<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________________
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
_______________________
MEDQUIST INC.
(Name of Subject Company)
MEDQUIST INC.
(Name of Person(s) Filing Statement)
Common Stock, No Par Value
(Title of Class of Securities)
584949101
(CUSIP Number of Class of Securities)
_______________________
John M. Suender, Esq.
Senior Vice President, General Counsel and Secretary
MedQuist Inc.
Five Greentree Centre, Suite 311
Marlton, New Jersey 08053
(856) 596-8877
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
Copy to:
James D. Epstein, Esq.
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, Pennsylvania 19103-2799
(215) 981-4000
[x] Check the box if the following relates solely to preliminary
communications made before the commencement of a tender offer
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PHILIPS ELECTRONICS AGREES TO ACQUIRE
60 PERCENT OF MEDQUIST SHARES AT $51 PER SHARE
- Partnership with Philips Creates
New Technology Platform for Transcription Services -
Marlton, N.J., and Amsterdam, Netherlands - - May 23, 2000 - - MedQuist, Inc.
(Nasdaq: MEDQ) and Koninklijke Philips Electronics NV of the Netherlands (AEX:
PHI, NYSE: PHG) announced today that they have entered into an agreement whereby
Philips will make a tender offer for approximately 60 percent of MedQuist's
fully diluted common stock at a cash price of $51 per share. The transaction is
subject to Philips acquiring 60 percent of the fully diluted shares of common
stock of MedQuist, as well as the expiration of the Hart-Scott-Rodino waiting
period and other customary conditions. It is expected that after completion of
the transaction MedQuist's shares will continue to trade on NASDAQ under the
symbol "MEDQ".
MedQuist is a U.S.-based provider of outsourced medical record transcription
services with sales of approximately $330 million in 1999. Philips' investment
is intended to lead to the transformation of MedQuist into a multinational,
technology-based medical document services provider over broadband networks,
with accelerated growth. MedQuist plans to roll out Philips' speech and other
technology, enabling significant productivity improvements in the direct
conversion of dictated medical records into written text.
Philips Medical Systems is a global leader in diagnostic imaging and services,
incorporating advanced x-ray, magnetic resonance, computed tomography,
ultrasound and imaging information systems to provide the data necessary for the
most effective patient care. MedQuist occupies a strong adjacent position in
the hospital's information chain.
"This acquisition moves us further into healthcare services, which is in line
with our stated strategy, and provides us with a significant growth opportunity,
as well as leveraging our speech technology capability," said Cor Boonstra, CEO
of Philips. "MedQuist has a market leadership position and a strong management
team which enables it to become an effective early adopter of automated
dictation. We have confidence in the current management team's ability to
continue to drive MedQuist forward."
David A. Cohen, Chairman and Chief Executive Officer of MedQuist said, "We are
delighted to have Philips as our partner as the combination of our client base
and their world-class technology and experience is extremely powerful. As a
result of this partnership we expect to introduce Philips' speech and other
technologies to our 2,400 U.S. healthcare accounts, and Philips anticipates
accelerating our existing plans to expand into Europe, where Philips Medical
Systems and Philips Speech Processing have strong existing hospital
relationships."
Mr. Cohen continued, "During the coming year we will utilize Philips
technologies to begin the transition to our new digital transcription platform,
via regional data centers, providing us with additional growth opportunities,
generating revenue and cost synergies, and enabling us to enter important new
markets. Based around a small number of large regional data centers, this new
technology will create additional capacity, allowing us to take advantage of the
significant continuing growth in our market, as well as the opportunity to
access new revenue sources such as coding and data mining. With Philips as our
technological partner and major shareholder, we are confident in our ability to
undertake this important step in the future of our company."
Mr. Cohen added, "The benefits of this transaction provide us with a real
opportunity to use state-of-the-art and best-of-breed technology to expand our
business and become a leader in the provision of a much wider area of
technological services to the healthcare sector. The transaction structure we
have agreed also allows MedQuist shareholders to realize a significant premium
over the recent trading price for the majority of their holdings, while sharing
in the additional long-term growth to be generated once our transition is
complete."
The two companies also plan to expand MedQuist's current range of outsourced
transcription services to include in-house speech recognition software sales and
Application Service Provider models.
As part of the transaction, MedQuist and Philips have also entered into a
license agreement for the joint development and implementation of speech
recognition technology. The more efficient use of MedQuist's transcription
workforce, via the use of Philips Speech Processing's technology, and the
recruitment of more widely available "editors", is anticipated to lead to
accelerated revenue growth (already 20% per year on average), due to the fact
that growth has been limited by the availability of qualified transcriptionists.
Consequently, Philips and MedQuist do not expect any workforce reductions as a
result of the speech technology rollout, which will take place between 2001 and
2005.
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UBS Warburg LLC acted as financial advisor to MedQuist and Goldman Sachs
International served as financial advisor to Royal Philips Electronics.
For further information, please contact:
For Philips:
Ben Geerts, Corporate Communications, tel: +31 20 5977215
Email: [email protected]
----------------------
For MedQuist:
John Emery, Chief Financial Officer, tel: 856-810-8000, x-4418
Email: [email protected]
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MedQuist is the leading U.S. provider of electronic medical transcription
services, the process by which dictation is converted into a medical report.
Through the company's nationwide network of more than 8,000 trained
transcriptionists, broadband telecommunication systems and interface with health
care providers' computer systems, MedQuist shortens its customers billing cycles
and reduces overhead and other administrative costs.
Philips Medical Systems is a leading supplier of diagnostic imaging systems and
related services worldwide, represented in more than 100 countries and employing
11,800 people. A worldwide network of research and development and sales and
service organizations backs Philips' products. Philips Medical Systems is part
of Royal Philips Electronics, one of the world's largest electronics companies.
Additional information on Philips Medical Systems can be obtained by accessing
its homepage at http://www.medical.philips.com.
Royal Philips Electronics of the Netherlands is one of the world's biggest
electronics companies and Europe's largest, with sales of $33.5billion (EUR 31.5
billion) in 1999. Its 226,900 employees in more than 60 countries are active in
the areas of lighting, consumer electronics, domestic appliances, components,
semiconductors, medical systems, and IT services (Origin). Philips is quoted on
the NYSE (symbol: PHG), London, Frankfurt, Amsterdam (symbol: PHI) and other
stock exchanges. News from Philips is located at www.news.philips.com.
The agreement obligates Philips to commence the tender offer within seven
business days and contains customary termination provisions. Philips and
MedQuist have also entered into a Governance Agreement, under which Philips will
nominate a majority of directors to MedQuist's board. Mr. Cohen will remain
MedQuist's Chairman of the Board and Chief Executive Officer, and John A.
Donohoe will continue as President and Chief Operating Officer and a member of
the Board. The Board will also consist of three independent directors currently
on MedQuist's Board and who will serve as a supervisory committee to review
transactions between Philips and MedQuist. This agreement also includes
restrictions on Philips' ability to purchase and sell MedQuist shares.
The 60 percent of MedQuist's fully diluted shares to be acquired by Philips in
the transaction for $51 per share in cash comprises 57 percent to be acquired
pursuant to the tender offer to all shareholders and 3 percent which Philips has
agreed to acquire directly from a number of the senior management of MedQuist.
The shares to be acquired directly from senior management represent
approximately 37 percent of their combined holdings, and those involved have
agreed not to sell their remaining holdings for at least two years. The
transaction is subject to MedQuist shareholders tendering sufficient shares such
that Philips will be able to acquire at least 60 percent of MedQuist's fully
diluted common stock.
This press release contains certain statements by or relating to MedQuist and
the transaction with Philips that are neither reported financial results nor
other historical information. These statements are forward-looking statements
within the meaning of the safe-harbor provisions of the U.S. federal securities
laws, and include statements of market estimates, growth and expansion plans and
opportunities, potential revenue and cost synergies, and the benefits of new
technologies. These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in the forward looking statements. Many of these risks and
uncertainties relate to factors that are beyond MedQuist's ability to control or
estimate precisely, including, without limitation, future market and economic
conditions; the behavior of other market participants; MedQuist's ability to
implement and achieve market acceptance of new technology platforms, including
speech processing technology; MedQuist's ability to successfully integrate
acquired businesses and achieve anticipated synergies; MedQuist's ability to
recruit and retain qualified transcriptionists and other employees; the impact
of new services or products or the demand for MedQuist's services; and
MedQuist's ability to expand its customer base. These and other risk factors
are detailed in MedQuist's reports, including its Form 10-K for the year ended
December 31, 1999 filed with the SEC.
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<PAGE>
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release. MedQuist does
not undertake any obligation to publicly release any revisions to these forward-
looking statements to reflect events or circumstances after the date of these
materials.
The tender offer described in this announcement for outstanding shares of common
stock of MedQuist has not yet commenced, and this announcement is neither an
offer to purchase nor a solicitation of an offer to sell securities or any
recommendation with respect to the tender offer. The tender offer will be made
only through the Offer to Purchase and related Letter of Transmittal. We urge
MedQuist shareholders to read the following documents, when they become
available, regarding the tender offer because they contain important
information: (i) Philips' Tender Offer Statement on Schedule TO, including the
Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery; and
(ii) MedQuist's Solicitation/Recommendation Statement on Schedule 14D-9. These
documents will be filed with the Securities and Exchange Commission when the
tender offer commences. When these and other documents are filed with the SEC,
they may be obtained free of charge at the SEC's website at www.sec.gov.
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<PAGE>
Conference Call Script for Philips Announcement to MedQuist Employees
- ---------------------------------------------------------------------
Good afternoon everyone and thank you for attending our conference call. This
is David Cohen, MedQuist's Chairman and Chief Executive Officer. I am speaking
with you today from MedQuist's Marlton, New Jersey headquarters. With me today
are John Donohoe, our President and Chief Operating Officer and other corporate
officers based in the Marlton office.
I know that John Donohoe has asked you to be on this call today to review our
interim financial results; however I have more exciting news that I would like
to communicate.
I am extremely pleased to announce that today MedQuist and Royal Philips
Electronics have entered into an agreement where Philips will make a tender
offer for approximately 60 percent of MedQuist common stock at a cash price of
$51 per share. Philips is one of the world's largest electronics companies,
with sales of over $33.5 billion and 226 thousand employees. With this
transaction, Philips is committing over $1 billion of its capital and its
leading global technology to help transform MedQuist into a multi-national
technology-based medical document services provider over broadband networks.
We believe this is a terrific deal for MedQuist employees, customers and
shareholders. First let me say that nobody's job will change as a result of
this transaction. Management will not change and Philips has said there will be
no operational interference from Philips. MedQuist needs good management and
employees more than ever, and Philips recognizes that no one knows how to run
MedQuist's business better than MedQuist management and employees.
I want to repeat how excited we are to be teaming up with a technology partner
of Philip's caliber, to help us grow into a major U.S. and worldwide force in
healthcare information technology.
I also want to say how proud we are of the MedQuist team and all the people who
have helped us grow from a $20 million market capitalization company in 1994 to
a company valued in excess of $1.5 billion.
Those of you who own MedQuist stock may speak with your Regional Vice Presidents
to determine how this transaction may affect your MedQuist shareholdings.
This transaction is being announced publicly as we speak. Please make sure that
you communicate what you have heard this afternoon to your employees as soon as
possible.
Additional details about this transaction will be available shortly through your
Regional Vice Presidents.
Thank you. Our general counsel now must read to you a detailed notice required
for legal reasons.
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<PAGE>
This presentation contains certain statements by or relating to MedQuist and the
transaction with Philips that are neither reported financial results nor other
historical information. These statements are forward-looking statements within
the meaning of the safe-harbor provisions of the U.S. federal securities laws.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed in the
forward looking statements. These and other risk factors are detailed in
MedQuist's reports, including its Form 10-K for the year ended December 31, 1999
filed with the SEC. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this press
release. MedQuist does not undertake any obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of these materials.
The tender offer described in this announcement for outstanding shares of common
stock of MedQuist has not yet commenced, and this announcement is neither an
offer to purchase nor a solicitation of an offer to sell securities or any
recommendation with respect to the tender offer. The tender offer will be made
only through the Offer to Purchase and related Letter of Transmittal. We urge
MedQuist shareholders to read the following documents, when they become
available, regarding the tender offer because they contain important
information: (i) Philips' Tender Offer Statement on Schedule TO, including the
Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery; and
(ii) MedQuist's Solicitation/Recommendation Statement on Schedule 14D-9. These
documents will be filed with the Securities and Exchange Commission when the
tender offer commences. When these and other documents are filed with the SEC,
they may be obtained free of charge at the SEC's website at www.sec.gov.
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