SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
TRIAD HOSPITALS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[LOGO]Triad [LOGO]Quorum
Supplement to the Joint Proxy Statement/Prospectus
for the
Special Meeting of Stockholders of Special Meeting of Stockholders of
Triad Hospitals, Inc., Quorum Health Group, Inc.,
to be held at 10:00 a.m., local time, to be held at 9:00 a.m., local time,
on April 26, 2001, at on April 26, 2001, at
Four Seasons Hotel Homewood Suites Hotel
57 East 57th Street 5107 Peter Taylor Park
New York, New York 10022 Brentwood, Tennessee 37027
You recently received a joint proxy statement/prospectus dated March 19,
2001 in connection with the solicitation of proxies by the Triad and Quorum
boards of directors to be used at the special meetings of Triad and Quorum
stockholders. As you know, the Agreement and Plan of Merger between Triad and
Quorum will be considered at these special meetings. We are providing this
joint proxy statement/prospectus supplement to supplement the information
contained in the joint proxy statement/prospectus dated March 19, 2001. This
supplement should be read in conjunction with that document. If you need
another copy of the joint proxy statement/prospectus, Triad stockholders can
call Georgeson Shareholder Communications at 1 (800) 809-5938 and Quorum
stockholders can call Morrow & Co., Inc. at 1 (800) 607-0088.
Included with this supplement is another proxy card for your use if you
have already voted and you wish to change your vote or revoke your proxy in
accordance with the instructions set forth below under "Voting Procedures." If
you do not wish to change your vote or revoke your proxy, no action is required
by you in connection with this supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon
the adequacy or accuracy of the joint proxy statement/prospectus or this
supplement thereto. Any representation to the contrary is a criminal
offense.
This joint proxy statement/prospectus supplement is dated April 13, 2001,
and is first being mailed to the stockholders of Triad and the stockholders of
Quorum on or about April 14, 2001.
Legal Proceedings Regarding the Merger
On October 20, 2000, a purported class action, Samuel Brand v. Colleen
Conway Welch, et al., Case No.: OCC-3066, was filed against Triad and members
of the board of directors of Quorum in the Circuit Court of Davidson County,
Tennessee, on behalf of all public stockholders of Quorum. The complaint
alleges, among other things, that Quorum's directors breached their fiduciary
duties to Quorum and its stockholders in agreeing to the merger at an unfair
price. Triad and Quorum believe the claims asserted in the complaint are
without merit.
In March 2001, plaintiff informed the Court of his intention to seek a
preliminary injunction preventing consummation of the merger. On March 16, the
Court scheduled a hearing for April 17-18, 2001 on plaintiff's motion for a
preliminary injunction. The parties subsequently negotiated a settlement that
will result in the dismissal of the action. The settlement is subject to a
number of conditions, including completion of definitive documentation relating
to the settlement, consummation of the merger and Court approval. The
settlement provides, among other things, that Triad and Quorum amend the merger
agreement and disclose certain of the other matters described in this
supplement.
Amendments to the Merger Agreement
The joint proxy statement/prospectus is supplemented to provide the
following additional information:
On April 13, 2001, Triad and Quorum amended the merger agreement to reduce
the termination fee payable by Quorum pursuant to Section 10.3(b) of the merger
agreement from $75 million to $55 million and the termination fee payable by
Quorum pursuant to Section 10.3(d) of the merger agreement from $20 million to
$15 million. The circumstances under which these fees are payable are described
in the joint proxy statement/prospectus under the caption "The Merger
Agreement--Termination of the Merger Agreement."
Selected Market Prices of Triad and Quorum Common Stock
The joint proxy statement/prospectus is supplemented to provide the
following additional information:
On October 18, 2000, the last full trading day before Triad and Quorum
publicly announced the execution of the merger agreement, the last reported
closing prices per share of Triad and Quorum common stock were $30.75 and
$13.625, respectively. Based on the closing price of Triad common stock on that
date, the $3.50 in cash and .4107 of a share of Triad common stock yield an
implied value of the merger consideration to Quorum stockholders of $16.13 per
share as of that date.
On April 12, 2001, the most recent practicable date prior to the mailing of
this supplement, the last reported closing prices per share of Triad and Quorum
stock were $28.10 and $14.81, respectively. Based on the closing price of Triad
common stock on that date, the $3.50 in cash and .4107 of a share of Triad
common stock yield an implied value of the merger consideration to Quorum
stockholders of $15.04 per share as of that date.
Stockholders are urged to obtain current market quotations prior to making
any decision with respect to the merger.
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Recent Developments
The joint proxy statement/prospectus is supplemented to amend and restate
the information contained in the second paragraph under the caption "Amendment
to the Triad 1999 Long-Term Incentive Plan" as follows:
On March 13, 2001, Triad's board of directors amended the plan, subject to
stockholder approval, to increase the number of shares of common stock
authorized for issuance under the plan to 14,000,000 from 6,500,000. This
increase is necessary to allow Triad to continue to provide appropriate equity
incentives to an eligible employee group that will increase significantly as a
result of the merger of Quorum into Triad. In the event stockholder approval of
this amendment is not obtained, Triad will not increase the number of shares
authorized for issuance under the plan, but awards of the approximately 375,000
shares of common stock currently available under the plan may continue to be
made under the previously existing terms of the plan. In addition, on April 13,
2001, the plan was amended to provide that no more than 5% of the 7,500,000
additional shares authorized for issuance may be used for awards other than
options (such as Restricted Stock and Stock Appreciation Rights) and that
options granted after the date that stockholder approval of these amendments is
obtained may not be repriced unless further stockholder approval is obtained
for the repricing.
The joint proxy statement/prospectus is supplemented to amend and restate
the information contained under the caption "The Proposed Merger--Recent
Developments," as follows:
Quorum Health Resources
After entering into the merger agreement, Triad engaged its financial
advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to assist it in
exploring strategic alternatives with respect to Quorum Health Resources, Inc.,
including a possible sale. Triad's financial advisor contacted a number of
parties to explore their interest in acquiring Quorum Health Resources and
received several indications of interest. Among the parties submitting
indications of interest in such a transaction were Welsh, Carson, Anderson &
Stowe IX, L.P. (of which Russell L. Carson, chairman of the Quorum board of
directors, is a general partner) and Joseph C. Hutts (a director of Quorum).
Triad believes that the aggregate value to be received for Quorum Health
Resources would be approximately $170 million. There are no ongoing
negotiations with respect to a transaction involving Welsh, Carson, Anderson &
Stowe IX, L.P. We cannot state whether any agreement for a transaction
involving Quorum Health Resources will be reached, what the purchase price,
form of consideration and other terms and structure of any transaction would
be, or when any such transaction would occur, if at all.
Quorum Health Resources contributed:
. $142.4 million of Quorum's $1,762.8 million net operating revenue for
the fiscal year ended June 30, 2000, and $72.2 million of Quorum's
$912.6 million net operating revenue for the six months ended December
31, 2000; and
. $29.9 million of Quorum's $288.2 million EBITDA for the fiscal year
ended June 30, 2000, and $15.8 million of Quorum's $140.4 million
EBITDA for the six months ended December 31, 2000.
Sale of Certain Quorum Facilities
Triad has agreed to sell UniMed Medical Center, with locations in Minot and
Kenmare, North Dakota, to Trinity Health for a purchase price of approximately
$38 million. These facilities are owned by Quorum. Triad expects to complete
the transaction concurrently with the merger.
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Listing of Triad Common Stock
Triad common stock is traded on the Nasdaq National Market under the ticker
symbol "TRIH." Triad has applied for listing of its common stock on the New
York Stock Exchange, and intends that its shares will begin trading on the NYSE
under the symbol "TRI" soon after the merger, on a date to be determined. We
cannot assure you as to when or whether Triad common stock will be traded on
the NYSE.
Qui Tam estimates and other charges; pro forma results
Based on continuing due diligence and discussions with various parties
including the Department of Justice, Triad expects that the estimate of the
liability for Quorum's qui tam lawsuits will be increased by approximately $16
million prior to or upon consummation of the merger. In addition, during the
quarter in which the merger occurs, Triad expects to record a charge of
approximately $20 million to $30 million associated with coordinating Quorum's
accounting policies, practices and estimation processes with those of Triad.
Triad will continue to evaluate the Quorum qui tam lawsuits and other items,
including receipt of fixed asset appraisals, associated with the merger and
appropriately reflect the amounts in accordance with applicable purchase
accounting or other accounting principles, which may result in additional
charges.
As a result of changed market conditions and negotiations with its lenders,
Triad estimates that the approximately $1.6 billion in borrowings it will incur
in connection with the merger will bear interest at an estimated composite
annual rate of approximately 8.7%, as compared to the estimated composite
annual rate of approximately 10.3% reflected in the unaudited pro forma
condensed combined financial statements and other pro forma financial
information included in the joint proxy statement/prospectus. After giving
effect to this revised estimated composite annual rate, on a pro forma basis
for the twelve months ended December 31, 2000:
. Interest expense, net, would decrease to $174.1 million from $200.0
million;
. Loss before income tax provision would decrease to $36.8 million from
$62.7 million;
. Income tax provision would decrease to $1.4 million from $11.5 million;
. Net loss would decrease to $35.4 million (or $0.52 per share on a basic
and diluted basis) from $51.2 million (or $0.75 per share on a basic
and diluted basis); and
. the amount by which earnings were insufficient to cover fixed charges
would decrease to $25.8 million from $51.7 million.
Opinion of Quorum's Financial Advisor Goldman Sachs
The joint proxy statement/prospectus is supplemented to provide the
following additional information:
As described more fully in the joint proxy statement/prospectus under the
caption "The Proposed Merger--Opinion of Quorum's Financial Advisor--Goldman
Sachs," the board of directors of Quorum received an opinion of its financial
advisor, Goldman, Sachs & Co., dated October 18, 2000, the date of the merger
agreement, as to the fairness, from a financial point of view, of the $3.50 in
cash and the stock consideration to be received by the holders (other than
Triad and its subsidiaries) of Quorum common stock in the merger. The opinion
of Goldman Sachs was expressed as of the date rendered and was based upon and
subject to the considerations and assumptions expressed therein, which are
summarized in the joint proxy statement/prospectus.
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Goldman Sachs confirmed its opinion, dated October 18, 2000, by delivering
a written opinion, dated the date hereof, to the Quorum board of directors to
the effect that, as of the date of this document, and based upon and subject to
the considerations set forth in its opinion, the $3.50 in cash and the stock
consideration to be received by the holders (other than Triad and its
subsidiaries) of Quorum common stock in the merger is fair, from a financial
point of view, to such holders. In connection with its opinion, dated the date
of this document, Goldman Sachs reviewed the assumptions used in its analyses
and the factors considered in connection with its opinion dated October 18,
2000 (which analyses and related disclosures are set forth in the joint proxy
statement/prospectus under the caption "The Proposed Merger--Opinion of
Quorum's Financial Advisor--Goldman Sachs") and held discussions with members
of the management of Quorum and Triad regarding the past and current business
operations, financial condition and future prospects of their respective
companies. Goldman Sachs will receive no additional fee for the written opinion
dated the date hereof delivered to the Quorum board of directors.
The full text of the Goldman Sachs opinion dated the date of this document,
which sets forth the assumptions made, the procedures followed, matters
considered, and limits on the review undertaken, is attached as Annex A to this
supplement and is incorporated herein by reference. The Goldman Sachs opinion
was provided to the Quorum board of directors for its information and
assistance, is directed only to the fairness, from a financial point of view,
of the $3.50 in cash and the stock consideration to the holders (other than
Triad and its subsidiaries) of Quorum common stock and does not constitute a
recommendation to any Quorum stockholder as to how such stockholder should vote
at the Quorum special meeting of stockholders with respect to the merger or any
other matter related thereto. The description of the Goldman Sachs opinion set
forth herein is qualified in its entirety by reference to Annex A. Quorum
stockholders are urged to read the Goldman Sachs opinion in its entirety.
* * *
Each of the Boards of Directors of Triad and Quorum unanimously recommends
to its respective stockholders that they vote "FOR" approval and adoption of
the merger agreement, as amended, and the merger.
IMPORTANT
If you have not done so, please complete, sign and date your proxy card and
return it, or vote by telephone or through the Internet, as soon as possible.
Voting Procedures
Enclosed with this supplement is an additional proxy card (and a return
envelope) for your use. If you have already voted and you do not wish to change
your vote, you do not need to return this second proxy card. If you have
already voted and you wish to change your vote, you can do so at any time
before your proxy is voted at your company's stockholder meeting. You can
change your vote in one of three ways:
. timely delivery of a valid, later-dated proxy, including a proxy given
by telephone or Internet;
. written notice to your company's Secretary before the special meeting
that you have revoked your proxy; or
. voting in person at your company's special meeting.
If you have instructed a broker to vote your shares, you must follow directions
from your broker to change those instructions.
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If you have not already voted, you may use either the proxy card originally
sent to you or the proxy card included with this supplement. You do not need to
return both proxy cards. You may also vote by telephone or through the
Internet. To vote by telephone or through the Internet, you should follow the
instructions contained on the enclosed proxy card. Votes cast by telephone or
the Internet must be submitted prior to 11:59 p.m. on Wednesday, April 25, 2001
(the day prior to the date of the special meetings) in order to be counted.
If you properly give your proxy and submit it in time to vote, one of the
individuals named as your proxy will vote your shares as you have directed. You
may vote for or against the proposals or abstain from voting. If you submit
your proxy but do not make specific choices, the person named as your proxy
will follow the respective board of directors recommendations and vote your
shares in favor of the matters to be voted upon at your special meeting,
including approval of the merger and the merger agreement, as amended.
To obtain more information or to request an additional copy of the joint
proxy statement/prospectus:
. Triad stockholders can call Georgeson Shareholder Communications at 1
(800) 809-5938 or Triad's Investor Relations at (972) 789-2700; and
. Quorum stockholders can call Morrow & Co., Inc. at 1 (800) 607-0088 or
Quorum's Assistant Corporate Secretary, Gayle Jenkins, at (615) 371-
7979.
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Annex A
[GOLDMAN SACHS LOGO]
PERSONAL AND CONFIDENTIAL
April 13, 2001
Board of Directors
Quorum Health Group, Inc.
103 Continental Place
Brentwood, TN 37027
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders (other than Triad, as defined below, and its subsidiaries)
of the outstanding shares of Common Stock, par value $0.01 per share (the
"Shares"), of Quorum Health Group, Inc. (the "Company") of the Consideration
(as defined below) to be received by such holders pursuant to the Agreement and
Plan of Merger, dated as of October 18, 2000, between Triad Hospitals, Inc.
("Triad") and the Company, as amended by Amendment No. 1, dated as of April 13,
2001 (as so amended, the "Agreement"). Pursuant to the Agreement, the Company
will be merged with and into Triad and each outstanding Share (other than those
held by Triad and its subsidiaries) will be converted into the right to receive
0.4107 of a share (the "Stock Consideration") of Common Stock, par value $0.01
per share (the "Triad Shares"), of Triad and $3.50 in cash (the "Cash
Consideration"; together with the Stock Consideration, the "Consideration").
Also pursuant to the Agreement, in the event that the average closing price of
a Triad Share as reported on National Association of Securities Dealers
Automated Quotation System for the twenty trading days ending five business
days prior to the Company Stockholder Meeting, as defined in the Agreement (the
"Meeting Price"), is less than $21.00, the Company will have the right to give
Triad notice of its intention to terminate the Agreement; provided, however,
that if the Company gives such notice, Triad shall have the right to increase
the cash to be paid to Company shareholders pursuant to the Agreement by an
amount equal to the product of (x) the difference between $21.00 and the
Meeting Price and (y) 0.4107. In such event, if Triad does not so exercise this
right, the Company shall have the right to terminate the Agreement pursuant to
its terms.
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Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having acted as lead manager on an
offering of $150 million aggregate principal amount of 8 3/4% Senior Notes of
the Company due 2005, in November 1995; having acted as lead agent for the
Company in tendering for $97.8 million of its $100 million aggregate principal
amount of 11 7/8% Senior Subordinated Notes due 2002, in May 1997; and as
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. Thomas S. Murphy, Jr., a Managing
Director of Goldman, Sachs & Co., is a director of the Company. We also have
provided certain investment banking services to Triad from time to time,
including having acted as joint book-running lead manager on a offering of $325
million aggregate principal amount of 11% Senior Subordinated Notes due 2009 of
Triad, in April 1999. Goldman, Sachs & Co. also acted as financial advisor to
HCA--The Healthcare Company, formerly known as Columbia/HCA ("HCA"), in the
spin-off of Triad from HCA in May 1999, and may provide investment banking
services to Triad in the future. Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
positions in securities, including derivative securities, of the Company or
Triad for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Registration Statement on Form S-4 of Triad dated March 15, 2001 and the
related Joint Proxy Statement/Prospectus, dated March 19, 2001, relating to the
special meetings of stockholders of the Company and Triad to be held in
connection with the Agreement, and the Supplement to the Joint Proxy
Statement/Prospectus, dated the date hereof; the Agreement; the Annual Reports
to Stockholders and Annual Reports on Form 10-K of the Company for the five
fiscal years ended June 30, 2000; the Annual Report to Stockholders and Annual
Report on Form 10-K of Triad for the two years ended December 31, 2000; the
Registration Statement on Form 10 of Triad dated April 27, 1999; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and Triad; certain other communications from the Company and Triad to
their respective stockholders; certain internal financial analyses and
forecasts for the Company prepared by the management of the Company (the
"Company Forecasts"); certain internal financial analyses and forecasts for
Triad prepared by the management of Triad, as well as those forecasts as
adjusted by the management of the Company (the "Adjusted Triad Forecasts"); and
certain cost savings projected by the management of the Company to result from
the transaction contemplated by the Agreement (the "Synergies"). We also have
held discussions with members of the senior management of the Company and Triad
regarding their assessment of the strategic rationale for, and the potential
benefits of, the transaction contemplated by the Agreement and the past and
current business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for the Shares and the Triad Shares, compared certain
financial and stock market information for the Company and Triad with similar
information for certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business combinations in
the healthcare services industry specifically and in other industries generally
and performed such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard we have assumed, with your consent, that the Adjusted Triad Forecasts
and the Synergies have been reasonably prepared (or adjusted, as the case may
be) on a basis reflecting the best currently available estimates and judgments
of the Company. We also have
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taken into account the view of the Company's management of the risks and
uncertainties relating to the Company's ability to achieve the Company
Forecasts in the amounts and time periods contemplated thereby. We also have
assumed that all material governmental, regulatory or other consents and
approvals, including the receipt of the private letter ruling from the Internal
Revenue Service contemplated by the Agreement, necessary for the consummation
of the transaction contemplated by the Agreement will be obtained without any
adverse effect on the Company or Triad or on the contemplated benefits of the
transaction contemplated by the Agreement. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the
Company or Triad or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board
of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Shares should vote with respect to
such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Consideration to be received by the holders of Shares (other than Triad and its
subsidiaries) pursuant to the Agreement is fair from a financial point of view
to such holders.
Very truly yours,
/s/ Goldman, Sachs & Co.)
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(GOLDMAN, SACHS & CO.)
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