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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9/A
(Amendment No. 5)
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
CIRCON CORPORATION
(Name of Subject Company)
CIRCON CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, $.01 par value
(Title of Class of Securities)
172736 10 0
(CUSIP Number of Class of Securities)
RICHARD A. AUHLL
President and Chief Executive Officer
Circon Corporation
6500 Hollister Avenue
Santa Barbara, California 93117
(805) 685-5100
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of person(s) filing statement)
Copy to:
LARRY W. SONSINI, ESQ.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
(415) 493-9300
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This Amendment No. 5 supplements the Schedule 14D-9 of Circon Corporation, a
Delaware corporation (the "Company"), filed with the Securities and Exchange
Commission ("SEC") on August 15, 1996, and as subsequently amended, relating to
a Tender Offer Statement on Schedule 14D-1, dated August 2, 1996 (the "Schedule
14D-1"), filed with the SEC by USS Acquisition Corp. (the "Purchaser"), a
Delaware corporation and wholly-owned subsidiary of United States Surgical
Corporation, a Delaware corporation ("USS"), relating to an offer the ("Offer")
by Purchaser to purchase all outstanding Shares at a price of $18.00 per Share,
net to the seller in cash, without interest thereon.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) On August 1, 1996, Leon C. Hirsch, President and Chief Executive Officer
of USS, advised Richard A. Auhll, President and Chief Executive Officer of the
Company, that USS was commencing the Offer the next day. Neither Mr. Auhll, nor
any other member of the Company's senior management or Board of Directors had
any other prior notice of the Offer, nor were they aware of USS's intention to
make the Offer.
On August 5, 1996, the Company's Board of Directors (the "Board") convened a
meeting, where the Board, with the assistance of senior management and Wilson
Sonsini Goodrich & Rosati ("WSGR"), reviewed the Company's financial performance
and the Offer, including its terms and conditions. The Board also discussed
potential defensive measures in response to the Offer, including the
implementation of a Stockholders Rights Plan. In addition, the Board decided to
retain Bear, Stearns & Co. Inc. ("Bear Stearns") to serve as financial advisors
to the Company and assist the Board in considering and analyzing the Offer.
On August 8, 1996, the Board convened an additional meeting, where the Board
continued its analysis of the Offer and the implementation of a Stockholders
Rights Plan. The Board also reviewed the Company's financial performance,
business strategy and strategic plan. The Board instructed management and the
Company's financial advisors to continue examining the Company's strategic plan
and to provide the Board with further analyses at the next Board meeting.
On August 13, 1996, the Board held an additional meeting to finalize its
review of the Offer and to make a recommendation in response to the Offer. In
addition, the Board determined that the implementation of a Stockholders Rights
Plan would be in the best interests of the Company and its stockholders. The
Board unanimously approved the Stockholders Rights Plan previously furnished to
the Board and instructed management to implement the Plan.
At the August 13, 1996 meeting, the Board determined that the best means for
providing value to its stockholders is for the Company to continue to pursue its
strategic plan and not to be put up for sale at this time. The Board unanimously
concluded that the Offer is inadequate and not in the best interests of the
Company and its stockholders. In particular, the Board determined that the
Company's strategic plan offers the potential for greater long-term benefits for
the Company's stockholders than the Offer based on, among other things, greater
opportunities for business expansion, revenue and earnings growth, as well as
benefits following the full integration of the business of Cabot Medical
Corporation ("Cabot") into the Company.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to stockholders communicating the Board's recommendation
and a form of press release announcing such recommendation are filed as Exhibits
5 and 6 hereto, respectively, and are incorporated herein by reference.
(b) In reaching the conclusions referred to in Item 4(a), the Board of
Directors took into account numerous factors, including but not limited to the
following:
(i) The Board's familiarity with the business, financial condition,
prospects and current business strategy of the Company, the nature of the
business in which the Company operates and the Board's belief that the Offer
does not reflect the long-term values inherent in the Company. In this
regard, the Board particularly considered the following:
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ITEM 4. THE SOLICITATION OR RECOMMENDATION (CONTINUED)
- The Company's reputation as a provider of quality products and
services and its position in its industry as a technological
leader and innovator.
- The market share of the Company in the urology and gynecology
markets and new products planned for introduction in the
future.
- The expected growth rates of the markets for urological and
gynecological products and the product position of the Company
in such markets.
- The Company's long-term sales plan, including the effects of
products under development and enhancements to current
products.
- The cost savings and growth impact of the Cabot acquisition
which the Company expects to realize, including cost savings
from programs already in process and those that are currently
planned.
- The historical trading price of the Company's Common Stock,
including the Board's belief, based in part on the factors
referred to above, that the trading price for the Company's
Common Stock immediately prior to commencement of the Offer did
not reflect the long-term value inherent in the Company. In
this regard, the Board noted that the Offer represented a 23%
discount from the highest closing price of the Common Stock
during the 12-month period preceding the Offer.
- The risks inherent in achieving the Company's business plan.
(ii) The Company's prospects for future growth and profitability, based
on the Company's strategic plan, the various strategic initiatives which
have been implemented and investments that have been made over the past
several years, including the acquisition of Cabot, and other opportunities
that will be available in the future, the availability in the future of
certain new products and enhancements to current products in various stages
of development, and current conditions in the businesses in which the
Company operates.
(iii) The opinion of Bear Stearns to the effect that the consideration
offered pursuant to the Offer is inadequate from a financial point of view
to the stockholders of the Company (excluding USS and its affiliates). A
copy of the written opinion of Bear Stearns which sets forth the assumptions
made, matters considered and basis for their review is filed as Exhibit 7
hereto and incorporated herein by reference.
(iv) The Board's commitment to protecting the best interests of the
Company's stockholders.
(v) The disruptive effect of the Offer on the Company's employees,
suppliers and customers.
(vi) The numerous conditions to which the Offer is subject.
The Offer is conditioned upon, among other things, the acquisition of Shares
pursuant to the Offer and the proposed merger following the Offer having been
approved pursuant to Section 203 of the Delaware General Corporation Law
("Section 203") or the Purchaser being satisfied in its sole discretion that
Section 203 is otherwise inapplicable to the acquisition of Shares pursuant to
the Offer and the proposed merger. In light of the Board's decision discussed
above, the Board has determined to take no action which would render Section 203
so inapplicable.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer, the Board did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific factors
considered in reaching its respective determinations.
On August 30, 1996, USS announced that the expiration of the Offer had been
extended to September 30, 1996. That day, the Company issued a press release
relating to USS's announcement. A
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ITEM 4. THE SOLICITATION OR RECOMMENDATION (CONTINUED)
copy of this press release is filed as Exhibit 20 to this statement. Also on
that day, the Company circulated a letter to its employees regarding the Offer,
a copy of which is filed as Exhibit 21 to this statement.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
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Exhibit 1(F) The "Board Compensation," "Remuneration of Officers," "Report of the
Compensation Committee" and "Compensation Committee Interlocks and
Insider Participation" sections of the Proxy
Exhibit 2(F) Article Ninth of Certificate of Incorporation, as amended
Exhibit 3(F) Article V of the Bylaws
Exhibit 4(F) Form of Indemnification Agreement
Exhibit 5*(F) Letter to Stockholders regarding Board's Recommendation
Exhibit 6(F) Press Release Announcing Board's Recommendation
Exhibit 7(F) Opinion of Bear, Stearns & Co. Inc.
Exhibit 8*(F) Summary of Stockholders Rights Plan
Exhibit 9(F) Press Release of the Company dated August 5, 1996
Exhibit 10(F) Letter to Employees Regarding the Offer
Exhibit 11(F) Complaint of William Steiner against the Company, its Directors and
certain of its officers, filed on or about August 15, 1996
Exhibit 12(F) Complaint of Charles Miller against the Company, its Directors and
certain of its officers, filed on or about August 15, 1996
Exhibit 13(F) Complaint of F. Richard Manson against the Company, its Directors
and certain of its officers, filed on or about August 15, 1996
Exhibit 14(F) Press Release of the Company dated August 19, 1996
Exhibit 15(F) Management Retention Plan
Exhibit 16(F) Sales Force Retention Plan
Exhibit 17(F) Managers, Professionals and Key Contributors Retention Plan
Exhibit 18(F) Press Release of the Company dated August 27, 1996
Exhibit 19(F) Letter to Employees Regarding the Retention Plans
Exhibit 20(F) Press Release of the Company dated August 30, 1996
Exhibit 21 Letter to Employees Regarding the Offer
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* Included in copy mailed to stockholders
(F) Previously filed
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
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Dated: September 2, 1996 CIRCON CORPORATION
By: /s/ Richard A. Auhll
Richard A. Auhll
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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Exhibit 21
[Letterhead]
Dear Fellow Employees:
I am writing to give you an update on the U.S. Surgical Corporation (USSC)
hostile tender offer, and to clear up some misconceptions you may have
encountered.
1. CURRENT SITUATION
We are not surprised that today USSC was forced to "extend" and not
consummate its August 2 hostile takeover offer because several of the conditions
of its offer could not be met.
Without the approval of our Board of Directors, this hostile offer has
very little chance of success due to our defensive positions. Our Board has
already rejected it. Current circumstances have encouraged short term
speculation in our stock. We believe in time we will attract more shareholders
interested in the strategic value of this Company.
As a practical matter, the extension of the offer extends this period
of distraction for all of us at Circon. Let me reiterate what I said to you
earlier this week: WE NEED YOU TO REMAIN FOCUSED. The best thing we can do for
ourselves and our Company is to continue to work hard to serve our customers.
We have a strategic plan in place which will reward stockholders with greater
value than they can obtain through tendering their shares in this offer.
Now, I would like to give you important background information and clear up
any misconceptions or misinformation you may have encountered.
TENDERED vs OWNED SHARES
USSC still owns only 1.0 million shares of Circon stock. By
comparison, I own nearly 1.6 million shares. A "tendered share" is an offer
to sell a share to USSC. However, USSC has several means of not actually
buying a tendered share. One way is to unilaterally "extend" the time when
they would actually buy the tendered stock. They can also unilaterally
withdraw the offer to buy any stock at any time. Thus, there is a big
difference between a share owned by USSC and a share tendered to USSC.
NUMBER OF SHARES TENDERED
We were not surprised, for several reasons, that 63% of the
outstanding shares were tendered to USSC. First of all, the selling
stockholders also have the right to cancel their tender at any time, so they had
nothing to lose by mailing theirs to USSC. Also, the activity in Circon has
attracted a number of short term speculators. Moreover, in these situations it
is not unusual to have a high percentage tendered. For instance, when Moore
made a hostile offer for Wallace Computer, it obtained tenders for 73.5% of all
stock just before it FAILED in its attempt.
TIMING
The U.S. Surgical offer now expires on September 30th. But it is very
common for these offers to be extended once, twice, even half a dozen times.
That often happens when the company making the offer does not get enough shares
tendered and does not obtain the desired conditions.
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PAGE 2 AUGUST 30, 1996
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An extension could also happen because, in the end, it will be very
difficult for U.S. Surgical to succeed without gaining the approval of the
Board. So they could keep extending their offer to try to increase the pressure
on us. The process could go on for quite a long time. Moore Corporation
recently dropped its effort to take over Wallace Computer Services after a year
of trying. Earlier this year, Hasbro turned back a hostile bid form Mattel, and
Alumax turned back one from Kaiser Aluminum.
2. BACKGROUND INFORMATION
CIRCON STOCKHOLDERS RIGHTS PLAN
On August 15, Circon announced a Stockholders Rights Plan to protect
all of its stockholders against coercive and abusive offers.
These plans are becoming increasingly common these days and are
already in place in many of the Fortune 500 companies. What our plan means
is this: if USSC or any other stockholder, acquires more than 15 percent of
all our shares without Board approval, then every other stockholder, except
USSC, essentially has the right to purchase additional Circon shares at half
the market price. Also, under certain conditions, Circon shareholders could
also buy USSC stock at half the market price.
The importance of this stockholders rights plan is that it makes it
very expensive -- prohibitively expensive -- for someone to take over Circon
without the approval of the Board of Directors.
EMPLOYEE RETENTION PLAN
On August 27, Circon announced an Employee Retention Plan to retain
certain key Circon employees by providing them with retention benefits payable
upon their remaining with the Company for a specified period, and certain
severance benefits payable upon an involuntary termination of employment,
following a change in control of the Company. We were limited as to how many
employees could be put onto the Plan, but all employees benefit through our
existing severance policy.
The key to our business is attracting and retaining a highly
skilled workforce. The Board determined that it is in the best interest of
Circon and its stockholders to assure that the Company will have the
continued dedication of our employees with the possibility, threat, or
occurrence of a change in control of the Company. This Plan is designed to
help Circon retain its employees, thereby enabling successful pursuit of its
strategic plan.
LAWSUITS
It is very common these days for hostile bidders and others to file
lawsuits to try and pressure the Board. Just look at recent offers. The
Wallace and Hasbro Boards were sued within days after their rejection of bids.
Lawsuits are an every day part of business. I would not be surprised that if
the Board had accepted the USSC offer, it would have been sued by many
shareholders as well.
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PAGE 3 AUGUST 30,1996
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3. CONCLUSION
This was an unsolicited offer. We have never said Circon was for
sale. We are not trying to sell the Company. We did not even know the offer
was coming. I was informed of the offer for the first time the night before it
was made.
There are a number of other things that could happen going forward. I
am not going to try to list them all here. We have retained expert financial
and legal advisors to help us prevail, no matter what USSC does. The important
point is that the Board's position is this: we have a great future ahead of us.
That future is going to create a lot of value for our stockholders. We do not
need to sell the Company to create this value for our stockholders.
Lastly, in a situation like this, success is often the best defense.
The better we perform, the more investors will believe in our strategic plan,
and in our ability to make it happen.
As you know, we have had a bumpy ride in the last few months - for a
lot of reasons I do not need to rehash here. That is why our stock price has
dropped to a point where USSC can make a low-ball offer look like a big premium.
I hope you also know, we are making good progress and feel very good about our
chances of getting back on our growth track in the near future. I suspect that
is one reason why USSC is so interested in Circon.
The fact that we are getting back on track is due to a lot of hard
work from all of our team. I and all members of the Board, are deeply
appreciative of the effort and ingenuity you have put into Circon. But this is
not the time to let up. Now, more than ever, our performance really matters.
Sincerely,
CIRCON CORPORATION
/s/ Richard A. Auhll
RICHARD A. AUHLL
President
Chairman of the Board
