Filed by aaiPharma Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: aaiPharma Inc.
Commission File No. 0-21185
Subject Company: CIMA LABS INC.
Commission File No. 0-24424
In connection with a proposed business combination transaction, Scarlet
Holding Corporation, the holding company in the proposed transaction, intends to
file with the Securities and Exchange Commission (the "SEC") a registration
statement on Form S-4 that will include a joint proxy statement/prospectus and
other relevant documents in connection with the proposed transaction. Investors
of aaiPharma Inc. ("aaiPharma") and CIMA LABS INC. ("Cima") are urged to read
the joint proxy statement/prospectus and other relevant materials when they
become available because they will contain important information about Scarlet
Holding Corporation, aaiPharma and Cima and the proposed transaction. Investors
may obtain a free copy of these materials (when they are available) and other
documents filed by the Holding Company, aaiPharma and Cima with the Securities
and Exchange Commission at the SEC's website at www.sec.gov. A free copy of the
joint proxy statement/prospectus, when it becomes available, also may be
obtained from aaiPharma Inc., 2320 Scientific Park Drive, Wilmington, North
Carolina 28405 or CIMA LABS INC., 10000 Valley View Road, Eden Prairie,
Minnesota 55344. Investors also may access free copies of the documents filed
with the SEC by aaiPharma on aaiPharma's website at www.aaiPharma.com or upon
written request to aaiPharma at its address listed above, and investors may
access free copies of the documents filed with the SEC by Cima on Cima's website
at www.cimalabs.com or upon written request to Cima at its address indicated
above.
aaiPharma, Cima and their respective directors, executive officers and
certain other members of management and employees may be soliciting proxies from
their respective stockholders in favor of the proposed business combination.
Information regarding the persons who may, under the rules of the SEC, be
considered to be participants in the solicitation of aaiPharma's stockholders in
connection with the proposed merger is set forth in aaiPharma's proxy statement
for its 2003 annual meeting, dated April 8, 2003 and filed with the SEC on April
11, 2003, and information regarding the persons who may, under the rules of the
SEC, be considered to be participants in the solicitation of Cima's stockholders
in connection with the proposed transaction is set forth in Cima's proxy
statement for its 2003 annual meeting, dated April 14, 2003 and filed with the
SEC on April 11, 2003. Additional information about these persons is contained
in the Current Reports on Form 8-K filed by aaiPharma and Cima on August 5,
2003.
Additional information regarding these individuals and any interest
they have in the proposed transaction will be set forth in the joint proxy
statement/prospectus when it is filed with the SEC.
Set forth below are written materials relating to the merger first
published on or after the date hereof. These materials contain forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These statements are based on the
current expectations and beliefs of the management of aaiPharma and Cima and are
subject to a number of factors and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements. The
forward-looking statements contained in these materials include statements about
future financial and operating results, synergies and the proposed merger of
aaiPharma and Cima. These statements are not guarantees of future performance,
involve certain risks, uncertainties and assumptions that are difficult to
predict, and are based upon assumptions as to future events that may not prove
accurate. Therefore, actual outcomes and results may differ materially from what
is expressed therein.
Risks and uncertainties pertaining to the following factors, among
others, could cause actual results to differ materially from those described in
the forward-looking statements: the ability of aaiPharma and Cima to obtain the
stockholder and regulatory approvals required for the merger; the new company's
ability to successfully integrate the businesses of the two companies;
unexpected costs involved in the merger or in the new company's ability to
achieve cost-cutting synergies; the impact of uncertainty surrounding the merger
on the businesses of the two companies; the impact of competition, new data,
supply issues or marketplace trends on the market for the companies' products;
deterioration in the business of aaiPharma or Cima prior to closing; technical,
regulatory or manufacturing issues, new data or intellectual property disputes
that may affect the companies' programs; the ability of the new company to
develop and market products in a timely manner; and difficulties in gaining
approval of new products. Additional economic, business, competitive and/or
regulatory factors affecting aaiPharma's and Cima's businesses generally that
may cause actual results to differ materially are discussed in their respective
filings with the SEC, including their Annual Reports on Form 10-K for the fiscal
year ended December 31, 2002, especially in the Management's Discussion and
Analysis section, their most recent Quarterly Reports on Form 10-Q and their
Current Reports on Form 8-K. aaiPharma and Cima do not undertake any obligation
to (and expressly disclaim any such obligation to) update or alter their
forward-looking statements, whether as a result of new information, future
events or otherwise.
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EXTERNAL WEB SITE FAQS:
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TRANSACTION SPECIFICS
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1. WHAT ARE THE TERMS OF THE TRANSACTION?
Under terms of this transaction, each outstanding share of aaiPharma
stock will be exchanged for 1.0 share of the new holding company; each
outstanding share of CIMA stock, will be exchanged for 1.3657 shares of
the new holding company.
2. WHAT WILL BE THE OWNERSHIP OF THE COMBINED COMPANY?
aaiPharma stockholders would own 59.4% of the stock of the combined
company, and CIMA stockholders would own 40.6% of the stock of the
combined company.
3. WHAT WILL BE THE NAME OF THE COMBINED COMPANY?
The name of the new company will be determined before closing. We are
engaging a branding firm to help determine the name of the combined
company.
4. WHEN WILL THE DEAL CLOSE?
The companies must receive both regulatory and stockholder approval
before the transaction can close. Provided there are no unforeseen
delays, we expect the transaction to close by the end of 2003.
5. ARE THERE ANY STOCKHOLDER APPROVALS REQUIRED?
Yes. Both aaiPharma and CIMA stockholder approvals are required. We
expect to submit the merger for a vote in the fourth quarter.
6. IS REGULATORY APPROVAL REQUIRED?
Hart-Scott-Rodino and other customary regulatory notifications will be
filed in the U.S., as well as in certain foreign jurisdictions. We
believe that our businesses are complementary rather than competitive,
and we will work to obtain antitrust clearance as quickly as possible.
7. ARE THERE ANY ANTITRUST CONCERNS?
There have been no antitrust concerns communicated to us. We believe
that our businesses are complementary rather than competitive and we
will work to obtain antitrust clearance as quickly as possible.
8. HAS DUE DILIGENCE BEEN COMPLETED?
Yes. Both companies and their advisors have completed extensive and
detailed due diligence over the past several months including detailed
reviews in such areas as: commercial, finance, accounting, legal,
regulatory, research and operations.
9. WHAT WAS INVOLVED IN DUE DILIGENCE BY BOTH COMPANIES? MANAGEMENT
PRESENTATIONS? REVIEW OF THE OTHER COMPANY'S PIPELINE?
Diligence was conducted over several months. In addition to diligence
in areas such as finance, accounting, legal and regulatory, senior
management teams from both companies and their advisors worked together
to fully understand the two businesses, their capabilities, their
products and their prospects.
10. WHAT IS THE EXPECTED CALENDAR OF MILESTONES LEADING TO COMPLETION OF
THE MERGER?
-- Hart-Scott-Rodino and other required competition regulatory
filings are expected to be made promptly
-- We expect the S-4 to be filed by the end of the third quarter
2003
-- Stockholder approvals and closing is expected by the end of
the fourth quarter 2003
11. IS THIS A MERGER OR AN ACQUISITION?
This is a merger in which a new holding company will be created that
includes management from both companies.
12. ARE THERE ANY CHANGE-OF-CONTROL PAYMENTS AS A RESULT OF THIS MERGER?
The merger will trigger an obligation of aaiPharma to tender for its
outstanding bonds at a price equal to 101% of principal. The bonds are
currently trading at a significantly higher price
While stock options at both companies will vest as a result of the
merger, we do not foresee any significant change-of-control payments to
executives or other employees at this time.
13. ARE THERE ANY SHOP AND BREAKUP PROVISIONS IN THE DEAL?
Yes, the merger agreement limits each company's ability to solicit a
competing transaction and provides for a $11.5 million break-up fee if
the merger agreement is terminated to allow a company to pursue a
competing transaction. A copy of the merger agreement will soon be
filed by each company on SEC Form 8-K.
14. WHO ARE THE COMPANIES' ADVISORS?
Banc of America Securities provided financial advice to AaiPharma and
Deutsche Bank served as the advisor to CIMA. Robinson, Bradshaw &
Hinson provided legal advice to aaiPharma, and Latham & Watkins and
Faegre & Benson provided legal advice to CIMA.
15. ARE THERE WALKAWAY PROVISIONS?
There are reciprocal termination provisions standard for transactions
of this type, and in various circumstances termination may trigger a
termination payment. A copy of the merger agreement will soon be filed
by each company on SEC Form 8-K.
16. WHAT IS THE RATIONALE FOR THE MERGER?
The merger will accelerate both companies' strategies to develop,
enhance and commercialize proprietary pharmaceutical brands. By
combining aaiPharma's strong branded product portfolio and robust
pipeline with CIMA's pipeline and established proprietary technology,
including its orally disintegrating tablet (ODT) drug delivery
portfolio, the new company will be a more powerful, science-based
specialty pharmaceutical company. With a strong balance sheet, an
estimated $30 million in R&D spending and increased state-of-the-art
manufacturing capacity, the results of this merger will significantly
advance the long-term growth potential of both entities.
17. WHAT ARE THE BENEFITS OF HAVING A HIGHER MARKET CAP?
There are several benefits to having a higher market cap such as a more
diverse portfolio, more resources to invest into R&D and better return
on investment ratio. Importantly, with a higher market cap, we believe
that the combined company will be an attractive investment to a much
broader group of both small and midcap investors.
18. WHAT IS THE FINANCIAL IMPACT (ACCRETION/DILUTION) TO CIMA'S
STOCKHOLDERS?
The merger is expected to be immediately accretive to CIMA
stockholders. Accretion per diluted share is estimated to be $0.36 and
$0.35 in 2004 and 2005, respectively.
19. WHAT IS THE FINANCIAL IMPACT (ACCRETION/DILUTION) TO AAIPHARMA
STOCKHOLDERS?
The merger is expected to be dilutive to aaiPharma stockholders in 2004
and 2005, and accretive thereafter. Dilution to aaiPharma's earnings
per diluted share is estimated to be $0.16 and $0.18 in 2004 and 2005,
respectively.
20. WHAT WILL BE THE COMBINED COMPANY'S BOARD MAKEUP?
The Board of Directors of the combined company will consist of 8
members at closing comprised of four members from each of aaiPharma's
and CIMA's current Boards.
21. WHO WILL BE RESPONSIBLE FOR RUNNING THE COMBINED COMPANY?
Fred Sancilio, Ph.D., Chairman and CSO of aaiPharma, will become
Chairman of the combined company.
Steve Ratoff, the Interim CEO of CIMA, will become Vice Chairman of the
combined company.
Phil S. Tabbiner, President and CEO of aaiPharma, will become the
President and CEO of the combined company.
22. WHAT WILL BE THE COMBINED FINANCIAL PROFILE OF THE COMBINED COMPANY?
Combined pro forma 2003 revenue of $350 to 365 million.
Combined operating income of $90 to $95 million
Strong balance sheet with more than $50 million in cash and $175
million in long term debt
23. WHAT WILL BE THE R&D BUDGET FOR THE COMBINED COMPANY IN THE FIRST FULL
YEAR OF OPERATION?
We expect that the R&D budget for the first full year will be
approximately $30 million.
24. WILL THERE BE GOODWILL? HOW WILL THE EXCESS PURCHASE PRICE BE WRITTEN
OFF?
This transaction will be accounted for under the new purchase
accounting rules adopted in 2001. Thus, goodwill will be created,
although not amortized.
25. WHERE WILL THE COMPANY'S HEADQUARTERS BE LOCATED?
The new company will be headquartered in Wilmington, NC. We will
maintain both of CIMA's laboratory and manufacturing facilities in
Minnesota.
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The following notice was sent to all Cima employees via email on behalf of James
C. Hawley, Vice President, Chief Financial Officer and Secretary of Cima.
Subject: Merger/Acquisition News Link on CIMA Web Site
There has been a link set up on our CIMA home page for news related to the
aai/CIMA merger.
To access this please go to the CIMA home page at www.cimalabs.com and click on
the CIMA/aaiPharma Merger news link.
Thank you
Diane Keith for Jim Hawley