amended as of October 1,
1992 (the "Stock Purchase Agreement"), the Corporation, pursuant to the duly
authorized action of its Board of Directors, hereby permits COBE to submit its
proposal to acquire all the common shares, no par value, of the Corporation that
COBE does not currently own pursuant to the letter attached hereto from COBE
addressed to the Board of Directors of the Corporation and dated as of July 13,
1995.
Very truly yours,
REN CORPORATION--USA
By: /s/ LAWRENCE J. CENTELLA
..................................
Name: Lawrence J. Centella
Title: President and Chief
Executive Officer
5
COBE delivered the following letter to the Board containing its proposal
(the "Proposal"):
July 13, 1995
Board of Directors of REN Corporation--USA
Gentlemen:
I am pleased to offer on behalf of COBE Laboratories, Inc. ("COBE"), to
acquire the equity interest represented by all of the issued and outstanding
common shares, no par value, of REN Corporation--USA ("REN") not currently owned
by COBE including all common shares that may be issued upon the exercise of
options and warrants outstanding on the date hereof (the "Public Shares"). The
principal terms of our offer are as follows:
1. The transaction would be a cash merger in which each holder of a Public
Share would receive $18 per share, or an aggregate of approximately $170
million based on the number of Public Shares outstanding on July 12,
1995.
2. Consummation of the acquisition would be subject to among other things,
approval by the Board of Directors of REN and other conditions customary
in a transaction of this type.
3. COBE proposes to finance the acquisition of the Public Shares from bank
borrowings.
4. We anticipate that, upon completion of the acquisition, COBE will cause
the common shares of REN to be delisted from trading on the NASDAQ
National Market System and to cause deregistration of such common shares
with the Securities and Exchange Commission.
We believe that our offer is fair to, and in the best interests of, REN and
its public shareholders. The proposed acquisition price is equivalent to an 18%
premium over the average closing price of the common shares on the NASDAQ
National Market System over the 60 trading days ended July 12, 1995.
We believe that the investment by COBE in REN has been beneficial to COBE
and its parent, Gambro AB, and also to REN's public shareholders. However, COBE
and REN are facing an increasingly competitive environment and the prospect of
industry-wide consolidation. We believe that COBE and REN must grow, by
acquisition or otherwise, to compete effectively in this rapidly changing
environment and that this growth can be achieved much more effectively if REN
becomes a wholly owned subsidiary.
We wish to make it clear that we are not interested under any circumstances
in selling our interest in REN and that there is thus no prospect of a sale of
controlling interest to a third party. Our offer is made pursuant to your letter
dated as of July 13, 1995 to COBE.
We understand that you may wish to deliberate on this offer through a
special committee of independent directors and that such committee may wish to
retain its own advisors to assist in those deliberations. We invite your
representatives to meet with our advisors to discuss this proposal at your
earliest convenience.
We hope you will give this proposal your prompt attention. We reserve the
right to amend or withdraw this proposal at any time in our discretion.
Sincerely
/s/ MATS WAHLSTROM
......................................
Mats Wahlstrom
President
COBE Laboratories, Inc.
6
The Company issued the following press release, dated July 14, 1995, in
connection with the Proposed Transaction:
"COBE LABORATORIES, INC. PROPOSES TO BUY PUBLIC INTEREST IN ITS
REN CORPORATION-USA SUBSIDIARY FOR $18.00 PER SHARE.
COBE Laboratories, Inc., a wholly-owned subsidiary of Gambro AB, today
announced a proposal to acquire all of the equity interests in REN
Corporation-USA (NASDAQ National Market System: RENL) not currently owned by
COBE Laboratories, Inc., including all common shares that may be issued upon the
exercise of options and warrants outstanding on July 12, 1995.
Under the proposed transaction, the public shareholders of REN
Corporation-USA would receive $18.00 a share in cash, or an aggregate of
approximately $170.2 million for all the shares of common stock, no par value
(the "Common Stock"), of REN Corporation-USA held by the public. As of the date
hereof, COBE Laboratories, Inc. owns approximately 53% of the Common Stock of
REN Corporation-USA.
The offer is subject to the approval of the Board of Directors of REN
Corporation-USA, and other conditions customary in transactions of this type.
The offer also noted that the proposed acquisition price is equivalent to an
approximately 17.9% premium over the average closing price of REN
Corporation-USA Common Stock on the NASDAQ National Market System over the 60
trading days ended July 12, 1995.
In response to the offer by COBE Laboratories, Inc., the Board of REN
Corporation-USA has established a special committee of its independent directors
to consider the terms of the offer and to make recommendations in connection
with the offer to the Board of Directors of REN Corporation-USA.
UBS Securities, Inc. is acting as financial advisor to COBE Laboratories,
Inc. in connection with the proposed transaction.
July 14, 1995"
In the second half of July 1995, the Special Committee retained Alex. Brown
as its financial advisor and also retained independent legal counsel. Beginning
at the end of July 1995, the Special Committee's financial and legal advisors
commenced an investigation of the Company and its business. As part of that
investigation, officers of the Company met with, and supplied information to,
the Special Committee's financial and legal advisors.
On August 8, 1995, the Special Committee held a telephonic meeting with its
financial and legal advisors. At that meeting, the Special Committee discussed
the results of the investigation of the Company and its business (which was
still ongoing) that the Committee's financial and legal advisors were conducting
and the possible structure and terms of any agreement that might be reached with
COBE. Between August 8 and August 28, the financial and legal investigation of
the Company and its business continued.
On August 28, 1995, the Special Committee held a meeting in Nashville,
Tennessee with its financial and legal advisors. The Special Committee reviewed
and discussed with its counsel its fiduciary duties and the rights and powers of
the Special Committee under applicable law, the Charter and By-laws of the
Company and under the Stock Purchase Agreement. The Special Committee was
advised that its purpose was to negotiate at arm's length with COBE in order to
protect the interests of the Company's stockholders other than COBE and its
affiliates. The Special Committee was further advised that it was under no
obligation to reach any agreement at all with COBE unless the Special Committee
determined that such an agreement was in the best interests of the Company's
stockholders other than
7
COBE and its affiliates. The Special Committee also discussed the possibility,
and the benefits and detriments, of the use of forms of consideration other than
cash in a transaction with COBE and discussed the possible structure of a
transaction with COBE, including the benefits and detriments of the use of a
tender offer and of a single-step merger transaction and the possibility of
requiring majority of the minority tendering or voting conditions.
At the August 28 meeting, Alex. Brown made a financial presentation about
the Company to the Special Committee, which included various analyses, including
a review of the reported price and trading activity for the Shares, a comparison
of certain financial and stock market information for the Company with similar
information for certain other companies whose securities are publicly traded, a
review of the financial terms of certain recent business combinations and a
discounted cash flow analysis. The Special Committee also received a
presentation from its legal advisors on certain proposed and pending federal
legislative and regulatory initiatives, including in the Medicare reimbursement
area, and discussed and considered the possible impact of those initiatives on
the Company. The Special Committee's legal advisors also discussed with the
Committee the terms of a draft merger agreement that had been submitted to the
Special Committee's legal advisors by COBE's legal advisors.
In light of the foregoing, the Special Committee discussed at the August 28
meeting whether any transaction with COBE would be desirable at this time and
determined that it would be in the best interests of the Company's shareholders
other than COBE or its affiliates to enter into negotiations with COBE regarding
a possible transaction. At the August 28 meeting, the Special Committee
authorized its financial advisors to approach COBE's financial advisors with a
proposal for a transaction at $22.00 per Share. The Special Committee also
authorized its legal advisors to attempt to negotiate open issues with respect
to the non-financial terms of a merger agreement with COBE's legal advisors. The
Special Committee's legal advisors commenced that process following the August
28 meeting.
On August 30, 1995, the financial advisors for COBE and the Special
Committee met, at which time the Special Committee's financial advisors proposed
a price of $22.00 per Share and also requested COBE to consider a transaction in
which Gambro stock would be used as consideration, possibly in addition to cash.
COBE's financial advisors stated that a price of $22.00 per Share price was far
too high and also stated that COBE and Gambro were unwilling to use Gambro stock
instead of cash.
On September 6, 1995, COBE's financial advisors proposed to the Special
Committee's financial advisors that the transaction be effected through a cash
tender offer, followed by a merger, at $19.25 per Share. During the next several
days, the members of the Special Committee discussed that proposal with their
financial and legal advisors and representatives of the Special Committee held
discussions with representatives of COBE.
On September 9, 1995, the Special Committee held a telephonic meeting to
discuss COBE's proposal at $19.25 per Share. The Special Committee decided to
reject COBE's $19.25 per Share proposal and negotiate for a higher price. The
Special Committee also discussed the advantages and disadvantages of effecting a
transaction through a tender offer.
On September 10, 1995, the Special Committee and Mr. Wahlstrom, representing
COBE, met with their financial advisors. After some discussion and an
unsuccessful effort by Mr. Wahlstrom to persuade the Special Committee to accept
a price of less than $20.00 per Share, Mr. Wahlstrom proposed a price of $20.00
per Share in a transaction effected through a tender offer. Mr. Wahlstrom stated
that COBE would not pay a higher price. The Special Committee indicated that it
would accept this proposal subject to negotiation of the terms of a definitive
merger agreement. Following that meeting, the Special Committee authorized its
legal advisors to continue negotiations on the terms of a definitive merger
agreement, including the terms and conditions of the proposed tender offer,
subject to approval by the Special Committee and the Board. Those negotiations
took place during September 11 and 12, 1995.
8
On September 12, 1995, the Special Committee held a telephonic meeting with
its financial and legal advisors. The Special Committee reviewed the Merger
Agreement as it had been finally negotiated between its legal advisors and
COBE's legal advisors. Alex. Brown rendered its oral opinion that the
consideration of $20.00 per Share, in cash, to be received by the Company's
stockholders, other than Gambro, COBE, Purchaser and their affiliates, pursuant
to the Merger Agreement was fair from a financial point of view to such
shareholders as of the date of the opinion. That opinion has since been
confirmed in writing.
No limitations were imposed by the Special Committee upon Alex. Brown with
respect to the investigations made or procedures followed by it in rendering its
opinion. Alex. Brown relied, with the permission of the Special Committee, on
the statement made by COBE that it would not dispose of its Shares or vote its
Shares in favor of any transaction involving the sale of the Company and Alex.
Brown was not requested or authorized to solicit, and did not solicit, interest
from any party with respect to the acquisition of the Shares or the assets of
the Company or any of its constituent businesses.
The full text of the opinion of Alex. Brown dated as of September 12, 1995,
which sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex I. Holders of Shares are urged to read
this opinion in its entirety. Alex. Brown's opinion is directed only to the
fairness from a financial point of view of the cash consideration to be received
by the holders of Shares and does not constitute a recommendation to any holder
of Shares as to whether such holder should tender Shares in the Offer. The
following summary of the opinion of Alex. Brown is qualified in its entirety by
reference to the full text of such opinion.
In connection with its opinion, Alex. Brown reviewed the Merger Agreement
and certain publicly available financial information concerning the Company.
Alex. Brown also reviewed certain internal financial analyses and other
information, including financial projections furnished to it by the Company and
held discussions with members of the senior management of the Company regarding
the business and prospects of the Company. In addition, Alex. Brown (i) reviewed
the reported prices and trading activity for the Shares, (ii) compared certain
financial and stock market information for the Company with similar information
for certain other companies whose securities are publicly traded, (iii) reviewed
the financial terms of certain recent business combinations and (iv) performed
such other studies and analyses and considered such other factors as it deemed
appropriate.
As described in the opinion, Alex. Brown assumed, without independent
verification, the accuracy and completeness of the information that it reviewed
and relied upon for purposes of rendering its opinion. With respect to the
financial projections furnished to it, Alex. Brown assumed that they had been
reasonably prepared on bases reflecting the best currently available estimates
and judgements of the senior management of the Company as to the likely future
financial performance of the Company. In addition, Alex. Brown did not make an
independent valuation or appraisal of the assets of the Company, nor was it
furnished with any such valuation or appraisal. Alex. Brown's opinion stated
that such opinion was based on market, economic, financial and other conditions
as they existed and could be evaluated as of the date of the opinion.
The following is a summary of the report presented by Alex. Brown to the
Special Committee on September 12, 1995 (the "Alex. Brown Report") in connection
with its September 12, 1995 opinion.
Stock Trading History. Alex. Brown reviewed the historical trading volume
and market prices for the Shares. In addition, Alex. Brown reviewed and analyzed
the relationship between movements of the price of the Shares and movements in
the Standard & Poor's average of 500 stocks and movements in the prices of
companies considered by Alex. Brown to be reasonably similar to the Company.
This analysis showed that the $20.00 per Share offer price was 20.3% higher than
the highest closing price for the Shares prior to announcement of the Proposal
by COBE on July 14, 1995.
Comparison of the Company with Selected Publicly Traded Companies. Alex.
Brown compared certain financial information for the Company with corresponding
data and ratios for the following
9
group of six publicly traded health care services companies: American Medical
Response, Inc., HEALTHSOUTH Corporation, Lincare Holdings Inc., Renal Treatment
Centers, Inc., Surgical Care Affiliates, Inc. and Vivra Incorporated. Such
financial information included market value, aggregate market value (market
value adjusted by adding debt and subtracting cash and marketable securities),
profitability, returns, growth rates and implied multiples of revenues,
operating cash flow (earnings before depreciation, amortization, interest and
taxes less minority interest), operating income (earnings before interest and
taxes less minority interest), net income and estimated future earnings per
share (as reported by I/B/E/S) for the calendar years 1995 and 1996. This
analysis showed that on September 8, 1995, the ratio of stock price to projected
calendar 1995 earnings per share for the six companies listed above ranged from
16.5x to 25.3x and with a mean of 20.7x and the ratio of stock price to
projected calendar 1996 earnings per share ranged from 13.7x to 19.9x with a
mean of 16.9x. The implied equity value per share based on the mean multiples
and the Company's projected calendar 1995 and 1996 net income was $14.14 and
$16.61, respectively. Alex. Brown noted that the ratio of the $20.00 offer price
to the Company's projected calendar 1995 earnings per Share was 29.4x and the
ratio of the offer price to the Company's projected calendar 1996 earnings per
Share was 20.4x.
Analysis of Selected Health Care Merger and Acquisition Transactions. Alex.
Brown analyzed, based on thirteen recent mergers and acquisitions in the
alternate-site health care delivery market, the financial multiples of equity
purchase price to last twelve months' net income and to forward twelve months'
net income and the multiples of aggregate purchase price (equity purchase price
adjusted by adding debt and subtracting cash and marketable securities) to last
twelve months' revenues, operating cash flow and operating income. Alex. Brown
also analyzed the premiums of the purchase price over stock prices prior to
transaction announcement in these transactions. Alex. Brown calculated the
implied equity value per share of the Company by applying the Company's actual
and forecasted financial results to the mean multiple for each of the measures
derived from this analysis. For the thirteen transactions in the alternate-site
health care delivery market, the implied equity value per Share ranged from
$15.25 to $23.72.
Analysis of Selected Minority Buyouts. Using publicly available information,
Alex. Brown analyzed the purchase prices and premiums of the purchase price over
stock prices prior to transaction announcement paid in 31 minority buyout
transactions with values greater than $25.0 million since 1990. This analysis
resulted in a range of purchase price premiums to the stock price one day prior
to announcement of (9.8%) to 66.7%, with a mean purchase price premium of 26.6%
and a median purchase price premium of 24.3%. Alex. Brown also analyzed the
range of purchase price premiums to the stock price one month prior to
transaction announcement which indicated a range of 16.5% to 88.6% with a mean
purchase price premium of 32.7% and a median purchase price premium of 28.9%.
Alex. Brown calculated the implied Company purchase price per Share based on
these premiums. This analysis implied purchase prices per Share of $19.94 and
$19.58 based on the mean and median premiums, respectively, to the stock price
one day prior to announcement, and implied purchase prices per Share of $19.58
and $19.01 based on the mean and median premiums, respectively, to the stock
price one month prior to announcement.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis, Alex.
Brown calculated the present value of the future cash flows that the Company
could produce over a five-year period from 1996 through the end of 2000 under
various assumptions. The cash flows were based on financial forecasts prepared
by the Company's management for 1995 through 1998 and estimates for 1999 and
2000 which were based on an extrapolation of the 1998 data and were reviewed
with the Company's management. Alex. Brown discounted these cash flows to
September 30, 1995, at discount rates ranging from 11.0% to 15.0% based upon the
consideration of a number of factors, including cost of capital, required rates
of return to investors and risks attributable to the uncertainty of achieving
the projected cash flows. The terminal value was computed based on projected
earnings before depreciation, amortization, interest and taxes less minority
interest in calendar year 2000 and a range of terminal multiples
10
of 7.0x to 9.0x. The foregoing analysis resulted in a present value range for
the Company of $18.63 to $27.63 per share.
The summary set forth above does not purport to be a complete description of
the presentation by Alex. Brown of the Alex. Brown Report to the Special
Committee or the analyses performed and factors considered by Alex. Brown in
connection with its opinion dated September 12, 1995. A copy of the Alex. Brown
Report has been attached hereto as Annex I. Alex. Brown believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, or
selecting portions of the above summary, without considering all factors and
analyses, could create an incomplete view of the process underlying the analyses
set forth in the opinion and the Alex. Brown Report. In performing its analyses,
Alex. Brown made numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of the Company. The analyses performed by
Alex. Brown are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than those which are suggested
by such analyses.
Alex. Brown is a nationally recognized investment banking firm and, as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements and valuations for corporate and
other purposes. Alex. Brown regularly publishes research reports regarding the
health care industry and the businesses and securities of publicly traded
companies in that industry.
After reviewing the foregoing analysis and receiving the oral opinion of
Alex. Brown, the Special Committee recommended that the Board approve and adopt
the Merger Agreement and approve and consent to the Offer.
Also on September 12, 1995, and immediately following the Special Committee
meeting, the Board held a telephonic meeting at which the opinion of Alex. Brown
and the recommendations of the Special Committee were presented and the Board
approved and adopted the Merger Agreement.
On September 12, 1995, the Board also delivered to the Board of COBE the
following letter requesting that Gambro, COBE and Purchaser enter into the
Merger Agreement and consummate the transactions contemplated thereby in
accordance with the terms and conditions of the Merger Agreement:
11
September 12, 1995
COBE Laboratories, Inc.
1185 Oak Street
Lakewood, Colorado 80215
Attention: Mats Wahlstrom
Re: Request for Proposal to Acquire Common Stock
Gentlemen:
As of the date hereof and pursuant to Section 5.11 of the Stock Purchase
Agreement dated as of May 24, 1991 between REN Corporation-USA (the
"Corporation") and COBE Laboratories, Inc. ("COBE"), as amended through April
26, 1994, the Corporation, pursuant to the duly authorized action of its Board
of Directors, hereby requests Gambro AB, a Swedish company ("Gambro"), COBE, a
wholly owned indirect subsidiary of Gambro, and REN Acquisition Corp., a
Tennessee corporation and a wholly owned subsidiary of COBE ("Purchaser"), to
enter into an Agreement and Plan of Merger, dated as of September 12, 1995,
among Gambro, COBE, Purchaser and the Corporation and to consummate the
transactions contemplated thereby in accordance with the terms and conditions
thereof.
Very truly yours,
REN CORPORATION-USA
By: /s/ LAWRENCE J. CENTELLA
..................................
Name: Lawrence J. Centella
Title: President and Chief
Executive Officer
The Merger Agreement was executed and delivered by the parties thereto on
September 12, 1995 and the transaction was announced on the morning of September
13, 1995.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit hereto. Such summary is qualified in its entirety by reference to
the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of Purchaser's intention to commence
the Offer. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the conditions
that are described in the Offer to Purchase (see THE TENDER OFFER--Section 10.
Certain Conditions of the Offer"). Purchaser and COBE have agreed that no change
in the Offer may be made which decreases the price per Share payable in the
Offer or which reduces the maximum number of Shares to be purchased in the Offer
or which imposes conditions to the Offer in addition to those set forth in the
Offer to Purchase.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with Tennessee Law, at the Effective
Time (as defined in the Merger Agreement), Purchaser shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving
12
Corporation and will become a wholly owned subsidiary of COBE after the Merger.
Upon consummation of the Merger, each issued and then outstanding Share (other
than any Shares held by the Company, or owned by Purchaser, COBE or any direct
or indirect wholly owned subsidiary of COBE or of the Company and any Shares
which are held by stockholders who have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly an appraisal
for such stockholders' Shares in accordance with Tennessee Law) shall be
cancelled and converted automatically into the right to receive the Merger
Consideration.
Pursuant to the Merger Agreement, each share of common stock, par value $.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one share of Common
Stock of the Surviving Corporation (as defined in the Merger Agreement).
The Merger Agreement provides that the directors of the Company immediately
prior to the Effective Time will be the directors of the Surviving Corporation
immediately following the Merger and that the officers of the Company
immediately prior to the Effective Time will be the officers of the Surviving
Corporation immediately following the Merger. The Merger Agreement provides
that, at the Effective Time, the Charter of the Company, as in effect
immediately prior to the Effective Time, will be the Charter of the Surviving
Corporation. The Merger Agreement also provides that the By-laws of the Company,
as in effect immediately prior to the Effective Time, will be the By-laws of the
Surviving Corporation.
The Merger Agreement also provides that each holder of an Option (as defined
in the Merger Agreement) to purchase shares of Company Common Stock under the
Company's Stock Option Plan (as defined in the Merger Agreement) which Option is
outstanding immediately prior to the Effective Time (whether or not then
exercisable) shall, pursuant to the Cancellation of Options Agreements, entered
into by the Company with each holder of Options, be entitled to receive, and
shall receive, in settlement and cancellation thereof, an amount in cash equal
to the product of (i) the excess, if any, of the amount of the Per Share Amount
over the exercise price of each such Option and (ii) the number of shares of
Company Common Stock covered by such Option. All payments by the Company in
respect of Options, other than Options granted within six months prior to the
Effective Time, shall be made promptly following the Effective Time. Payments in
respect of Options granted within six months prior to the Effective Time shall
be made six months and one day after the date of grant of such Options. The
Company shall cause the Stock Option Plan to terminate as of the Effective Time
and certificates evidencing Options shall be deemed to be cancelled as of the
Effective Time, and thereafter the only rights of participants therein shall be
the right to receive the consideration described above. Under the Merger
Agreement, the Company has agreed that prior to the Effective Time, the Company
shall use its reasonable best efforts to cause each holder of an outstanding
Option to acknowledge in writing the cancellation of such Option and to release
the Company from any obligation in respect thereof in consideration for the
payment provided herein and shall take such other action as may be necessary to
carry out the foregoing terms.
The Merger Agreement also provides that each holder of a Warrant (as defined
in the Merger Agreement) to purchase shares of Company Common Stock, which
Warrant is outstanding immediately prior to the Effective Time (whether or not
then presently exercisable), shall, pursuant to the Cancellation of Warrant
Agreements entered into by the Company with each of the Warrant holders, be
entitled to receive, and shall receive, in settlement and cancellation thereof,
an amount in cash equal to the product of (i) the excess, if any, of the Per
Share Amount over the exercise price of each such Warrant and (ii) the number of
shares of Company Common Stock covered by such Warrant. The Company shall cause
each such Warrants to which it is a party to terminate as of the Effective Time,
and thereafter the only rights of the holders of the Warrants shall be the right
to receive the consideration described above. Under the Merger Agreement, the
Company has agreed that prior to the Effective Time, the Company shall use its
reasonable best efforts to cause each holder of an outstanding
13
Warrant to acknowledge in writing the termination of such Warrants and to
release the Company from any obligation in respect thereof in consideration for
the payment provided herein and shall take such other action as may be necessary
to carry out the foregoing terms.
The Merger Agreement also provides that the Company shall terminate the ESPP
(as defined in the Merger Agreement) effective September 30, 1995 (the
"Termination Date") pursuant to which (i) all further payroll deductions from
each Participant (as defined in the ESPP) shall cease, (ii) the amount (the
"Plan Amount") credited to the account of each Participant as of the Termination
Date shall at the election of each Participant either (A) be paid by the Company
to such Participant (without interest) as soon as administratively practicable
or (B) be applied as of the Termination Date to the purchase of Shares in an
aggregate amount equal to each Participant's Plan Amount at a price per Share
equal to 85% of the lower of the Fair Market Value (as defined in the ESPP) per
share of Common Stock on July 1, 1995 or on the Termination Date (rounded up to
the next whole dime), in accordance with the terms of the current phase under
the ESPP, and (iii) for purposes of the current phase, the Termination Date
shall be treated for all purposes of the ESPP as the last day of such phase.
Under the Merger Agreement, in the event that a Participant makes no election
under clause (ii) above, such Participant shall be deemed to have elected as of
the Termination Date to apply such Participant's Plan Amount to the purchase of
Shares in accordance with the provisions of clause (ii)(B) above.
Agreements of COBE, Purchaser and the Company. Pursuant to the Merger
Agreement, if required by applicable law in order to consummate the Merger, the
Company, acting through the Board acting upon the unanimous recommendation of
the Special Committee, shall, in accordance with applicable law and the
Company's Charter and By-laws, (i) duly call, give notice of, convene and hold
an annual or special meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby (the
"Stockholders' Meeting"). Purchaser presently owns 10,036,221 Shares
constituting approximately 53% of the Shares. If all of the outstanding Options
and Warrants were to be exercised, Purchaser will have sufficient voting power
to approve and adopt the Merger and the Merger Agreement without the approval of
any other holder of Shares.
The Merger Agreement provides that the Company shall, if required by
applicable law, as promptly as practicable following consummation of the Offer,
file with the Commission (as defined in the Merger Agreement) under the Exchange
Act (as defined in the Merger Agreement), and use its reasonable best efforts to
have cleared by the Commission, a proxy statement and related proxy materials
(the "Proxy Statement") with respect to the Stockholders' Meeting. The Company
has agreed, unless in breach of its fiduciary duties under applicable law as
advised by outside counsel, to include in the Proxy Statement the unanimous
recommendation of the Board, acting upon the unanimous recommendation of the
Special Committee, that the stockholders of the Company approve and adopt the
Merger Agreement and the transactions contemplated thereby and to use its
reasonable best efforts to obtain such approval and adoption. At such
Stockholders' Meeting, Gambro, COBE and Purchaser have agreed to cause all
Shares then owned by them and their subsidiaries to be voted in favor of
approval and adoption of the Merger Agreement and the transactions contemplated
thereby.
The Merger Agreement further provides that COBE shall cause the Surviving
Corporation to keep in effect the provisions in its Charter and By-laws
containing the provisions with respect to exculpation of director and officer
liability and indemnification set forth in the Charter and By-laws of the
Company on the date of this Agreement to the fullest extent permitted under
applicable law, which provisions shall not be amended, repealed or otherwise
modified except as required by applicable law or except to make changes
permitted by applicable law that would enlarge the exculpation or rights of
indemnification thereunder. Under the Merger Agreement, from and after the
Effective Time, Gambro and COBE each agree, jointly and severally, to guarantee
and to cause the Surviving Corporation to perform all of its obligations under
the Charter and By-laws of the Company with respect to indemnification. The
Merger Agreement provides that to the extent that the foregoing or the
provisions of the Charter or By-
14
laws of the Surviving Corporation shall not serve to indemnify and hold harmless
each present and former director and officer or the Company (the "Indemnified
Parties"), after the Effective Time, Gambro and COBE shall, subject to the terms
set forth in the Merger Agreement, indemnify and hold harmless, to the fullest
extent permitted under applicable law (and shall also advance expenses as
incurred to the fullest extent permitted under applicable law provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is to entitled to
indemnification), each Indemnified Party against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts and paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to the
transactions contemplated by the Merger Agreement for a period of six years
after the date of the Merger Agreement; provided, that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims.
The Merger Agreement provides that COBE shall cause the Surviving
Corporation to use its best efforts to maintain in effect for six years from the
Effective Time, if available, the coverage provided by current directors' and
officers' liability insurance policies maintained by the Company (provided that
the Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement, including, without limitation, using its reasonable best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the transactions contemplated by the Merger Agreement and to fulfill the
conditions to the Offer and the Merger.
The Merger Agreement provides that in case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
the Merger Agreement, the proper officers and directors of each party to the
Merger Agreement are required to use their reasonable best efforts to take all
such action.
The Merger Agreement provides that Gambro guarantees the performance by COBE
and Purchaser of their agreements and obligations under the Merger Agreement.
Representations and Warranties. The Merger Agreement contains certain
customary representations and warranties of the parties thereto.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the extent
required by Tennessee Law and the Company's Charter; (b) the parties to the
Merger Agreement shall have performed or complied in all material respects with
all agreements and covenants required by the Merger Agreement to be performed or
complied with by them on or prior to the Effective Time; (c) no governmental
authority or other agency or commission or court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making the acquisition of Shares by Gambro, COBE or Purchaser or any
affiliate of either of them illegal or otherwise restricting, preventing or
prohibiting consummation of the transactions
15
contemplated by the Merger Agreement; and (d) Purchaser or its permitted
assignee shall have purchased all Shares validly tendered and not withdrawn
pursuant to the Offer; provided, however, that this conditions shall not be
applicable to the obligations of Gambro, COBE or Purchaser if, in breach of the
Merger Agreement or the terms of the Offer, Purchaser fails to purchase Shares
validly tendered and not withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement provides that it may be
terminated and the Merger and the other transactions contemplated by the Merger
Agreement may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of the Merger Agreement and
the transactions contemplated by the Merger Agreement by the stockholders of the
Company: (a) by mutual written consent of Gambro, COBE, Purchaser and the
Special Committee; (b) by either COBE, Purchaser or the Special Committee if (i)
the Effective Time shall not have occurred on or before March 31, 1996;
provided, however, that the right to terminate the Merger Agreement shall not be
available to any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date or (ii) any court of competent jurisdiction
or other governmental authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable; (c) by COBE if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in the Offer to
Purchase, Purchaser shall have (A) failed to commence the Offer within 60 days
following the date of the Merger Agreement, (B) terminated the Offer without
having accepted any Shares for payment thereunder, or (C) failed to pay for
Shares pursuant to the Offer within 90 days following the commencement of the
Offer, unless such failure to pay for Shares shall have been caused by or
resulted from the failure of Gambro, COBE or Purchaser to perform in any
material respect any material covenant or agreement of either of them contained
in the Merger Agreement or the material breach by Gambro, COBE or Purchaser of
any material representation or warranty of either of them contained in the
Merger Agreement or (ii) prior to the purchase of Shares pursuant to the Offer,
the Special Committee, acting on behalf of the Company, shall have withdrawn or
modified in a manner adverse to Purchaser or COBE its approval or recommendation
of the Offer, the Merger Agreement, the Merger or any other transaction
contemplated by the Merger Agreement or shall have recommended another merger,
consolidation, business combination with, or acquisition of, the Company or its
assets or another tender offer for Shares, or shall have resolved to do any of
the foregoing; (d) by the Special Committe acting on behalf of the Company,
Purchaser shall have (A) failed to commence the Offer within 60 days following
the date of the Merger Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder or (C) failed to pay for Shares
pursuant to the Offer within 90 days following the commencement of the Offer,
unless such failure to pay for Shares shall have been caused by or resulted from
the failure of the Company to perform in any material respect any material
covenant or agreement of it contained in the Merger Agreement or the material
breach by the Company of any material representation or warranty of it contained
in the Merger Agreement; (e) prior to the purchase of Shares pursuant to the
Offer, by the Special Committee, acting on behalf of the Company, (i) if any
representation or warranty of Gambro, Parent or Purchaser was untrue or
incorrect in any material respect when made and on and as of the expiration of
the Offer, except for changes contemplated by the Merger Agreement, with the
same force and effect as if made on and as of the date of such expiration, or in
the case of a representation or warranty made or given as of a specified time,
if such representation or warranty was untrue or incorrect in any material
respect as of such time, or (ii) if Parent, Purchaser or Gambro has failed to
perform or comply with, in any material respect, any of their covenants and
agreements in the Merger Agreement; or (f) by either Parent, Purchaser or the
Special Committee, acting on behalf of the Company, if the conditions to the
Merger are not reasonably capable of being satisfied on or before March 31,
1996.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and there shall be no
liability thereunder on the part of any party thereto
16
except under the provisions of the Merger Agreement related to fees and expenses
described below and under certain other provisions of the Merger Agreement which
survive termination.
All fees, costs and expenses incurred in connection with the Merger
Agreement and the Transactions shall be paid by the party incurring such
expenses, whether or not any such transaction is consummated; provided, however,
that the Purchaser and the Company shall each pay for one-half of all fees,
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby which are payable to the Commission and to any
financial or other printer.
THE STOCK PURCHASE AGREEMENTS
COBE and the Company are parties to the Stock Purchase Agreements pursuant
to which COBE purchased from the Company, and the Company issued Shares to COBE.
Copies of the Stock Purchase Agreements are filed as an Exhibit hereto. Under
the Stock Purchase Agreements, so long as COBE owns a majority of the issued and
outstanding Common Stock, COBE may designate a majority of the members of the
Board. Under the Stock Purchase Agreements, COBE agreed that for five years
after May 24, 1991, the closing date of the purchase of Shares by COBE pursuant
to one of the Stock Purchase Agreements which was dated as of May 11, 1991, COBE
would not directly or indirectly, unless specifically requested to do so in
writing in advance by the Board, (i) acquire or agree, offer, seek or propose to
acquire, or cause to be acquired, beneficial ownership of any securities of the
Company, any debt claims of the Company, any securities convertible or
exchangeable into or exercisable into or exercisable for any securities or
assets of the Company, or any rights or options to acquire such ownership,
except pursuant to COBE's preemptive rights (described below); (ii) propose to
enter into any merger or business combination involving the Company, except and
unless the Company enters into a definitive agreement with a third party
contemplating a merger, consolidation or similar transaction in which all or a
majority of the Company's equity securities or substantially all of its assets
are to be acquired by such third party, in which case COBE may make a
Financially Superior Offer (as defined in such Stock Purchase Agreement); (iii)
make, directly or indirectly, any "solicitation" of "proxies" (as such terms are
used in the Exchange Act) to vote any securities of the Company; (iv) form, join
or participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any securities of the Company; (v) otherwise act,
alone or in concert with others, to seek to control or exercise (other than
through its representation on the Board) a controlling influence over the
management, Board or the business of the Company; (vi) call a meeting of the
Company's stockholders; and (vii) enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of the
foregoing.
The Stock Purchase Agreements provide that so long as COBE owns more than
15% of the then outstanding Shares, COBE shall, in the event the Company issues
Shares or any other voting securities, have the option to purchase from the
Company sufficient Shares or other voting securities to permit COBE to maintain
its percentage ownership of Shares or of the total voting power it had
immediately prior to such issuance. Furthermore, the Company is required to
notify COBE within 15 days of the end of each calendar quarter of the number of
Shares and the number of voting securities outstanding as of such date. In
general terms, at the end of each calendar quarter COBE has the option to
purchase from the Company additional Shares to the extent necessary to permit
COBE to maintain 50.1% of the Company's total voting power. The per Share
purchase price for such Shares shall be the average of the closing bid and asked
prices of the Shares on each day during such calendar quarter.
The Stock Purchase Agreements set forth a supply arrangement under which the
Company and its subsidiaries agreed to purchase a minimum of 75% of their
requirements for renal dialysis machines and all bloodlines used therewith from
COBE on overall terms and conditions no less favorable than those offered by
COBE to independent third parties. However, the 75% minimum specified above
shall be reduced to the extent that medical directors in charge of facilities
which have generated more than 25% of the Company's aggregate purchases of renal
dialysis machines have delivered written objections to
17
the use of such machines. Under the Stock Purchase Agreements, the foregoing
supply arrangement terminates on the earlier of (i) May 24, 1997, being the
sixth anniversary of the closing date of one of the Stock Purchase Agreements
which was dated as of May 11, 1991 or (ii) at such time that COBE owns less than
20% of the Shares for a period of 45 consecutive days after any calendar
quarter. During 1994, 1993 and 1992, the Company paid $7,845,189, $6,801,258 and
$3,071,739, respectively, for equipment and supplies received from COBE. The
Stock Purchase Agreements also provide that during the time that COBE owns 15%
or more of the Shares and for one year thereafter (i) COBE shall not, without
the Company's consent, engage in providing, or invest in any entity that
provides, renal dialysis services and related laboratory services in North
America within a 75 mile radius of the Company's existing facilities ("Existing
Regions") or in locations identified by the Company ("Identified Regions") as a
location of likely expansion, (ii) COBE shall disclose to the Company all
acquisition opportunities of renal dialysis services centers in North America
outside the Existing Regions and Identified Regions and shall engage in good
faith discussions with the Company regarding strategic business ventures
concerning such acquisition opportunities, provided, however, that the Company
shall not acquire such acquisition opportunities without COBE's written consent,
which consent shall be given if COBE is no longer actively pursuing such
acquisition opportunity, and (iii) COBE, the Company and their respective
affiliates shall not solicit or entice away any of their respective employees or
employ any such employee until one year after such employee leaves the employ of
such company or affiliate.
Under the Stock Purchase Agreements, COBE received two "demand" registration
rights and certain "piggyback" registration rights in respect of Shares, subject
to customary "cutbacks". Under the Stock Purchase Agreements, so long as
directors designated by COBE constitute a majority of the Board, no amendment to
any of the Stock Purchase Agreements will be effective unless it is approved by
a majority of the Company's directors who were not designated by COBE.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
The Company, acting through the Board acting upon the unanimous
recommendation of the Special Committee, has approved of and consented to the
Offer, and the Board, acting upon the unanimous recommendation of the Special
Committee, at a meeting duly called and held on September 12, 1995, has
unanimously (A) determined that the Merger Agreement and the transactions
contemplated thereby, including each of the Offer and the Merger, are fair to
and in the best interests of the holders of Shares, (B) approved and adopted the
Merger Agreement, the execution of the Merger Agreement and the transactions
contemplated by the Merger Agreement (which approval includes the approval of a
majority of the Company's disinterested directors, as required both by the
Tennessee Business Corporation Act and by Article X of the Company's By-laws),
and (C) recommended that the stockholders of the Company accept the Offer and
approve and adopt the Merger Agreement and the transactions contemplated
thereby.
In reaching its conclusions, the Special Committee considered a number of
factors (some of which had been discussed at earlier meetings), including,
without limitation, the following:
. The price of $20.00 per Share represents a substantial premium over the
market price of the Common Stock prior to the announcement of Cobe's
Proposal and was higher than the highest historical market price for the
Common Stock prior to such announcement.
. The fact that stock market prices, both for the Company and in the United
States in general, are at or near historic highs, indicating that the
timing of a transaction is not unfavorable for the minority stockholders.
. The Special Committee's perception, after consultation with its financial
advisors, that $20 per Share is, based on a number of tests, including a
comparison of recent comparable transactions involving the buy-out of
minority stockholders, a reasonable price for the minority stockholders'
Shares.
18
. The Special Committee's knowledge of the Company's business, measured
against the possibility of changes in the legal and regulatory climate in
the healthcare industry and other factors that might affect the Company's
business.
. The existence of the Standstill Provision prohibiting COBE and its
affiliates from purchasing Shares and a covenant not to compete with the
Company by COBE and its affiliates in the Stock Purchase Agreements,
Article X of the Company's By-laws (prohibiting a transaction between the
Company and an affiliate without the approval of a majority of
disinterested directors), the fact that the Standstill Provision will
expire on May 24, 1996 and that the Company's By-laws can be amended by
the holders of two-thirds of the Shares.
. The possibility that, because of a decline in the Company's business, the
trading price of the Shares or the stock market in general, the
consideration that the minority stockholders would obtain for their Shares
in a future transaction might be less advantageous than the consideration
they would receive pursuant to the Offer and the Merger.
. The opinion of Alex. Brown that the cash consideration to be received by
the stockholders of the Company other than Gambro, COBE, Purchaser and
their affiliates pursuant to the Merger Agreement was fair from a
financial point of view to such stockholders as of the date of the
opinion.
None of the factors considered by the Special Committee, including the
foregoing factors, was dispositive to the Special Committee's conclusions, nor
did the Special Committee assign any relative priority to the various factors
considered.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated as of August 10, 1995 (the "Engagement
Letter") between the Special Committee, the Company and Alex. Brown, the Company
paid Alex. Brown a fee of $100,000 in consideration of its services as the
Special Committee's financial advisor. The Company also agreed to pay Alex.
Brown an additional fee of $800,000 for its services as the Special Committee's
financial advisor upon the earlier to occur of (i) the conclusion of the Special
Committee's work with regard to the transaction proposed by COBE (regardless of
whether there was an agreement regarding any business combination transaction or
whether any business combination transaction was consummated) (ii) the execution
of a definitive agreement for a business combination transaction or (iii) 90
days from the date of the Engagement Letter. The Engagement Letter also provides
that if Alex. Brown is requested to deliver any additional opinions with respect
to amended or revised offers, the Company will pay Alex. Brown an additional fee
of $100,000 upon delivery of each such additional opinion. The Company also
agreed to indemnify and hold harmless Alex. Brown and each of its directors,
officers, agents, employees and controlling persons against any losses, claims,
damages or liabilities related to or arising out of Alex. Brown's engagement. If
such indemnification is not available, the Company agreed to contribute to the
losses, claims, damages or liabilities in proportion to the relative benefits
received by the Company and the party seeking contribution as well as in
proportion to the relative faults of the Company and the party seeking
contribution. The Company also agreed to pay all of Alex. Brown's reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel.
Neither the Company, nor any person acting on its behalf, currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
The Company, and to the best knowledge of the Company, none of its executive
officers, directors, affiliates or subsidiaries has effected any transaction in
the Company's securities in the past 60 days. To
19
the best knowledge of the Company, all of its executive officers, directors,
affiliates or subsidiaries who are also stockholders intend to either tender
their Shares in the Offer or vote in favor of the Merger.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------------- -------------------------------------------------------------------------
Exhibit 99(a)(1) Offer to Purchase dated September 19, 1995.
Exhibit 99(a)(2) Press Release dated September 13, 1995.
Exhibit 99(a)(3) Letter to Shareholders of the Company dated September 19, 1995.
Exhibit 99(c)(1) Agreement and Plan of Merger, dated as of September 12, 1995 among the
Company, Gambro, COBE and Purchaser.
Exhibit 99(c)(2) Stock Purchase Agreement, dated as of May 11, 1991, as amended, between
the Company and COBE.
Exhibit 99(c)(3) Stock Purchase Agreement, dated as of February 9, 1992, as amended,
between the Company and COBE.
Exhibit 99(c)(4) Stock Purchase Agreement, dated as of July 2, 1992, as amended, between
the Company and COBE.
20
SIGNATURE
After reasonable 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.
September 19, 1995 /s/ LAWRENCE J. CENTELLA
------------------ -------------------------------------------
(Date) Lawrence J. Centella
President and Chief Executive
Officer
21
ANNEX I
[ALEX. BROWN & SONS LETTERHEAD]
September 12, 1995
Special Committee of the
Board of Directors
REN Corporation--USA
6820 Charlotte Pike
Nashville, TN 37209
Dear Sirs:
REN Corporation--USA ("REN"), Gambro AB ("Gambro"), COBE Laboratories, Inc.,
a Colorado corporation and indirect wholly owned subsidiary of Gambro
("Parent"), and REN Acquisition Corp., a wholly owned subsidiary of Parent
("Purchaser"), have entered into an Agreement and Plan of Merger dated as of
September 12, 1995 (the "Agreement") pursuant to which Purchaser shall make a
tender offer (the "Offer") to purchase all the issued and outstanding shares of
common stock, no par value, of REN (the "Common Stock") at a price of $20.00 per
share, net to the seller in cash. The Agreement also provides that, following
the Offer, Purchaser shall be merged with and into REN (the "Merger"), and that
each then outstanding share of Common Stock, other than shares held by Parent,
Purchaser and their affiliates, will be converted into the right to receive
$20.00 in cash. You have requested our opinion regarding the fairness, from a
financial point of view, of the cash consideration to be received by the
stockholders of REN, other than Gambro, Parent, Purchaser and their affiliates,
pursuant to the Agreement.
Alex. Brown & Sons Incorporated, as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements, and valuations for corporate
and other purposes. We have served as financial advisor to the Special Committee
of the Board of Directors of REN in connection with the transaction contemplated
by the Agreement and will receive a fee for our services. We regularly publish
research reports regarding the health care industry and the businesses and
securities of publicly owned companies in that industry.
In connection with this opinion, we have reviewed the Agreement and certain
publicly available financial information concerning REN. We have reviewed
certain internal financial analyses of REN made available to us by the
management of REN and have held discussions with members of the senior
management of REN regarding the business and prospects of REN. In addition, we
have (i) reviewed the reported price and trading activity for the Common Stock
of REN, (ii) compared certain financial and stock market information for REN
with similar information for certain other companies whose securities are
publicly traded, (iii) reviewed the financial terms of certain recent business
combinations, and (iv) performed such other studies and analyses and took into
account such other matters as we deemed necessary.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for purposes of this
opinion. With respect to the financial projections used in our analyses, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the REN senior management as to
the likely future performance of REN. In addition, we have not made an
independent valuation or appraisal of the assets of REN, nor have we been
furnished with any such valuation or appraisal. We have relied, with your
permission, on the statement made by Parent that Parent would not consent to the
sale of REN and we were not requested or authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Common
Stock, REN or any of its constituent businesses. Our opinion
is based on market, economic, financial and other conditions as they exist and
can be evaluated as of the date of this letter.
It is understood that this letter is for the benefit and use of the Special
Committee of the Board of Directors of REN only and may not be used for any
other purpose without our prior written consent, provided, however, that we
hereby consent to the inclusion of this opinion in any offer to purchase,
Schedule 14D-9, Schedule 13E-3 or proxy statement used in conjunction with the
Offer or the Merger.
Based on the analysis described above and subject to the foregoing
limitations and qualifications, it is our opinion that the cash consideration to
be received by the stockholders of REN other than Gambro, Parent, Purchaser and
their affiliates pursuant to the Agreement is fair from a financial point of
view to such stockholders as of the date of delivery of this letter.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
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