SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
(Amendment No. 2)
KINETIC CONCEPTS, INC.
(NAME OF ISSUER)
KINETIC CONCEPTS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
49460W-01-0
(CUSIP NUMBER OF CLASS OF SECURITIES)
DENNIS E. NOLL
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
KINETIC CONCEPTS, INC.
8023 VANTAGE DRIVE
SAN ANTONIO, TEXAS 78230
TELEPHONE: (210) 524-9000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE
PERSON(S) FILING STATEMENT)
Copy to:
DAVID W. HELENIAK, ESQ. STEPHEN D. SEIDEL, ESQ.
SHEARMAN & STERLING COX & SMITH INCORPORATED
599 LEXINGTON AVENUE 112 E. PECAN STREET, SUITE 1800
NEW YORK, NEW YORK 10022 SAN ANTONIO, TEXAS 78205
(212) 848-4000 (210) 554-5500
OCTOBER 8, 1997
(Date Tender Offer First Published, Sent or Given to
Security Holders)
CALCULATION OF FILING FEE
_____________________________________________________________
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$654,293,626.90 $130,858.73
*For purposes of calculating fee only. This transaction
applies to an aggregate of 35,440,157 shares (sum of (i)
32,633,971 outstanding shares of common stock (not including
186,824 treasury shares or 6,064,155, 100,000 and 3,837,890
shares of common stock held by James R. Leininger, M.D.,
Peter A. Leininger, M.D. and Richard C. Blum & Associates,
L.P., respectively, to remain outstanding after the Offer)
and (ii) 2,806,186 outstanding options to purchase shares of
Common Stock).
Except as otherwise noted, the per unit price or other
underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 is $19.25 per unit. The per unit
price with respect to 723,300 options to purchase shares of
Common Stock is $19.9375 per unit.
The proposed maximum aggregate value of transaction is
$654,293,626.90 (sum of (i) product of 32,633,971 shares of
Common Stock and $19.25, (ii) product of (A) 2,082,886
options to purchase shares of Common Stock and (B) the
difference between $19.25 and the exercise price of such
options and (iii) product of (A) 723,300 options to purchase
shares of Common Stock and (B) the difference between
$19.9375 and the exercise price of such options).
The total fee is $130,858.73 paid by wire transfer on
October 7, 1997 to the designated lockbox depository
maintained by the Commission at Mellon Bank. The amount of
the filing fee, calculated in accordance with Rule 0-11
promulgated under the Securities Exchange Act of 1934, as
amended, equals 1/50 of one percent of the Common Stock to
be acquired.
[x] Check box if any part of the fee is offset as provided
by Rule 0-11(a)(2) and identify the filing with which
the offsetting fee was previously paid. Identify the
previous filing by registration statement number, or
the form or schedule and the date of its filing.
Amount Previously Paid: $130,858.73
Form or Registration No.: SC13E4
Filing Party: Kinetic Concepts, Inc.
Date Filed: October 8, 1997
___________________________________________________________
SCHEDULE 13E-4
INTRODUCTION
This Amendment No. 2 to the Issuer Tender Offer
Statement on Schedule 13E-4 (the "Statement") relates to the
offer by Kinetic Concepts, Inc., a Texas corporation (the
"Company"), to purchase all of its issued and outstanding
shares of common stock, $.001 par value per share
("Shares"), for $19.25 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in
the Offer to Purchase dated October 8, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal dated
October 8, 1997 (which together constitute the "Offer"),
copies of which were attached to the Statement as Exhibits
(a)(1) and (a)(2), respectively. The Statement was
initially filed with the Securities and Exchange Commission
on October 8, 1997, and amended on October 21, 1997.
Capitalized terms used but not defined herein have the
meanings ascribed to such terms in the Offer to Purchase and
the Statement.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 2(a) and (b) are hereby amended and supplemented
by the following:
The following two paragraphs are hereby inserted into
the Offer to Purchase immediately following the first
paragraph under "THE TENDER OFFER -- Section 8. Financing of
the Transactions":
"The funds to be provided by F Purchaser in the Stock
Purchase have come from the following sources: Fremont
Partners, L.P., Fremont Offshore Partners, L.P. and Fremont
Partners Side-By-Side, L.P.. The total amount of the funds
is currently available in a bank account maintained for F
Purchaser.
The funds to be provided by B Purchaser in the Stock
Purchase will come from RCBA-KCI Capital Partners, L.P.,
which has binding commitments from its investors to provide
such funds. The total amount of the funds will be funded
into a bank account maintained for B Purchaser prior to the
Stock Purchase."
ITEM 8. ADDITIONAL INFORMATION
Item 8 is hereby further amended as follows:
1. The definition of "Purchasers" contained in the Offer
to Purchase is hereby amended to include Fremont Investors,
Inc. ("Fremont"), Richard C. Blum & Associates, Inc.
("RCBA") and Richard C. Blum ("Blum").
2. The second-to-last paragraph of the sub-section
entitled "Recommendation of the Disinterested Directors and
the Board" under "SPECIAL FACTORS -- Recommendation of the
Disinterested Directors and the Board" contained in the
Offer to Purchase is hereby amended and restated to read in
its entirety as follows:
"In connection with its deliberations, the Board did
not consider, and did not request that BT Alex. Brown
evaluate, the Company's liquidation value. The Board did not
view the Company's liquidation value to be a relevant
measure of valuation, given that the Per Share Amount
significantly exceeded the book value per Share of the
Company on June 30, 1997, and it was the Board's view that
the Company is far more valuable as a going concern than its
net book value per share of $5.26 as of June 30, 1997.
However, book value per share is a historical accounting
number, and an evaluation of liquidation value could produce
a higher valuation than book value per share. Additionally,
there can be no assurance that the liquidation value would
not produce a higher valuation of the Company than its value
as a going concern."
3. The following paragraph is hereby inserted into the
Offer to Purchase immediately following the third-to-last
paragraph of the sub-section entitled "Recommendation of the
Disinterested Directors and the Board" under "SPECIAL
FACTORS -- Recommendation of the Disinterested Directors and
the Board; Fairness of the Transactions":
"With respect to the fairness of the Per Share Amount
from a financial point of view, the Board and the
Disinterested Directors specifically noted that the
multiples of certain financial data implied for the Company
based on the Per Share Amount generally were within the
ranges of corresponding multiples derived for comparable
companies and transactions (see "Opinion of BT Alex. Brown
Incorporated - Analysis of Selected Public Company Trading
and Financial Information" and "Analysis of Selected Merger
and Acquisition Transactions"). The Board and the
Disinterested Directors also noted that while the estimated
equity reference range for the Company based on a discounted
cash flow analysis utilizing internal estimates of the
Company's management exceeded the Per Share Amount (see Case
I discussion under "Opinion of BT Alex. Brown Incorporated -
Discounted Cash Flow Analysis"), the Per Share Amount was
within the estimated equity reference range for the Company
after taking into account adjustments for certain risks and
other factors (see Case II discussion under "Opinion of BT
Alex. Brown Incorporated - Discounted Cash Flow Analysis").
Specifically, Case I did not take into account the fact that
an increasing amount of the Company's revenue growth was
projected to result from new products, the risks inherent in
successfully marketing new products, the risks presented by
the recently adopted Balanced Budget Act of 1997 (which has
not been fully implemented), the risks of other changes in
reimbursement policy or increased pricing pressure from the
Company's customers, the risks of increased shift in
customer preference from high margin products to lower
margin products, potential increases in regional and
corporate overhead expenses and general inflation. The
Board and the Disinterested Directors also noted that the
Per Share Amount had been agreed upon through arms-length
negotiations following an extensive auction process. The
views of the Board and the Disinterested Directors were
based on the totality of factors and analyses considered,
with no single factor or analysis being dispositive of the
Board's or the Disinterested Directors' fairness
determination."
4. The first sentence of the paragraph entitled
"Discounted Cash Flow Analysis" under "SPECIAL FACTORS --
Opinion of BT Alex. Brown Incorporated" contained in the
Offer to Purchase is hereby amended and restated to read in
its entirety as follows:
"BT Alex. Brown performed a discounted cash flow
analysis of the Company to estimate the present value of the
stand-alone, unlevered, after-tax free cash flows that the
Company could generate over the years 1997 through 2001,
based both on internal estimates of the management of the
Company ("Case I") and adjustments to such internal
estimates based on discussions with potential acquirors who
had declined to proceed with a transaction with the Company
to reflect certain factors which potential acquirors might
consider in estimating the value of the Company ("Case II").
Case II assumed lower compound annual growth rates and
EBITDA margins for the Company than Case I. Specifically,
Case I did not take into account adjustments for certain
risks and other factors, including the fact that an
increasing amount of the Company's revenue growth was
projected to result from new products, the risks inherent in
successfully marketing new products, the risks presented by
the recently adopted Balanced Budget Act of 1997 (which has
not been fully implemented), the risks of other changes in
reimbursement policy or increased pricing pressure from the
Company's customers, the risks of increased shift in
customer preference from high margin products to lower
margin products, and potential increases in regional and
corporate overhead expenses and general inflation."
5. The last sentence of the paragraph entitled
"Purchasers" under "SPECIAL FACTORS -- Position of
Purchasers and Dr. James Leininger Regarding Fairness of the
Transactions" contained in the Offer to Purchase is hereby
deleted and the following is hereby inserted in its place:
"With respect to the fairness of the Per Share Amount from a
financial point of view, the Purchasers noted that the
multiples of certain financial data implied for the Company
based on the Per Share Amount were generally within the
ranges of corresponding multiples derived for comparable
companies and transactions. The Purchasers also noted that
the Per Share Amount was within the estimated equity
reference range for the Company based on a discounted cash
flow analysis after taking into account adjustments for
certain risks and other factors, including the fact that an
increasing amount of the Company's revenue growth was
projected to result from new products, the risks inherent in
successfully marketing new products, the risks presented by
the recently adopted Balanced Budget Act of 1997 (which has
not been fully implemented), the risks of other changes in
reimbursement policy or increased pricing pressure from the
Company's customers, the risks of increased shift in
customer preference from high margin products to lower
margin products, and potential increases in regional and
corporate overhead expenses and general inflation. Finally,
the Purchasers noted that the Per Share Amount had been
agreed upon through arms-length negotiations following an
extensive auction process. The views of the Purchasers were
based on the totality of factors and analyses considered,
with no single factor or analysis being dispositive of the
Purchasers' fairness determination and should not be
construed as a recommendation by them to the Company's
shareholders to tender their Shares or vote to approve the
Transaction Agreement and the Merger."
6. The last sentence of the paragraph entitled "Dr. James
Leininger" under "SPECIAL FACTORS -- Position of Purchasers
and Dr. James Leininger Regarding Fairness of the
Transactions" contained in the Offer to Purchase is hereby
deleted and the following is hereby inserted in its place:
"With respect to the fairness of the Per Share Amount from a
financial point of view, Dr. James Leininger noted that the
multiples of certain financial data implied for the Company
based on the Per Share Amount were generally within the
ranges of corresponding multiples derived for comparable
companies and transactions. Dr. James Leininger also noted
that the Per Share Amount was within the estimated equity
reference range for the Company based on a discounted cash
flow analysis after taking into account certain risks and
other factors, including the fact that an increasing amount
of the Company's revenue growth was projected to result from
new products, the risks inherent in successfully marketing
new products, the risks presented by the recently adopted
Balanced Budget Act of 1997 (which has not been fully
implemented), the risks of other changes in reimbursement
policy or increased pricing pressure from the Company's
customers, the risks of increased shift in customer
preference from high margin products to lower margin
products, and potential increases in regional and corporate
overhead expenses and general inflation. Finally, the
Purchasers noted that the Per Share Amount had been agreed
upon through arms-length negotiations following an extensive
auction process. The views of Dr. James Leininger were
based on the totality of factors and analyses considered,
with no single factor or analysis being dispositive of Dr.
James Leininger's fairness determination and should not be
construed as a recommendation by him to the Company's
shareholders to tender their Shares or vote to approve the
Transaction Agreement and the Merger."
7. The paragraph under "SPECIAL FACTORS -- Cautionary
Statement Concerning Forward-Looking Statements" contained
in the Offer to Purchase, is hereby amended and restated to
read in its entirety as follows:
"Certain matters discussed herein are forward-looking
statements that involve risks and uncertainties. Forward-
looking statements include the projections set forth below
(collectively, the "Projections"). Such information has been
included in this Offer to Purchase for the limited purpose
of giving the Company's shareholders access to financial
projections made by the Company's management in connection
with the Transactions and the Debt Financing. Such
information was prepared by the Company's management for
internal use and not with a view to publication. The
Projections were based on assumptions concerning the
Company's products and business prospects in 1997 through
2002, including the assumption that the Company would
continue to operate under the same ownership structure as
then existed. The Projections were also based on other
revenue and operating assumptions. Information of this type
is based on estimates and assumptions that are inherently
subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult
to predict and many of which are beyond the Company's
control. Accordingly, there can be no assurance that the
projected results would be realized or that actual results
would not be significantly higher or lower than those set
forth above. In addition, the Projections were not prepared
with a view to public disclosure or compliance with the
published guidelines of the Securities and Exchange
Commission (the "Commission"), or the guidelines established
by the American Institute of Certified Public Accountants
regarding projections and forecasts and are included in this
Offer to Purchase only because such information was made
available to Purchasers by the Company. Neither Purchasers'
nor the Company's independent accountants have examined,
compiled or applied any agreed upon procedures to this
information and, accordingly, assume no responsibility for
this information."
8. The lead-in paragraph under "THE TENDER OFFER --
Section 11. Certain Conditions to the Offer" contained in
the Offer to Purchase is hereby amended and restated to read
in its entirety as follows:
"Notwithstanding any other provision of the Offer, the
Company shall not be required to accept for payment or pay
for any Shares tendered pursuant to the Offer, if (v) the
Minimum Condition shall not have been satisfied prior to the
Expiration Date, (w) any applicable waiting period under the
HSR Act (as defined herein) shall not have expired or been
terminated prior to the expiration of the Offer, (x) the
Debt Financing shall not have been obtained prior to the
Expiration Date, (y) the Closing shall not have occurred
prior to the Expiration Date or (z) at any time on or
after the date of the Transaction Agreement, and prior to
the Expiration Date, any of the following conditions shall
exist:"
SIGNATURE
After due 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.
Date: November 3, 1997
KINETIC CONCEPTS, INC.
By: /s/ DENNIS E. NOLL
-----------------------
Name: Dennis E. Noll
Title: Senior Vice President
