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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 3)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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COHR INC.
(NAME OF SUBJECT COMPANY)
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COHR INC.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
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192567105
(CUSIP NUMBER OF CLASS OF SECURITIES)
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RAYMOND E. LIST
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COHR INC.
21540 PLUMMER STREET
CHATSWORTH, CA 91311
(818) 773-2647
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
ROBERT B. KNAUSS
MUNGER, TOLLES & OLSON LLP
355 SOUTH GRAND AVENUE
35TH FLOOR
LOS ANGELES, CALIFORNIA 90071-1560
(213) 683-9100
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This Amendment No. 3 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, as amended by Amendment No. 1 thereto filed on
February 5, 1999 and Amendment No. 2 thereto filed on February 8, 1999 (as may
be amended or supplemented from time to time, the "Schedule 14D-9) of COHR Inc.,
a Delaware corporation (the "Company"), relating to the tender offer by TCF
Acquisition Corporation, a Delaware corporation (the "Purchaser") and wholly
owned subsidiary of the Three Cities Fund II, L.P. and Three Cities Offshore II,
C.V. (the "Three Cities Funds"), to purchase all the outstanding shares
("Shares") of common stock, par value $0.01 per share, of the Company at a price
of $6.50 per Share, net to the seller in cash, disclosed in the Purchaser's
Tender Offer Statement on Schedule 14D-1, as amended, and subject to the
conditions set forth in the related Offer to Purchase and Letter of Transmittal
(the terms and conditions of which together with any amendments or supplements
thereto, collectively constitute the "Revised Offer").
The purpose of this Amendment No. 3 is to supplement the disclosure in (i)
Item 4(b)(1) ("Background") to include a description of a letter (the "MHA
Letter") received by the Board of Directors of the Company (the "Board") on
February 12, 1999 from counsel for Managed Health Care Associates, Inc. ("MHA")
and (ii) Item 4(b)(2) ("Reasons for Recommendations") to include additional
information regarding the fairness opinion presented to the Board of Directors
of the Company by Lehman Brothers Inc., the Company's financial advisor. The MHA
Letter is filed as Exhibit (a)(19) hereto and is incorporated herein by
reference. All capitalized terms used herein but not otherwise defined shall
have the meanings ascribed to such terms in the Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(b)(1) BACKGROUND
Item 4(b)(1) is hereby amended and supplemented by addition of the
following:
Background of the Offer Since February 5, 1999. On February 12, 1999, the
Board received the MHA Letter which, among other things, stated that MHA "is
prepared to pay $7.50 per share for each outstanding share of common stock of
the Company" and "remains prepared to execute a merger agreement in
substantially the form previously provided to [the Company]." However, such
letter also stated that "MHA understands that pursuant to the revised merger
agreement with TCF [the Purchaser], based upon the information available to MHA,
the Company is precluded from accepting or even considering such an offer."
On February 13, 1999, counsel for the Purchaser confirmed in a letter to
counsel for the Company (the "TCR Letter") that it would violate the Amended
Plan and Agreement of Merger between the Purchaser and the Company (the "Amended
Merger Agreement") for the Company to encourage or otherwise facilitate an
inquiry by MHA or any other third party regarding an acquisition of the Company.
Such restriction was part of the agreement for the Purchaser to increase its
tender offer price to $6.50 per Share. The original Plan and Agreement of Merger
between the Purchaser and the Company (the "Original Merger Agreement") had
permitted the Company to consider acquisition proposals which were received by
February 2, 1999, but that date had passed. Thus, the Company would have also
been prohibited under the Original Merger Agreement to consider the inquiry in
the MHA Letter.
The TCR Letter also noted that the Three Cities Funds, which own 48.3% of
the Company's common stock, would be under no obligation to tender their Shares
or to vote for a merger and, therefore, it would be virtually impossible for the
Company to merge with an MHA subsidiary unless the Three Cities Funds were in
favor of the transaction.
The TCR Letter also pointed out, among other things, that (i) when MHA had
previously indicated it would be willing to pay $7.00 per Share for the Company,
it had stated that its willingness was conditioned on satisfactory conclusion of
due diligence, and (ii) the bank that issued a letter stating that it was highly
confident that it would be able to syndicate financing for the funds necessary
for MHA to engage in the proposed transaction with the Company conditioned its
"confidence" on the satisfactory conclusion by it of due diligence, including
specifically with respect to (a) the pending stockholder suits against the
Company and (b) the Company's MasterPlan business, the two most significant
problems currently confronting the
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Company. The TCR Letter further noted that the MHA Letter did not state that the
due diligence and financing contingencies identified in the bank's letter no
longer existed and "it was far from clean [sic] that MHA would have been able to
eliminate those contingencies by February 10, 1999, or by any other date."
The TCR Letter concluded by stating that the MHA Letter makes it clear that
MHA knows that any steps by the Company to enter into a transaction with MHA
would violate the Amended Merger Agreement, and if "MHA nonetheless tries to
pursue such a transaction or otherwise interfere with the transaction between
TCF Acquisition and COHR, the Three Cities Funds will expect COHR to join them
in seeking appropriate recourse against MHA." The TCR Letter is filed as Exhibit
(a)(20) hereto and is incorporated herein by reference.
As acknowledged by both the Three Cities Funds and MHA, the Company
believes that the terms of the Amended Merger Agreement precludes it from
considering a sale transaction with MHA at this time. Even under the Original
Merger Agreement, the Company would be precluded from considering an offer
received after February 2, 1999. Furthermore, the Company notes that the MHA
Letter did not appear to remove the due diligence and financing contingencies
set forth in MHA's earlier proposal, nor did it address the issues that the
Company had with MHA's draft merger agreement.
The Special Committee of the Board met to discuss the MHA Letter and the
TCR Letter and continues to believe for the reasons set forth in Item 4(b)(2)
("The Solicitation or Recommendation -- Reasons for Recommendations") of this
Schedule 14D-9 and the immediately prior paragraph that the transactions
contemplated by the Amended Merger Agreement, particularly in light of the
relative certainty of their consummation, are fair to, and in the best interests
of, stockholders (other than the Purchaser and its affiliates).
(2) REASONS FOR THE RECOMMENDATIONS
Item 4(b)(2) is hereby amended and supplemented by addition of the
following:
Lehman Brothers has acted as financial advisor to the Company in connection
with the Company's transactions with the Three Cities Funds. On December 24,
1998, Lehman Brothers delivered its original opinion (the "Original Opinion") to
the Board in connection with the Purchaser's original offer of $5.375 per Share
in cash (subject to increase to $6.375 per Share in the event that certain
stockholder litigation is settled) (the "Original Offer") contemplated by the
Original Merger Agreement. On February 4, 1999, Lehman Brothers delivered an
updated written opinion to the Board that the consideration to be offered in the
Revised Offer to the stockholders of the Company other than the Three Cities
Funds and its affiliates (the "Public Stockholders") is fair, from a financial
point of view, to the Public Stockholders.
The full text of Lehman Brothers' written opinion dated February 4, 1999 is
attached as Annex A (the "Lehman Opinion") to Amendment No. 2 to this Schedule
14D-9 and is incorporated herein by reference. Stockholders should read the
Lehman Opinion in its entirety for a discussion of assumptions made, matters
considered and limitations on the review undertaken by Lehman Brothers in
rendering its opinion. The summary of the Lehman Opinion set forth in this
Schedule 14D-9 is qualified in its entirety by reference to the full text of
such opinion.
No limitations were imposed by the Company or the Board on the scope of
Lehman Brothers' investigation or the procedures to be followed by Lehman
Brothers in rendering the Lehman Opinion, except that, since the initiation of
discussions with the Three Cities Funds, Lehman Brothers was not authorized to
solicit, and did not solicit, any indications of interest from any third party
with respect to a purchase of all or a part of the Company's business. In
arriving at the Lehman Opinion, Lehman Brothers did not ascribe a specific range
of value to the Company, but rather made its determination as to the fairness,
from a financial point of view, of the consideration to be offered to the Public
Stockholders in the Revised Offer on the basis of the financial and comparative
analyses described below. The Lehman Opinion is for the use and benefit of the
Board and was rendered to it in connection with its consideration of the Revised
Offer and the Merger and is not intended to be and does not constitute a
recommendation to any Public Stockholder as to whether to accept the
consideration to be received by such stockholder in the Revised Offer or the
Merger. Lehman
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Brothers was not requested to opine as to, and the Lehman Opinion does not in
any manner address, the Company's underlying business decision to proceed with
or effect the Revised Offer and the Merger.
In arriving at the Lehman Opinion, Lehman Brothers reviewed and analyzed:
(1) a draft copy of the Amended Merger Agreement and the specific terms of the
Revised Offer and the Merger, (2) publicly available information concerning the
Company that Lehman Brothers believed to be relevant to its analysis, including
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1998 (as amended) and Company's Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1998 and September 30, 1998, (3) financial and operating
information with respect to the business, operations and prospects of the
Company furnished to Lehman Brothers by the Company, including without
limitation current projections prepared by management of the Company and
information regarding recent financial performance of the Company, (4) a trading
history of the Shares from December 16, 1996 to February 4, 1999 and a
comparison of that trading history with those of other companies that Lehman
Brothers deemed relevant, (5) a comparison of the historical financial results
and present financial condition of the Company with those of other companies
that Lehman Brothers deemed relevant, (6) a comparison of the financial terms of
the Merger and the Revised Offer with the financial terms of certain other
transactions that Lehman Brothers deemed relevant and (7) the results of Lehman
Brothers' prior efforts to solicit indications of interest from third parties
with respect to a purchase of the Company. In addition, Lehman Brothers had
discussions with the management of the Company concerning its business,
operations, assets, financial condition and prospects and have undertaken such
other studies, analyses and investigations as it deemed appropriate.
In arriving at the Lehman Opinion, Lehman Brothers assumed and relied upon
the accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of management of the Company
that they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial projections
of the Company, upon advice of the Company, Lehman Brothers assumed that such
projections were reasonably prepared on a basis reflecting the best available
estimates and judgments of the management of the Company as to the future
financial performance of the Company, and that the Company would perform
substantially in accordance with such projections. In arriving at the Lehman
Opinion, Lehman Brothers conducted only a limited physical inspection of the
properties and facilities of the Company and did not make or obtain any
evaluations or appraisals of the assets or liabilities of the Company. In
addition, since the initiation of discussions with the Three Cities Funds, the
Company did not authorize Lehman Brothers to solicit, and Lehman Brothers did
not solicit, any indications of interest from any third party with respect to
the purchase of all or a part of the Company's business. However, in arriving at
the Lehman Opinion, Lehman Brothers did consider an unsolicited proposal
received from a third party and analyzed the terms of such proposal and the
risks of such third party being unable or unwilling to proceed with a proposed
acquisition on terms acceptable to the Company. The Lehman Opinion necessarily
was based upon market, economic and other conditions as they existed on, and
could be evaluated as of, the date of the Lehman Opinion.
The following is a summary of certain financial and comparative analysis
performed by Lehman Brothers in connection with its rendering the Original
Opinion with respect to the Original Offer. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at the
Lehman Opinion, Lehman Brothers did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevancy of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of its analyses, without considering all analyses, could
create a misleading or incomplete view of the process underlying the Lehman
Opinion. In its analyses, Lehman Brothers made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. Any estimates contained
in these analyses are not necessarily indicative of actual values or predictive
of future results or values, which may be significantly more or less favorable
than as set forth therein. Additionally, analyses relating to the value of
businesses do not purport to
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be appraisals or to reflect the prices at which businesses actually may be sold.
The Lehman Opinion is also based on certain financial and comparative analyses
performed by Lehman Brothers in connection with rendering its Original Opinion,
which analyses are summarized below.
Common Stock Price Analysis. Lehman Brothers examined the Share price
performance for the twelve month period preceding the delivery of the Original
Opinion and stated that the closing price of the Shares had fluctuated over that
period from a high of $13.00 to a low of $2.56, and closed at $4.00 on December
22, 1998. Lehman Brothers also compared the price performance of the Shares to a
weighted average of the stock prices of certain publicly traded health care
equipment servicing and health care outsourcing service companies and to the S&P
400 Index for the twenty-four month period prior to the delivery of the Original
Opinion. The companies that Lehman considered included Adac Laboratories Inc.,
American Residential Services Inc., DecisionOne Holdings Corp., Diagnostic
Health Services Inc. and Transcend Services Inc. (the "Comparable Companies").
Lehman Brothers noted that the price of the Shares had declined 65.26% compared
to an increase of 11.08% for the Comparable Companies and an increase of 29.93%
in the S&P 400 Index over that period.
Lehman Brothers also examined the premiums contained in the Original Offer
to the closing prices for the Shares for the 12 months preceding the delivery of
the Original Opinion. Based on a range of offer prices of $5.25, $5.75 and
$6.25, the premiums were 31.3%, 43.8% and 56.3%, respectively, above the
Company's $4.00 per Share closing price on December 22, 1998, 43.8%, 57.5% and
71.2%, respectively, above the average of the closing prices 10 days prior to
the Original Offer of $3.65 per share, 63.6%, 79.1% and 94.7, respectively,
above the average of the closing prices 30 days prior to the Original Offer of
$3.21 per share, 70.5%, 86.7% and 102.9%, respectively, above the average of the
closing prices 60 days prior to the Original Offer of $3.08 per share, 73.8%,
90.4% and 107.0%, respectively, above the average of the closing prices 90 days
prior to the Original Offer of $3.02 per share, 36.4%, 49.4% and 62.3%,
respectively, above the average of the closing prices 180 days prior to the
Original Offer of $3.85 per share, 59.6%, 55.8% and 51.9%, respectively, below
the Company's 52-week high of $13.00 per share and 104.9%, 124.4% and 143.9%,
respectively, above the Company's 52-week low of $2.56 per share.
Comparable Transactions Analysis. Lehman Brothers compared the financial
terms of certain 100% cash transactions, which Lehman Brothers considered
relevant, with the financial terms of the Original Offer and the Merger based
upon information that was publicly available at the time and based upon
information provided to Lehman Brothers by the Company's management. The
transactions that Lehman Brothers considered comparable to the Original Offer
and the Merger included the following eight 100% cash transactions of $75
million or less in the outsourcing industry since January 1995 (the "Comparable
Transactions"). The mean, median, high and low purchase prices per share for the
Comparable Transactions was then compared to the target's stock price one day
and one month prior to the announcement of the transaction and to the target's
latest twelve-month high and low stock price to calculate the premium over such
prices ("Premium"). The mean, median, high and low Premiums one day prior to the
transaction announcement were 28.3%, 30.0%, 35.1% and 13.8%, respectively, in
the Comparable Transactions. Lehman Brothers noted that Original Offer prices
ranging from $5.25, $5.75 and $6.25 represented premiums of 23.5%, 35.3% and
47.1%, respectively, over the $4.00 price of the Shares on December 22, 1998 two
days prior to the delivery of the Original Opinion and was above the range of
Comparable Transactions for offer prices exceeding $5.75 per share. The mean,
median, high and low Premiums 30 days prior to the Original Offer announcement
were 36.4%, 37.1%, 71.1% and 5.7%, respectively, in the Comparable Transactions.
Lehman Brothers noted that Original Offer prices ranging from $5.25, $5.75 and
$6.25 represented premiums of 100.0%, 119.0% and 138.1%, respectively, over the
$3.21 price of the Shares 30 days prior to the delivery of the Original Opinion
and was well above the range of Comparable Transactions for all the offer
prices. The mean, median, high and low Premiums to the target's latest
twelve-month high were 5.5%, 6.9%, 28.3% and -24.1%, respectively, in the
Comparable Transactions. Lehman Brothers noted that Original Offer prices
ranging from $5.25, $5.75 and $6.25 represented premiums of 59.6%, 55.8% and
51.9%, respectively, below the twelve month high of $13.00 for the Shares. The
mean, median, high and low Premiums to the target's latest twelve-month low were
127.9%, 106.7%, 285.0% and 60%, respectively, in the Comparable Transactions.
Lehman
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Brothers noted that Original Offer prices ranging from $5.25, $5.75 and $6.25
represented premiums of 104.9%, 124.4% and 143.9%, respectively, above the
twelve month low of $2.56 for the Shares.
However, because the reasons for and the circumstances surrounding each of
the transactions analyzed were specific to each transaction and because of the
inherent differences between the business, operations, technology and prospects
of the Company and the businesses, operations, technology and prospects of the
selected acquired companies analyzed, Lehman Brothers did not rely solely on the
quantitative results of the analysis but, rather, also made qualitative
judgments concerning differences between the characteristics of these
transactions and the Original Offer and the Merger that would affect the
acquisition values of the Company and such acquired companies.
Comparable Public Company Analysis. Lehman Brothers compared the historical
financial, operating and stock performances of the Comparable Companies with the
historical financial and operating performance of the Company, based upon
information that was publically available at the time and based upon information
provided to Lehman Brothers by management of the Company. For each of the
Company and the Comparable Companies, Lehman Brothers examined the multiple of
current stock price to: (i) the estimated calendar year 1998 earnings per share
(the "CY 1998 P/E Multiple") based on available Wall Street research analysts'
reports; (ii) the estimated 1999 earnings per share (the "CY 1999 P/E
Multiple"), based on available Wall Street research analysts' reports; and (iii)
the estimated 2000 earnings per share (the "CY 2000 P/E Multiple"), based on
available Wall Street research analysts' reports. Lehman Brothers noted that, as
of December 22, 1998, (i) the CY 1998 P/ E Multiples based upon the Original
Offer for the Company were not meaningful ("NM") at offer prices of $5.25, $5.75
and $6.25, as the Company had negative earnings per share during this period as
compared to a multiple of 9.8x for the median and 11.0x for the mean of the
Comparable Companies; (ii) the CY 1999 P/E Multiples for the Company were
105.0x, 115.0x and 125.0x at offer prices of $5.25, $5.75 and $6.25,
respectively, which were significantly higher than the 11.8x for the median and
11.2x for the mean of the Comparable Companies; and (iii) the 2000 P/E Multiples
for the Company were 12.9x, 14.1x and 15.3x at offer prices of $5.25, $5.75 and
$6.25, respectively, which were higher than the 9.9x for the median and 9.5 for
the mean of the Comparable Companies.
In addition, Lehman Brothers calculated the Firm Value (defined as market
value plus debt (plus minority interest) minus cash) as a multiple of the latest
twelve months revenues (the "LTM Firm Value Revenue Multiple"). Lehman Brothers
noted that, as of December 22, 1998, the LTM Firm Value Revenue Multiple for the
Company was 0.2x, 0.2x and 0.3x at offer prices of $5.25, $5.75 and $6.25,
respectively, as compared to 1.0x for the median and 1.1x for the mean of the
Comparable Companies.
However, because of the inherent differences between the businesses,
operations and prospects of the Company and the business, operations and
prospects of the Comparable Companies, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis, and accordingly also made qualitative judgments concerning
differences between the financial and operating characteristics of the Company
and the Comparable Companies that would affect the public trading values of
each.
Hypothetical Break-up Analysis. Lehman Brothers reviewed with the Board the
results of its prior efforts to solicit indications of interest in the Spring of
1998. Lehman Brothers also reviewed the indicative bids that were received at
that time. Lehman Brothers noted that these bids varied greatly in amount and
that many were subject to due diligence, financing and other material
contingencies that raised issues as to the likelihood of consummation of a
transaction at that time based on such bids. Lehman Brothers also noted that
despite the variants in bid values, terms and contingencies submitted in the
Spring of 1998, there would potentially be interest by a number of the parties
that previously submitted bids to participate in any renewed sales process. The
Board did not authorize Lehman Brothers to solicit additional or updated offers
or proposals for either the entire company or any of the divisions or assets of
the Company in connection with advising the Board on the Original Offer and the
Merger.
Lehman Brothers noted that there were significant downward revisions in the
Company's projections from the projections that were provided by management in
March 1998 to those available in December of 1998. Lehman Brothers noted the
differences between the March 1998 projections and the Company's fiscal
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year 1998 results, the fiscal year 1999 estimates and fiscal year 2000 estimates
provided by management in December 1998 for the Master Plan, Purchase Connection
and Corporate divisions of the Company with respect to revenues and operating
profits. The fiscal year 1998 results, the revised fiscal year 1999 management
estimates and the revised fiscal year 2000 management estimates for the Master
Plan division for revenue and operating profits varied from the March 1998
projections by 2.9% and -98.0%, -3.5% and -404.8% and -24.5% and -38.0%,
respectively. The fiscal 1998 results, the revised fiscal year 1999 management
estimates and the revised fiscal year 2000 management estimates for the Purchase
Connection division for revenue and operating profits varied from the March 1998
projections by 1.8% and 3.1%, -2.2% and 10.7% and -12.5% and 6.2%, respectively.
The fiscal 1998 results, the revised 1999 management estimates and the revised
2000 management estimates for the Corporate division for revenue and operating
profits varied from the March 1998 projections by -100.0% and -9.0%, NM and
- -26.4% and NM and -5.6%, respectively.
Assuming no changes had occurred in the Company's March 1998 projections,
Lehman Brothers reviewed hypothetical break up values for the Company under the
low, medium and high cash purchase price scenarios indicated by the bids
received in the Spring of 1998 and reviewed the resulting per Share values that
would be received by its stockholders at 100%, 75% and 50% achievement of such
hypothetical purchase prices. Lehman Brothers observed that the Original Offer
was approximately the mid-point of the hypothetical range. However, in light of
the variance in the financial performance of the Company's business (much of
which was negative) Lehman Brothers noted that (i) there was no certainty that
the indicative bids received in the Spring of 1998 would be re-submitted in
December of 1998 or that new indicative bids would be submitted at that time,
and (ii) if the Board had authorized the pursuit of additional or updated offers
or proposals in the event such bids were re-submitted or newly proposed, there
was no certainty that such bids would reach the same or comparable purchase
prices as those submitted in the Spring of 1998 or contain fewer contingencies.
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Lehman Brothers in an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Company selected Lehman
Brothers as its financial advisor because of its expertise, reputation and
familiarity with the Company and because its investment banking professionals
have substantial experience in transactions similar to the Company's
transactions with the Three Cities Funds.
As compensation for its services in connection with the transactions with
the Three Cities Funds, the Company has agreed to pay Lehman Brothers a fee of
$1,000,000, of which $100,000 was previously paid by the Company to Lehman
Brothers as a retainer, $300,000 of which is to be paid for the delivery of the
Lehman Opinion, with the remaining $600,000 to be paid to Lehman Brothers for
its role as financial advisor in the Three Cities transactions. In addition, the
Company has agreed to reimburse Lehman Brothers for reasonable out-of-pocket
expenses incurred in connection with the Three Cities transactions and to
indemnify Lehman Brothers for certain liabilities that may arise out of its
engagement by the Company and the rendering of its opinion.
In considering whether to reopen the Spring 1998 auction process, the Board
considered, among other things, (i) the results of the Spring 1998 auction
process, including the fact that the Company received only one highly contingent
offer for the entire Company, (ii) the risks that engaging in another sales
process may have an adverse affect on the Company's business, (iii) that there
was no assurance that the Company could improve the Original Offer by soliciting
other offers in light of the Company's recent disappointing business and
financial results, (iv) the receipt of the Original Offer, at a significant
premium to the Company's then-current Share price, with few contingencies and
the risk that the Company would lose such offer if it engaged in another broad
or limited sales process and (v) the desire of certain significant stockholders
of the Company holding in aggregate approximately 48% of the Shares to sell
their Shares to the Purchaser at $5.125 per Share.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
(a)(19) Text of Letter from counsel for MHA to counsel to the Board
of Directors of the Company, dated February 12, 1999.
(a)(20) Text of Letter from counsel for the Purchaser to counsel for
the Company, dated February 13, 1999.
</TABLE>
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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.
COHR Inc.
By:/s/ RAYMOND E. LIST
-------------------------
Raymond E. List
Chief Executive Officer
Dated as of February 19, 1999
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EXHIBIT (a)(19)
[LETTERHEAD OF SWIDLER BERLIN SHEREFF FRIEDMAN, LLP]
February 12, 1999
VIA FAX: (213) 687-3702
The Board of Directors of COHR, Inc.
c/o Robert B. Knauss, Esq.
Munger, Tolles & Olsen
355 South Grand Avenue
35th Floor
Los Angeles, California 90071
Re: Managed Health Care Associates, Inc./COHR, Inc.
Dear Rob:
MHA is stunned by the recent announcement of an agreement whereby COHR,
Inc. ("COHR" or the "Company") agreed to amend its previously executed merger
agreement with TCF Acquisition Corporation ("TCF") and accept a revised purchase
price of $6.50 per share when MHA was offering $7.00 per share. The Company's
express concern as stated in its press release of February 5, 1999 concerning
the due diligence contingency contained in MHA's proposal is inaccurate. MHA's
proposal was submitted to the COHR directors on February 2, 1999. In response to
a request from the COHR Board, MHA made it clear that it would seek to negotiate
and sign a merger agreement, without a due diligence or financing contingency,
on or prior to February 10, 1999. Since the TCF merger agreement executed on
December 24, 1999 allowed the COHR directors ten business days from their
receipt of a Superior Proposal (as defined in the TCF merger agreement) to
notify TCF, COHR was never at risk of losing TCF as a $6.50 per share purchaser
without having MHA as a $7.00 per share replacement purchaser. That the COHR
directors did not even attempt to complete the MHA merger agreement is
surprising, particularly since those same directors had just characterized the
MHA proposal as a Superior Proposal.
MHA is prepared to pay $7.50 per share for each outstanding share of
common stock of the Company. MHA remains prepared to execute a merger agreement
in substantially the form previously provided to you. Such agreement would
contain no due diligence or financing contingency. Such agreement would also
provide for a tender offer followed by a merger. MHA understands that pursuant
to the revised merger agreement with TCF, based upon the information available
to MHA, the Company is precluded from accepting or even considering such an
offer. Given the history of the transaction, we question whether such a
preclusion is enforceable under Delaware law. Moreover, it is not clear whether
the revised merger agreement contains any other provisions which would permit
COHR to accept a superior proposal.
MHA would like to review, for the record, the conduct of the Company in
connection with the sale of the Company. Beginning in June 1998, there were
numerous conversations between Messrs. Ritterbush and List (two senior executive
officers and directors), on the one hand, and various representatives of MHA, on
the other. During November and early December 1998, MHA, at the urging of
various officers of the Company, attempted to meet with Mr. Ritterbush. Meetings
were set for December 2, 1998 and December 17, 1998. On each occasion, Mr.
Ritterbush rescheduled the meeting. On December 22, 1998, Mr. Ritterbush finally
met at MHA's corporate offices with several MHA directors. At that meeting, MHA
informed Mr. Ritterbush that it was prepared to pay $8.00 cash for each
outstanding share of Company common stock. At the conclusion of the meeting, Mr.
Ritterbush said that Mr. List, the Company's President and Chief Executive
Officer,
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desired to meet with MHA the following week while he was on the east coast, in
order to continue these discussions. As a result, MHA was startled at the
Company's announcement, two days later, on December 24, 1998, that it had signed
a merger agreement providing for the sale of the Company for a price of only
$5.375 per share (or $6.375 per share if the existing shareholders litigation
were settled on specified conditions). MHA was surprised also, that none of the
disclosure documents filed in connection with the proposed sale and tender offer
made any reference to either MHA's initial $45 million offer for the Company's
Purchase Connection division in the spring of 1998 or to its more recent
proposal of $8.00 per share. To make matters worse, MHA learned in the following
two weeks that none of the COHR directors (other than Messrs. Ritterbush and
List) had ever been informed about MHA's December 1998 conversations or
meetings. Furthermore, the Company's press release issued on December 24, 1998
failed to publicly state that the TCF Merger Agreement permitted the Company to
entertain superior proposals, which delayed MHA's formulation of a
counter-proposal.
On January 6, 1999, a full 13 days after the announcement of the
transaction with TCF and the other Three Cities entities (collectively, "Three
Cities"), MHA through the public filings first learned of all of the terms of
the TCF merger agreement. Those documents, filed by Three Cities, failed to
mention that Messrs. Ritterbush and List, two of COHR's senior executive
officers and members of the Board, were going to continue to manage the Company
upon the consummation of the Three Cities transaction.
Upon review by MHA of the TCF merger agreement, MHA still attempted to
comply with its terms, even though the unusual right to match so tipped the
balance in Three Cities' favor as to make a level playing field impossible. MHA
submitted letters on January 25, 1999 and January 26, 1999, offering to pay
$8.00 per share in cash and seeking an opportunity to complete a due diligence
investigation. MHA commenced due diligence on January 27, 1999. On February 2,
1999, as a consequence of new information learned during its due diligence
investigation, MHA reduced its offer and stated that it would pay $7.00 per
share in cash. MHA was informed that it had complied with the terms of the TCF
merger agreement and had submitted a Superior Proposal (as defined in the TCF
merger agreement). On February 3,1999, MHA submitted a draft merger agreement to
the Company. As noted previously in this letter, a clear reading of the TCF
merger agreement states that once a Superior Proposal is received, the Company
has ten business days to determine whether to accept that proposal.
Representatives of MHA made it very clear to the representatives of the Company
that MHA was prepared to negotiate its draft merger agreement to completion, no
later than February 10, 1999. At that time, MHA acknowledged to the Company that
such completed agreement would have no due diligence or financing contingencies.
The suggestion in the Company's press release dated February 5, 1999, that MHA's
proposal was subject to due diligence is inaccurate because on February 10, 1999
there would have been no such contingencies. Consequently the Board would have
been in a position to choose between an offer of $6.50 a share and an offer of
$7.00 per share, with all other terms being materially identical. The Board,
inexplicably, rushed to accept a revised offer by Three Cities which was $.50
per share less than MHA's offer.
MHA intends to pursue a transaction to purchase the Company at $7.50 per
share. MHA believes the Board should take a careful look at these facts.
Very truly yours,
Charles I. Weissman
CIW:slc
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EXHIBIT (a)(20)
[LETTERHEAD OF ROGERS & WELLS]
February 13, 1999
Robert Knauss, Esq.
Munger Tolles & Olson
350 South Grand Avenue
Los Angeles, CA 90071-1560
Dear Rob:
I have read the February 12, 1999 letter from Charles Weissman to the Board of
Directors of COHR, Inc. in which Mr. Weissman says that Managed Health Care
Associates is prepared to pay $7.50 per share for COHR's common stock and to
execute a merger agreement, presumably relating to a transaction at that price.
Although Mr. Weissman's letter says that MHA understands that, pursuant to the
revised merger agreement with TCF Acquisition Corporation, COHR is precluded
from accepting or even considering such an offer, much of his letter either
ignores or misstates the provisions of the Amended Plan and Agreement of Merger
dated February 5, 1999, and the provisions of the original Plan and Agreement of
Merger dated December 24, 1998, which were applicable until the Amended Merger
Agreement was signed. Therefore, I thought it would be appropriate for me, on
behalf of the Three Cities Funds and TCF Acquisition Corp., to state how the
transaction Mr. Weissman describes would violate the Amended Merger Agreement
and, even if the Amended Merger Agreement had not been signed, would have
violated the original Merger Agreement. That is as follows:
1. The Amended Merger Agreement requires COHR to take various steps to assist
TCF Acquisition's tender offer, to facilitate stockholder approval of the merger
of TCF Acquisition and COHR and to carry out that merger if it is approved by
COHR's stockholders. It precludes COHR from, among other things, encouraging or
otherwise facilitating any inquiry or the making of any proposal or offer with
respect to a merger or a purchase of, or tender for, all or any significant
portion of its equity securities or assets. There is no provision permitting
COHR to terminate the Amended Merger Agreement because of a proposal received
from somebody other than TCF Acquisition. Therefore, Mr. Weissman is correct
that COHR is precluded from accepting or considering an offer from MHA (or
anyone else).
2. Under the original Merger Agreement, COHR could only accept a Superior
Proposal if it was received on or before February 2, 1999. While the Three
Cities Funds and TCF Acquisition do not believe what was set forth in Mr.
Weissman's letter of February 2, 1999 constituted a proposal or met the minimum
requirements to be deemed a Superior Proposal, even if it did, MHA could not
after, February 2, 1999, have increased the purchase price it proposed to pay. A
proposal at a new purchase price would be a new proposal. If MHA wanted COHR's
Board to consider a proposal for an MHA purchase at $7.50 per share, it should
have made a proposal of $7.50 per share while COHR's Board was still permitted
by the original Merger Agreement to consider proposals.
3. Referring to what MHA submitted to the COHR directors on February 2, 1999,
Mr. Weissman's February 12 letter states "MHA made it clear that it would seek
to negotiate and sign a merger agreement, without a due diligence or financing
contingency, on or prior to February 10, 1999." Mr. Weissman's statement makes
it clear that what was described in Mr. Weissman's February 2, 1999 letter was
subject to a financing contingency, as well as a contingency, on February 2,
1999. While Mr. Weissman says MHA would have eliminated those contingencies by
February 10, 1999, that would have been 8 days later than the last day for a
person to submit a proposal which was not subject to a financing contingency.
Further, it is far from clean that MHA would have been able to eliminate those
contingencies by February 10, 1999, or by any other date. While the letter from
Banque Nationale de Paris which accompanied Mr. Weissman's February 2 letter
said BNP was highly confident it would be able to syndicate a loan for all the
money MHA would need to pay $7.00 per share for COHR's shares, that "confidence"
was subject to satisfactory conclusion of diligence about the assets and
business of COHR, and specifically about the pending stockholder suits and
COHR's MasterPlan business, the two biggest problems currently confronting COHR.
There is no reason to think BNP would have been satisfied about those problems
by February 10, 1999, or that BNP could in the future
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Robert Knauss, Esq. Page 2
February 13, 1999
become satisfied about those problems if MHA were able to advance a proposal of
the type described in Mr. Weissman's February 12 letter. Certainly, Mr.
Weissman's February 12 letter does not say that the due diligence and financing
contingencies no longer exist.
4. Mr. Weissman's February 12 letter says that since the original Merger
Agreement allowed the COHR directors 10 business days from the receipt of a
Superior Proposal to notify TCF, "COHR was never at risk of losing TCF as a
$6.50 per share purchaser without having MHA as a $7.00 per share replacement
purchaser." That is not correct. Under the original Merger Agreement, the only
amount it was certain TCF Acquisition would pay was $5.375 per share. There was
a possibility the amount TCF Acquisition would pay would increase to $6.375 per
share, but that required that pending stockholder suits be settled within 120
days (or under some circumstances, 210 days). While COHR may never have been at
risk of losing TCF as a $5.375 (and possibly $6.375) per share purchaser, it was
not until COHR and TCF Acquisition signed the Amended Merger Agreement that for
the first time TCF was a $6.50 per share purchaser. Presumably the change from
$5.375 per share with the possibility of an additional $1 per share to a certain
$6.50 per share was a significant factor COHR's directors considered in deciding
to approve the Amended Merger Agreement.
5. Mr. Weissman's February 12 letter says that MHA was prepared to negotiate its
draft merger agreement to completion no later than February 10, 1999 and that
the completed agreement would have no due diligence or financing contingencies.
He goes on to say that, "Consequently the Board would have been in a position to
choose between an offer of $6.50 a share and an offer of $7.00 per share, with
all of the terms being materially identical." However, Three Cities was under no
obligation to keep its $6.50 per share offer open until February 10, 1999, and
had made it clear that offer would terminate at the end of the day on February
5, 1999. Therefore, the Board's choice on February 5 was between a certain $6.50
per share agreement and the highly contingent possibility that five days later
COHR would be able to enter into an agreement at $7.00 per share, with the
prospect of the transaction's remaining at $5.375, or maybe $6.375, if the $7.00
transaction did not eventuate.
6. If MHA were to make a tender offer at $7.50 per share (or any other price),
the Three Cities Funds, which own 48.3% of COHR's common stock, would be under
no obligation to tender their shares or to vote in favor of a merger following
the tender offer. Therefore, it would be virtually impossible for COHR to get
the necessary stockholder approval of a merger with a MHA subsidiary unless the
Three Cities Funds were in favor of the transaction.
7. The form of merger agreement which MHA submitted to COHR included a
representation that the Three Cities Funds had tendered their shares and a
representation that counsel for the plaintiffs in the Stockholder Suits have
made an offer to settle all such outstanding Stockholder Suits for an aggregate
of $13 million (inclusive of all fees and expenses) and such offer has not been
withdrawn. COHR could not make the first of these representations unless the
Three Cities Funds were in favor of the MHA transaction, and the second
representation might have to be qualified to point out that the Three Cities
Funds, which hold what probably are well over 50% in amount of the claims that
are the subject of the Stockholder Suits, would have the right to opt out of any
settlement.
In summary, it would violate the Amended Merger Agreement for COHR to enter into
an agreement with MHA relating to a transaction of the type described in Mr.
Weissman's February 12 letter, and even if the Amended Merger Agreement had not
been executed, it would have violated the original Merger Agreement for COHR at
this time to enter into such an agreement with MHA.
Earlier this week, a representative of Advent International Inc told
representatives of the Three Cities Funds that, unless MHA were assured that the
Three Cities Funds would negotiate regarding a sale of COHR's Purchase
Connection business to MHA after they acquired COHR, MHA could create roadblocks
that would make it more different for the Three Cities Funds to succeed in
acquiring COHR, although the representative of Advent acknowledged it was
unlikely that MHA could prevent the transaction from taking place. Mr.
Weissman's February 12 letter appears to be a step in MHA's trying to do that.
Any delay in the Three Cities Funds' completing their acquisition of COHR could
be costly to COHR, particularly in view of the need to address the operating
problems being encountered by COHR in its MasterPlan business. Mr. Weissman's
letter makes it clear that MHA knows that any steps by COHR to put together a
transaction with MHA would violate the Amended
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Robert Knauss, Esq. Page 3
February 13, 1999
Merger Agreement. If MHA nonetheless tries to pursue such a transaction or
otherwise interfere with the transaction between TCF Acquisition and COHR, the
Three Cities Funds will expect COHR to join them in seeking appropriate recourse
against MHA.
Very truly yours,
David W. Bernstein
cc: Kevin Masuda
J. William Uhrig
3
