Exhibit 99
MAGELLAN NEWS RELEASE
HEALTH SERVICES
6950 Columbia Gateway Drive
Columbia, MD 21046
www.magellanhealth.com
FOR IMMEDIATE RELEASE
- --------------------- TEXAS PACIFIC CONTACT: Owen Blicksilver
212-419-4283
MAGELLAN INVESTOR CONTACT: Kevin Helmintoller
410-953-1218
MAGELLAN MEDIA CONTACT: Christine Verdon
410-953-2423
MAGELLAN HEALTH SERVICES ENTERS INTO
STRATEGIC PARTNERSHIP WITH TEXAS PACIFIC GROUP
TPG TO INVEST IN MAGELLAN AND JOIN BOARD OF DIRECTORS
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COLUMBIA, Md. -- July 19, 1999 -- Magellan Health Services, Inc. (NYSE:MGL)
today announced that it has signed an investment agreement with Texas Pacific
Group (TPG) whereby TPG will invest approximately $75 million in cumulative
convertible preferred stock of Magellan Health Services. Magellan and TPG
have established the framework for an additional investment by TPG of up to
$70 million, subject to mutual agreement between Magellan and TPG regarding
the terms of the investment. Additionally, TPG has the right to increase its
ownership in Magellan by up to 10% through share purchases in the open market.
Henry Harbin, president and CEO of Magellan Health Services said, "We
are pleased to bring on TPG as our partner. Their financial and healthcare
expertise will serve us well, as we continue to improve the company's
financial position and strategic focus."
Harbin continued, "Management and TPG share a common vision for
Magellan's future, which centers around continuous improvement of our leading
expertise and position in the behavioral managed care segment and focused
growth in our specialty managed care segment. With TPG's help, we will
continue to push forward on our plan to further improve our balance sheet
while we continue to integrate acquisitions that are strategic and beneficial
to our long-term growth plan. While the investment will be dilutive to
earnings per share, TPG's investment, along with continued disposition of
non-core assets, will strengthen our financial flexibility and further
position us for growth."
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Jonathan Coslet, senior partner of Texas Pacific Group, added, "Magellan
has developed a unique platform in the behavioral managed care market.
Consolidation of its recent acquisitions is going well, and the company is
really starting to leverage the combined resources and expertise. We also are
very excited about the approach Magellan is taking in the specialty managed
care market. The company understands how to add value to its payor customers,
while maintaining high levels of care."
The $75 million investment by TPG is made up of approximately $59
million of Series A cumulative convertible preferred stock and approximately
$16 million of Series B cumulative convertible preferred stock. The Series A
cumulative convertible preferred stock will have 6.3 million "as converted"
voting rights and a cumulative dividend of 6.5%, which will be payable at
Magellan's option in cash, additions to the stated value of the Series A or,
subject to certain conditions, common stock. The conversion price on the
Series A cumulative convertible preferred stock of $9.375 represents an
approximate 21% premium over the last 90 days trading average of the
Company's common stock. Completion of the Series B investment and the terms
of such investment are subject to a Magellan shareholder vote. Upon
shareholder approval, the Series B will have 1.7 million "as converted"
voting rights giving TPG a total of approximately 20% of the voting rights of
Magellan.
Under the agreement, TPG will also get three board seats on Magellan's
board of directors. Completion of the investment by TPG is subject to lender
approval, regulatory approval and other customary closing conditions.
Magellan Health Services, Inc. is the nation's leading specialty managed
care organization. The company is comprised by three main business units:
Magellan Behavioral Health, the nation's largest managed behavioral
healthcare organization, covering nearly 65 million members; Magellan
Specialty Health, a manager of specialist networks and disease management
programs for 4 million health plan members; and National MENTOR, which
provides community-based services to over 6,500 individuals.
Texas Pacific Group is a private investment firm with over $3.0 billion
under management. TPG has investments in targeted industries, including
healthcare (Oxford Health Plans, Vivra, Genesis Eldercare), technology
(Zilog, Globespan, Paradyne), food and beverage (Beringer, Del Monte),
consumer products (J.Crew, Ducati, Virgin Entertainment), airlines (America
West, Continental) and Oil & Gas (Denbury Resources, Belden & Blake).
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Certain of the statements in this press release including, without
limitation, statements regarding completion of the TPG investment, ability to
deleverage, accretion/dilution to earnings and additional investments by TPG
constitute forward-looking statements contemplated under the Private
Securities Litigation Reform Act of 1995. Risk factors such as the ability to
complete the transaction discussed, the ability to obtain lender approval and
ability to reach future agreement for additional investments and other
factors could have a material adverse impact on the Company or prevent the
Company from obtaining the results discussed. For a more complete
discussion of these and other risk factors, please see "Cautionary
Statements--The Company" and "Cautionary Statements--CBHS" in Magellan's
Annual Report on Form 10-K for fiscal year ended September 30, 1998 filed
with the Securities and Exchange Commission on December 29, 1998 and the
Company's most recent Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission on May 14, 1999.
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