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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
STATEMENT ON
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
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AMENDMENT NO. 2
SHERIDAN HEALTHCARE, INC.
(NAME OF SUBJECT COMPANY)
VESTAR/SHERIDAN, INC.
VESTAR/SHERIDAN HOLDINGS, INC.
VESTAR/SHERIDAN INVESTORS, LLC
(BIDDER)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLES OF CLASSES OF SECURITIES)
------------------------
823781109
823781208
(CUSIP NUMBERS OF CLASSES OF SECURITIES)
------------------------
JAMES L. ELROD, JR.
VESTAR/SHERIDAN INVESTORS, LLC
245 PARK AVENUE, 41ST FLOOR
NEW YORK, NY 10167
TELEPHONE: (212) 351-1600
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
COPY TO:
PETER J. GORDON, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
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This Amendment No. 2 amends and supplements the Tender Offer Statement on
Schedule 14D-1 and Statement on Schedule 13D (the "Schedule 14D-1/13D") filed on
March 31, 1999 relating to the offer by Vestar/Sheridan, Inc., (formerly known
as Vestar/Calvary, Inc.) a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of Vestar/Sheridan Holdings, Inc.(formerly known as Vestar/Calvary
Holdings, Inc.), a Delaware corporation ("Parent") and a wholly owned subsidiary
of Vestar/Sheridan Investors, LLC (formerly known as Vestar/Calvary Investors,
LLC) ("Holdings"), a Delaware limited liability company, to purchase for cash
all of the outstanding shares of Common Stock, par value $0.01 per share, and
Class A Common Stock, par value $0.01 per share (collectively, the "Shares"), of
Sheridan Healthcare, Inc., a Delaware corporation (the "Company"), at a purchase
price of $9.25 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated as of March 31, 1999 (the "Offer to Purchase"), and in the related Letter
of Transmittal (which, together with the Offer to Purchase, as amended from time
to time, constitute the "Offer").
All capitalized terms used herein and not defined herein shall have the
meanings set forth in the Offer to Purchase.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
Items (3)(a) and (b) of the Schedule 14D-1/13D are hereby amended and
supplemented as follows:
On April 21, 1999, the Parent distributed a Supplement to the Offer to
Purchase dated April 21, 1999, the full text of which is set forth in Exhibit
(a)(9) and incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Items 4(a) and (b) of the Schedule 14D-1/13D are hereby amended and
supplemented as follows:
On April 21, 1999, the Parent distributed a Supplement to the Offer to
Purchase dated April 21, 1999, the full text of which is set forth in Exhibit
(a)(9) and incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
Items 5(a)-(e) of the Schedule 14D-1/13D are hereby amended and
supplemented as follows:
On April 21, 1999, the Parent distributed a Supplement to the Offer to
Purchase dated April 21, 1999, the full text of which is set forth in Exhibit
(a)(9) and incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
Item 7 of the Schedule 14D-1/13D is hereby amended and supplemented as
follows:
On April 21, 1999, the Parent distributed a Supplement to the Offer to
Purchase dated April 21, 1999, the full text of which is set forth in Exhibit
(a)(9) and incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
Items 10(b), (c), (d) and (f) of the Schedule 14D-1/13D are hereby amended
and supplemented as follows:
On April 21, 1999, the Parent distributed a Supplement to the Offer to
Purchase dated April 21, 1999, the full text of which is set forth in Exhibit
(a)(9) and incorporated herein by reference.
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ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(9) Supplement to the Offer to Purchase dated April 21, 1999.
(a)(10) Press Release issued by the Company on April 21, 1999.
(c)(16) Amendment No. 1, dated as of April 20, 1999, to the
Agreement and Plan of Merger, dated as of March 24, 1999,
among Parent, Purchaser and the Company (included as
Schedule VI to exhibit (a)(9)).
(c)(17) Memorandum of Understanding, dated April 20, 1999, by and
among Stanley Henner, Robert Betz, Bob Schoenfield, and on
behalf of all stockholders of Sheridan Healthcare, Inc.,
Vestar Capital Partners, Inc., Vestar/Sheridan, Inc.,
Vestar/Sheridan Holdings, Inc., Sheridan Healthcare, Inc.,
Mitchell Eisenberg, Lewis Gold, Henry E. Golembesky, Jamie
Hopping and Neil A. Natkow.
</TABLE>
3
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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.
VESTAR/SHERIDAN INVESTORS, LLC
By: VESTAR CAPITAL PARTNERS III,
L.P.,
------------------------------------
its Sole Member
By: VESTAR ASSOCIATES III,
L.P.,
------------------------------------
its General Partner
By: VESTAR ASSOCIATES CORPORATION
III
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its General Partner
By: /s/ JAMES L. ELROD, JR.
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Name: James L. Elrod, Jr.
Title: Vice President
VESTAR/SHERIDAN HOLDINGS, INC.
By: /s/ JAMES L. ELROD, JR.
------------------------------------
Name: James L. Elrod, Jr.
Title: President
VESTAR/SHERIDAN, INC.
By: /s/ JAMES L. ELROD, JR.
------------------------------------
Name: James L. Elrod, Jr.
Title: President
Date: April 21, 1999
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
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<S> <C> <C>
(a)(9) Supplement to the Offer to Purchase dated April 21, 1999.
(a)(10) Press Release issued by the Company on April 21, 1999.
(c)(16) Amendment No. 1, dated as of April 20, 1999, to the
Agreement and Plan of Merger, dated as of March 24, 1999,
among Parent, Purchaser and the Company (included as
Schedule VI to exhibit (a)(9)).
(c)(17) Memorandum of Understanding, dated April 20, 1999, by and
among Stanley Henner, Robert Betz, Bob Schoenfield, and on
behalf of all stockholders of Sheridan Healthcare, Inc.,
Vestar Capital Partners, Inc., Vestar/Sheridan, Inc.,
Vestar/Sheridan Holdings, Inc., Sheridan Healthcare, Inc.,
Mitchell Eisenberg, Lewis Gold, Henry E. Golembesky, Jamie
Hopping and Neil A. Natkow
</TABLE>
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SUPPLEMENT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND CLASS A COMMON STOCK
OF
SHERIDAN HEALTHCARE, INC.
AT
$9.25 NET PER SHARE
BY
VESTAR/SHERIDAN, INC.
A WHOLLY OWNED SUBSIDIARY OF
VESTAR/SHERIDAN HOLDINGS, INC.
A WHOLLY OWNED SUBSIDIARY OF
VESTAR/SHERIDAN INVESTORS, LLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON TUESDAY, APRIL 27, 1999, UNLESS THE OFFER IS EXTENDED.
To: The Stockholders
of Sheridan Healthcare, Inc.
This Supplement (the "Supplement") to the Offer to Purchase dated March 31,
1999 (the "Original Offer to Purchase") updates and/or supplements certain
information contained therein. Capitalized terms used but not otherwise defined
herein shall have the meanings set forth in the Original Offer to Purchase.
Sections referred to herein correspond to those sections set forth in the
Original Offer to Purchase.
On April 20, 1999, the parties to the Merger Agreement executed an
amendment thereto (the "Amendment"). The Amendment reduces the Termination Fee
from $6,400,000 to $5,000,000.
The twelfth and thirteenth paragraphs of "SPECIAL FACTORS -- Background of
the Transactions" are hereby amended and restated in their entirety as follows:
"During this time, Vestar continued to review the transaction and conduct
its due diligence review of the Company. Based on the results of Vestar's due
diligence review, Mr. Elrod telephoned Dr. Eisenberg on March 14, 1999 to tell
him that the results of Vestar's due diligence review did not support
consummating a transaction at a price of $11.50 per Share but that Vestar was
willing to consider a transaction at a price of approximately $9.00 per Share.
Robert L. Rosner of Vestar subsequently had discussions with the Financial
Advisors outlining the results of Vestar's due diligence review and Vestar's
rationale for proposing to reduce the per Share price that would be offered to
the Company's stockholders. Such results included (1) Vestar's conclusion that
the assumptions underlying the Company's projections set forth in notes 1 and 2
on page 45 of this Offer to Purchase were not achievable in light of, among
other things, the Company's past experience in effecting acquisitions and the
fact that the Company did not achieve its projected financial performance for
the fiscal year ended December 31, 1998 (see "THE TENDER OFFER -- Section 6"
("Certain Information Concerning the Company -- Certain Projections and Other
Information")), (2) Vestar's belief that the capital expenditure and
administrative budgets of the Company for 1999 and future years would need to be
increased, (3) Vestar's conclusion, based on the advice of its outside
accounting advisors, that the goodwill amortization periods applicable to
physician practice management companies are likely to be reduced in the
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future, which would significantly negatively impact earnings per share for such
companies, including the Company, and (4) the continued significant
deterioration in the valuation of, and financing prospects for, physician
practice management companies in the capital markets. After various discussions
among Vestar, the Company's management, the Financial Advisors and others,
Vestar agreed to submit in writing its revised proposal to consummate a merger
transaction, at its current price per Share of $9.25 and as it is currently
structured, and the Company's representatives agreed to present that proposal to
the Company Board for its consideration.
The Company's Board met on March 16, 1999 to review with the Company's
management and financial and legal advisors the terms and conditions of the
revised proposal. The Company Board was made aware of the results of Vestar's
due diligence review and Vestar's rationale for reducing the transaction price.
After reviewing with management in detail such results and rationale, and the
factors underlying Vestar's analysis, the Company Board concluded that it did
not materially disagree with Vestar's analysis. The Company Board queried the
Company's management and the Financial Advisors as to the likelihood that
another suitor would pursue a transaction with the Company on more favorable
terms. The Financial Advisors indicated that no other potential acquiror had
expressed interest in the Company to the extent that Vestar had and that, in
their opinion, beginning the sale process again or pursuing additional leads was
unlikely to result in a proposal that would be more advantageous to the
Company's stockholders than Vestar's revised proposal. In this regard, the
Company Board, the Financial Advisors and the Company's management were mindful
that another party had submitted on February 19, 1999 an offer to acquire all
outstanding Shares in a one-step merger transaction at a price to be determined
based on an enterprise valuation of the Company of $150 million on a debt-free
basis (including unspecified contingent obligations not on the Company's balance
sheet), representing what such party indicated was a multiple of 7.4 times
estimated 1998 EDITDA of the Company of $20.4 million. However, such party's
accounting, tax, insurance, regulatory and other advisors had not conducted a
due diligence review of the Company, the valuation of the Company's contingent
obligations would be based on such due diligence, the Company Board believed
that such party's offer did not reflect the factors which had led Vestar to
reduce the price per Share it was willing to pay, such party's offer was
conditioned, among other things, on the completion of due diligence and the
retention of senior management of the Company on terms satisfactory to such
party, and the Company's 1998 EBITDA was $19.8 million. In light of the timing
of Vestar's proposed transaction, Vestar's willingness to purchase all
outstanding Shares, Vestar's willingness to structure the transaction as a
tender offer followed by a merger, the delay and uncertainty that would be
entailed in beginning the sale process again with another party due to, among
other things, the need for such party to complete a due diligence review of the
Company and to negotiate definitive agreements with the Company and its senior
management, and the advice of the Financial Advisors that the other party's
offer and Vestar's revised proposal were substantially similar in respect of
their valuation of the Company, the Company Board instructed management to
continue negotiations with Vestar."
"SPECIAL FACTORS -- Recommendation of the Board of Directors; Fairness of
the Transactions" is hereby amended and restated in its entirety as follows:
"RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE TRANSACTIONS.
The Company. At a meeting held on March 24, 1999, the Company Board
unanimously (with the interested directors abstaining) (i) determined that the
Offer and the Merger, taken together, are fair to and in the best interests of
the Company's unaffiliated and affiliated stockholders, (ii) approved the Merger
Agreement and the transactions contemplated thereby, and (iii) decided to
recommend to the Company's stockholders that they accept the Offer and tender
their Shares pursuant to the Offer and adopt the Merger Agreement.
In reaching its conclusion, the Company Board considered a number of
factors, including the following:
1. The fact that Vestar's proposal represented the best offer received
by the Company Board after the Financial Advisors had contacted a select
group of potential purchasers who had been given an opportunity to receive
confidential information about the Company and either declined to submit a
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proposal or submitted a proposal that the Company Board considered to be
less attractive to the Company's stockholders than the Vestar proposal.
2. The fact that the cash consideration that the Company's
stockholders would receive for each Share under the Vestar proposal was at
a premium to the Company's then current market price.
3. The fact that the Company Board had explored the possibility of
pursuing various other transactions that would secure the necessary capital
to finance future acquisitions in fulfillment of the Company's growth
strategy and no alternative transaction was as favorable to the Company's
stockholders as the Vestar proposal.
4. The Company's business, prospects, financial condition, current
business strategy and competitive position in the healthcare industry, as
well as the current and historical market prices of Shares and the going
concern value of the Company. (See "SPECIAL FACTORS -- Opinions of the
Financial Advisors" for a description of the presentation and analyses
presented to the Company Board by its Financial Advisors.)
5. The presentations and analyses of its Financial Advisors described
in "SPECIAL FACTORS -- Opinions of the Financial Advisors," which the
Company Board accepted and adopted, and the fairness opinions of its
Financial Advisors described in "Special Factors -- Opinions of the
Financial Advisors."
6. The terms and conditions of the Merger Agreement, including the
fact that the Offer is subject to various conditions, including the
Financing Condition, and that the Merger Agreement contemplates the payment
or reimbursement to Parent and Purchaser of certain fees and expenses
(including financing commitment fees and related expenses) and a
termination fee under certain circumstances. In analyzing the conditions to
this Offer, the Board of Directors considered, among other things, the
risks of failing to consummate the Offer and the Merger. In assessing the
expense payment and termination fee provision, the Board of Directors
recognized that its effect would be to increase by the amount of such fees
and expenses the cost of acquiring the Company by a third party other than
the Purchaser.
7. The nature of the financing commitments received by Parent and
Purchaser with respect to the Offer and the Merger, including the identity
of the institutions providing such commitments and their proven experience
in consummating transactions such as the Offer and the Merger and the
conditions to the obligations of such institutions to fund such
commitments, as well as the fact that consummation of the Offer and the
Merger will not be dependent on the ability of Parent and the Purchaser to
raise funds through the high yield debt or other securities market.
8. The likelihood of soliciting a firm offer from a third party to
acquire the Company at a price in excess of that to be paid in the Offer
and the Merger, the timing of the receipt of any such offer, and the
possible consequences of unsuccessfully seeking to solicit such an offer.
9. The results of Vestar's due diligence review and the reduction by
Vestar of the price to be paid for Shares in its proposal.
10. The market prices of other companies in the healthcare industry,
the market's increasingly unfavorable perception of physician practice
management companies, the fact that the market price of Shares had declined
notwithstanding that the Company had met or exceeded industry analysts'
expectations as to earnings for the last nine fiscal quarters (increasing
earnings by approximately $.01 per share per quarter during that time), the
belief of the Company Board that it was unlikely that the Company could
sustain that growth without securing additional sources of capital to
finance future acquisitions in fulfillment of the Company's growth
strategy, and the belief of the Company Board that the failure by the
Company to sustain that growth would lead in the current market environment
to a further, and very possibly a material, decline in the market price of
Shares.
11. In addition to the extrinsic factors described above, the recent
inability of other companies in the Company's industry to complete proposed
business combination transactions due to, among other things, the inability
to obtain financing and negative trends in the market prices of shares of
stock of healthcare service companies, and the adverse effect of such
factors on the market valuation of the Company and its
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ability to obtain financing. In particular, the Company Board recognized
that the Company no longer had the ability to issue equity securities to
finance acquisitions without an unacceptable dilutive effect on its
stockholders and the Company's ability to incur debt to finance
acquisitions in compliance with the negative covenants in its credit
agreements had been substantially and adversely affected.
12. The Company Board's belief that, in light of the factors described
above, if it did not pursue the Offer and the Merger, the market price of
Shares would likely continue to decline and it would be increasingly
difficult for the Company to enable its stockholders to receive $9.25 per
Share in cash for all of their Shares.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Company Board did not find it
practicable to, and did not, qualify or otherwise assign relative weights to the
individual factors considered in reaching its determinations. Because only the
disinterested directors of the Company voted on the Vestar proposal and because
of the engagement of the Financial Advisors and outside legal counsel by the
Company Board, the Company Board believes that the transactions are procedurally
fair to the unaffiliated stockholders of the Company and did not consider it
necessary to retain an unaffiliated representative to act solely on behalf of
the unaffiliated stockholders of the Company for the purpose of negotiating the
terms of the Merger Agreement. As discussed above, the Merger Agreement does not
require the transactions contemplated thereby to be approved by a majority of
the unaffiliated stockholders of the Company.
Purchaser, Parent and Holdings. Purchaser, Parent and Holdings regard the
acquisition of the Company as an attractive investment opportunity because they
believe that the Company's future business prospects are favorable. Although the
investment will involve a substantial risk to holders of Parent Common Stock,
Parent believes that the long-term value of the equity investment could
appreciate significantly. Purchaser, Parent and Holdings believe that the price
per share offered hereby and the Merger Consideration is fair to the Company's
unaffiliated and affiliated stockholders. In reaching this conclusion, they have
taken into consideration the recent and historical prices of the Shares, see
"The Tender Offer -- Section 5" ("Price Range of Shares; Dividends"), and their
due diligence review of the Company. Purchaser, Parent and Holdings also believe
that the transactions are procedurally fair to the unaffiliated stockholders of
the Company. Their conclusions as to the fairness of the Offer and the Merger
and the procedural fairness of the transactions are supported by the conclusions
of the Company Board and by the fact that the terms of the transactions were
negotiated with the Company Board and its representatives at a time when
Purchaser, Parent and Holdings did not beneficially own any Shares and after
representatives of the Company had solicited proposals to purchase the Company
from third parties. Purchaser, Parent and Holdings did not assign a particular
weight to any one factor."
"SPECIAL FACTORS -- Opinions of the Financial Advisors" is hereby amended
and supplemented as follows:
The fifth paragraph of the subsection entitled "Opinion of Bowles Hollowell
Conner" is hereby amended and supplemented to include the following sentence at
the end thereof:
"Bowles Hollowell Conner has consented to the use of its opinion in the Schedule
14D-1 and the Schedule 14D-9."
The subsection entitled "Historical Stock Price Analysis" within the
subsection entitled "Opinion of Bowles Hollowell Conner" is hereby amended and
supplemented to include the following at the end thereof:
"Over both time periods reviewed, the Company's Common Stock, the
Multi-Specialty Comparable Companies and the Single Specialty Comparable
Companies appreciated less on a percentage basis than did the broader Standard &
Poor's 500 and Russell 2000 market indexes. The price performance of the
Company's Common Stock and stocks represented by the Multi-Specialty and Single
Specialty Comparable Companies was relevant to Bowles Hollowell Conner's
analysis of the fairness of the Merger in that the Company contemplated having
access to capital to realize its growth plans and one of the factors, among
many, to be considered by potential providers of capital will be historical
stock price performance of the Company and comparable companies relative to
broader indexes."
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<PAGE> 5
The subsection entitled "Opinion of Bowles Hollowell Conner" is hereby
amended and supplemented to include the following paragraph following the
subsection entitled "Healthcare LBO Premium Analysis":
"Bowles Hollowell Conner noted that the comparable acquisition analysis and
the discounted cash flow analyses assuming acquisitions at 5.0x EBITDA and 6.0x
EBITDA purchase multiples resulted in ranges of implied per Share equity values
that exceeded or partially exceeded the expected merger consideration. Bowles
Hollowell Conner also noted that the comparable company analysis, the earnings
impact analysis and the discounted cash flow analysis assuming no acquisitions
resulted in ranges of implied per Share equity values that were lower than the
expected merger consideration. The low and high ends of the range of implied per
Share equity values in the comparable acquisition analysis were established by
comparable transaction data for multi-specialty physician practice management
companies and single specialty physician practice management companies,
respectively. Bowles Hollowell Conner considered the Company more comparable to
multi-specialty physician practice management organizations and noted that the
expected merger consideration exceeded the end of the range established by
multi-specialty physician practice management companies of $3.87 per Share. The
ranges of implied per Share equity value resulting from the discounted cash flow
analyses assuming acquisitions at 5.0x EBITDA and 6.0x EBITDA purchase multiples
contemplated the Company having access to adequate capital to effect such
acquisitions and the availability of suitable practices at these purchase
multiples. In light of the Company's lack of, and likely difficulty in raising,
additional capital adequate to fund its growth and acquisition plans were the
Company not to effect the Merger, and the Company's recent experience in paying
higher acquisition multiples in the acquisitions it effected, Bowles Hollowell
Conner believed that the discounted cash flow analyses it performed, taken
together with all its analyses, supported its conclusion that the merger
consideration was fair, from a financial point of view, to the Company's
unaffiliated stockholders."
The subsection entitled "Opinion of Bowles Hollowell Conner" is hereby
further amended by deleting the word "solely" from the seventh line of the
existing second paragraph following the subsection entitled "Healthcare LBO
Premium Analysis" and inserting the parenthetical "(x)" prior to the word "1.0%"
on the fourth line of the existing fourth paragraph following the subsection
entitled "Healthcare LBO Premium Analysis".
The subsection entitled "Discounted Cash Flow Valuation of the Company"
within the subsection entitled "Opinion of Salomon Smith Barney" is hereby
amended and supplemented to include the following paragraph at the end thereof:
"Salomon Smith Barney noted that the analyses performed assuming
acquisitions at 5.0x EBITDA and 6.0x EBITDA resulted in a range of implied per
share values that exceeded the merger consideration. Salomon Smith Barney also
noted that the analyses performed assuming acquisitions at 7.0x EBITDA or no
additional acquisitions resulted in a range of implied per share values below
the merger consideration. In light of the Company's lack of, and likely
difficulty raising, adequate capital to fund its growth and acquisition plans
were the Company not to effect the Merger, and the Company's recent trend toward
paying higher acquisition multiples in the acquisitions it effected, Salomon
Smith Barney believed that the discounted cash flows analyses it performed,
taken together with all its analyses, supported its conclusion that the merger
consideration was fair, from a financial point of view, to the Company's
unaffiliated stockholders."
The first sentence of the fourth paragraph of the subsection entitled
"Implied Private Market Valuation of the Company' within the subsection entitled
"Opinion of Salomon Smith Barney" is hereby amended and restated as follows:
"Salomon Smith Barney rendered certain investment banking services to the
Company in connection with its initial public offering more than two years ago,
for which it was paid fees."
The first paragraph of "SPECIAL FACTORS -- Certain Effects of the
Transactions" is hereby amended and supplemented by adding after the second
sentence thereof, the following:
"Following the Merger, none of the unaffiliated stockholders of the Company will
continue to participate in the future earnings and potential growth of the
Company."
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The third paragraph of "SPECIAL FACTORS -- Certain Effects of the
Transactions" is hereby amended and restated as follows:
"The benefit of the Offer and the Merger to unaffiliated stockholders of
the Company is that they are being afforded an opportunity to sell all of their
Shares for cash at a price which, in the opinion of Parent, Purchaser and the
Company, is fair to such unaffiliated and affiliated stockholders and is at a
premium to the trading prices of the Shares prior to the announcement of the
Offer."
The second sentence of the first paragraph and the first sentence of the
third paragraph of "SPECIAL FACTORS -- Financing of the Transactions" are hereby
amended and supplemented by adding the phrase "legally binding" before the words
"commitment letter".
The word "willingness" within the third sentence of the first paragraph of
"SPECIAL FACTORS -- Financing of the Transactions" is hereby deleted and
replaced with the word "commitment".
The first paragraph of "SPECIAL FACTORS -- Financing of the Transactions"
is hereby amended and supplemented by adding the following after the third
sentence thereof:
"It currently is expected that the Tender Facility and the Permanent
Facilities will be executed and delivered by the currently scheduled Expiration
Date. It also is currently expected that the Financing Condition will be
satisfied by the current scheduled Expiration Date."
The first paragraph of "SPECIAL FACTORS -- Financing of the Transactions"
is hereby amended and supplemented by adding the following after the seventh
sentence thereof:
"Purchaser and Parent currently do not intend to utilize the Alternate
Financing."
The first sentence of the second paragraph of "SPECIAL FACTORS -- Financing
of the Transactions" is hereby amended and supplemented by deleting the phrase
"commitment letter" and replacing it with the phrase "NationsBank Commitment
Letter".
The third sentence of the second paragraph of "SPECIAL FACTORS -- Financing
of the Transactions" is hereby amended and supplemented to include the following
parenthetical after the word "utilized":
"(which, as indicated above, currently is not intended)"
The second paragraph of the subsection entitled "Antitrust" within "THE
TENDER OFFER -- Section 10" ("Certain Legal Matters and Regulatory Approvals")
is hereby amended and supplemented by adding the following after the first
sentence thereof.
"On Friday, April 2, 1999 Holdings, Parent and Purchaser received notice of
early termination of the waiting period under the HSR Act for the consummation
of the Offer and the Merger."
The first sentence of the subsection entitled "Pending Litigation" within
"THE TENDER OFFER -- Section 10" ("Certain Legal Matters and Regulatory
Approvals") is hereby amended and restated in its entirety as follows:
"On March 29, 1999 and March 31, 1999, purported class action lawsuits
entitled Henner v. Sheridan Healthcare, Inc., et al, Betz v. Sheridan
Healthcare, Inc., et al and Schoenfield v. Sheridan Healthcare, Inc., et al.,
respectively, were filed in Delaware Chancery Court by holders of Shares."
The subsection entitled "Pending Litigation" within "THE TENDER
OFFER -- Section 10" ("Certain Legal Matters and Regulatory Approvals") is
hereby amended and supplemented by adding at the end thereof the following:
"On April 20, 1999, the parties to the foregoing lawsuits entered into a
Memorandum of Understanding pursuant to which all such lawsuits will be
dismissed with prejudice. The Memorandum of Understanding is subject to certain
conditions, including the timing of confirmatory discovery, the drafting and
execution of a
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stipulation of settlement, final court approval and the consummation of the
Merger. The principal terms of the Memorandum of Understanding are as follows:
1. Parent, Purchaser and the Company will amend the Merger Agreement to
reduce the Termination Fee from $6,400,000 to $5,000,000. See "SPECIAL
FACTORS -- The Merger Agreement and the Management Agreement-Termination
Fee and Expenses." On April 20, 1999, Parent, Purchaser and the Company
executed and delivered such an amendment to the Merger Agreement, a copy
of which is attached hereto as Schedule VI.
2. Purchaser and Parent will disclose additional information regarding the
reasons for the reduction of the consideration paid in the Merger
following Vestar's due diligence. This Supplement satisfies such
requirement.
3. The Company will promptly issue a press release announcing the reduction
in the Termination Fee set forth in paragraph 1 above. Such a press
release has been issued, a copy of which has been filed as an exhibit to
the amended Schedule 14D-1.
Upon final approval of the settlement by the court, plaintiffs' counsel will
petition the court for an award of attorneys fees and expenses, which will be
paid by the Company. Plaintiffs' counsel has agreed to submit a request for, and
the defendants have agreed not to oppose, a request for court approval of not
more than $320,000 in attorneys fees, inclusive of all expenses."
Annex A to the Original Offer to Purchase is hereby deleted in its entirety
and replaced with Annex A to this Supplement.
7
<PAGE> 8
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Delivery:
40 Wall Street (for Eligible Institutions 40 Wall Street
New York, New York 10005 only) New York, New York 10005
(718) 236-4588
For Information Telephone:
(212) 936-5100
</TABLE>
The Information Agent for the Offer is:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Bankers and Brokers Call Collect: (212) 750-5833
All Others Call Toll Free: (888) 750-5834
April 21, 1999
<PAGE> 9
[SALOMON SMITH BARNEY LOGO] ANNEX A
March 24, 1999
Board of Directors
Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 200
Hollywood, FL 33021
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of shares of common stock, $.01
par value per share, and Class A common stock, $.01 par value per share
(collectively, the "Company Common Stock"), of Sheridan Healthcare, Inc. (the
"Company"), other than Vestar/Calvary Holdings, Inc. ("Holdings") and its
affiliates and certain members of management of the Company who have agreed to
become stockholders of Holdings (the "Management Stockholders"), of the
consideration to be received by such stockholders (the "Public Stockholders") in
the proposed acquisition of the Company by Holdings, pursuant to the Agreement
and Plan of Merger (the "Merger Agreement") to be entered into by and among
Holdings, Vestar/Calvary, Inc. ("Acquisition Sub") and the Company. We
understand that Holdings and Acquisition Sub are newly formed corporations
organized at the direction of an affiliate of Vestar Capital Partners III, L.P.
("Vestar").
As more specifically set forth in the Merger Agreement, Acquisition Sub
will commence a tender offer (the "Proposed Tender Offer") to purchase all
outstanding shares of Company Common Stock at an offer price of $9.25 per share
in cash. Following consummation of the Proposed Tender Offer, Acquisition Sub
will be merged into the Company (the "Proposed Merger" and, together with the
Proposed Tender Offer, the "Proposed Acquisition") and each then-outstanding
share of Company Common Stock (other than shares held by Holdings, Acquisition
Sub or any other direct or indirect subsidiary of Holdings or held in the
treasury of the Company and shares as to which appraisal rights have been
properly exercised under applicable law) will be converted into the right to
receive, in cash, the amount paid for a share of Company Common Stock pursuant
to the Proposed Tender Offer. We understand that the Management Stockholders
have agreed, among other things, to tender their shares of Company Common Stock
in the Proposed Tender Offer and to subscribe for and purchase shares of common
stock of Holdings.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) a draft dated March 23, 1999 of the
Merger Agreement; (ii) certain publicly available business and financial
information concerning the Company; (iii) certain other information, primarily
financial in nature, including financial forecasts, concerning the business and
operations of the Company furnished to us by the Company for purposes of our
analysis; (iv) certain publicly available information concerning the trading of,
and the trading market for, the Company Common Stock; (v) certain publicly
available information with respect to certain other companies that we believe to
be comparable to the Company and the trading market for certain of such other
companies' securities; and (vi) certain publicly available information
concerning the nature and terms of certain other transactions that we consider
relevant to our inquiry. We have considered and taken into account in our
analysis the Company's lack of, and likely difficulty raising, adequate capital
to fund its growth and acquisition plans if the Company were not to effect the
Proposed Acquisition. We have also considered such other information, financial
studies, analyses, investigations and financial, economic and market criteria
that we deemed relevant. We have also discussed the foregoing, as well as other
matters we believe relevant to our inquiry, with certain officers and employees
of the Company and officers of Vestar.
[SALOMON SMITH BARNEY LETTERHEAD]
<PAGE> 10
The Board of Directors
Sheridan Healthcare, Inc.
March 24, 1999
Page 2
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all information provided to us
or publicly available and have neither attempted independently to verify nor
assumed responsibility for verifying any of such information. We have further
relied upon the assurances of management of the Company that they are not aware
of any facts that would make any of such information inaccurate or misleading.
We have not conducted a physical inspection of any of the properties or
facilities of the Company, nor have we made or obtained or assumed any
responsibility for making or obtaining any independent evaluations or appraisals
of any of such properties or facilities, nor have we been furnished with any
such evaluations or appraisals. With respect to financial forecasts, we have
been advised by the management of the Company and have assumed that such
forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
future financial performance of the Company. We express no view with respect to
such financial forecasts or the assumptions on which they were based. We have
also assumed that the definitive Merger Agreement will not, when executed,
contain any terms or conditions that differ materially from the terms and
conditions contained in the draft of such agreement we have reviewed and that
the Proposed Acquisition will be consummated in a timely manner and in
accordance with the terms of the Merger Agreement.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company; (ii) the business prospects of the Company, including the likelihood
that, in the absence of additional capital support, the Company would be unable
to pursue its growth and acquisition strategy; (iii) the historical and current
market for the equity securities of certain other companies that we believe to
be comparable to the Company; and (iv) the nature and terms of certain other
merger and acquisition transactions that we believe to be relevant. We have also
taken into account our assessment of general economic, market and financial
conditions as well as our experience in connection with similar transactions and
securities valuation generally. We have also considered the process that
resulted in the negotiation of the Merger Agreement, including our extensive
solicitation of offers to acquire the Company and the responses received to such
solicitation and discussions we had with other potential acquirors.
We have not been asked to consider, and our opinion does not address, the
relative merits of the Proposed Acquisition as compared to any alternative
business strategy that might exist for the Company. Our opinion necessarily is
based upon conditions as they exist and can be evaluated on the date hereof, and
we assume no responsibility to update or revise our opinion based upon
circumstances or events occurring after the date hereof. Our opinion is, in any
event, limited to the fairness, from a financial point of view, of the
consideration to be received by the Public Stockholders in the Proposed
Acquisition and does not address the Company's underlying business decision to
effect the Proposed Acquisition or constitute a recommendation of the Proposed
Acquisition to the Company or a recommendation to any holder of Company Common
Stock as to whether such holder should tender such stock in the Proposed Tender
Offer or as to how such holder should vote with respect to the Proposed Merger,
if such a vote is taken.
As you are aware, Salomon Smith Barney Inc. ("Salomon Smith Barney") is
acting as financial advisor to the Company in connection with the Proposed
Acquisition and will receive a fee for such services, a substantial portion of
which is contingent upon consummation of the Proposed Acquisition. Additionally,
we or our predecessors or affiliates have previously rendered certain investment
banking and financial advisory services to the Company and Vestar for which we
or our predecessors or affiliates received customary compensation. In addition,
in the ordinary course of business, Salomon Smith Barney may hold or actively
trade the securities of the Company for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Salomon Smith Barney and its affiliates
<PAGE> 11
The Board of Directors
Sheridan Healthcare, Inc.
March 24, 1999
Page 3
(including Citigroup Inc. and its affiliates) may have other business and
financial relationships with the Company and Vestar.
This opinion is intended for the benefit and use of the members of Board of
Directors of the Company in considering the transaction to which it relates and
may not be used by the Company for any other purpose or published, reproduced,
disseminated, quoted or referred to by the Company at any time, in any manner or
for any purpose, without the prior written consent of Salomon Smith Barney,
except that this opinion may be reproduced in full in, and references to the
opinion and to Salomon Smith Barney (in each case in such form as Salomon Smith
Barney shall approve) may be included in, the solicitation/recommendation
statement the Company distributes to holders of Company Common Stock in
connection with the Proposed Tender Offer and any proxy/information statement
and rule 13E-3 transaction statement filed with the Securities and Exchange
Commission in connection with the Proposed Acquisition.
Based upon and subject to the foregoing, we are of the opinion as
investment bankers that, as of the date hereof, the consideration to be received
by the Public Stockholders in the Proposed Acquisition is fair, from a financial
point of view, to such Public Stockholders.
Very truly yours,
SALOMON SMITH BARNEY INC.
<PAGE> 12
SCHEDULE VI
AMENDMENT NO. 1 TO MERGER AGREEMENT
AMENDMENT No. 1, dated as of April 20, 1999 (this "Amendment"), to
Agreement and Plan of Merger dated as of March 24, 1999 (the "Agreement"), among
VESTAR/SHERIDAN HOLDINGS, INC., a Delaware corporation ("Holdings"),
VESTAR/SHERIDAN, INC., a Delaware corporation and a wholly owned subsidiary of
Holdings (the "Purchaser"), and SHERIDAN HEALTHCARE, INC., a Delaware
corporation (the "Company").
WHEREAS, the parties wish to amend certain provisions of the Agreement; and
WHEREAS, Section 9.5 of the Agreement provides in relevant part that at any
time before adoption of the Agreement by the stockholders of the Company, the
Company, Holdings and Purchaser may amend the Agreement by written agreement
signed on behalf of all the parties.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, Holdings,
Purchaser and the Company hereby agree as follows:
1. Terms not specifically defined herein shall have the meanings set
forth in the Agreement.
2. The Termination Fee provided for in Section 8.2(b) of the Agreement
is hereby reduced from $6,400,000 to $5,000,000.
3. This Amendment may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
4. This Amendment shall be governed by and construed in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, each of Holdings, Purchaser and the Company has caused
this Amendment to be signed by its respective officers thereunto duly
authorized, all as of the date first written above.
VESTAR/SHERIDAN HOLDINGS, INC.
By: /s/ JAMES L. ELROD
------------------------------------
Title: President
VESTAR/SHERIDAN, INC.
By: /s/ JAMES L. ELROD
------------------------------------
Title: President
SHERIDAN HEALTHCARE, INC.
By: /s/ MITCHELL EISENBERG
------------------------------------
Title: President
<PAGE> 1
SHERIDAN HEALTHCARE, INC.
REDUCES TERMINATION FEE
Sheridan Healthcare, Inc. ("Sheridan") announced today that,
in connection with an agreement in principle to settle shareholder litigation
pending in the Delaware Court of Chancery against Sheridan, the directors of
Sheridan and Vestar Capital Partners, Inc., the Company has amended its Merger
Agreement with Vestar/Sheridan Holdings, Inc. ("Holdings") and Vestar/Sheridan,
Inc. ("Vestar/Sheridan") to reduce the termination fee payable to Holdings under
circumstances described in the Merger Agreement from $6,400,000 to $5,000,000.
Pursuant to the Merger Agreement, Vestar/Sheridan has commenced a tender offer
at $9.25 net per share for all outstanding shares of common stock and Class A
common stock of Sheridan which will expire at 12:00 midnight, New York City
time, on Tuesday, April 27, 1999, unless the offer is extended.
The settlement of the shareholder litigation is conditioned,
among other things, upon completion of the merger contemplated by the Merger
Agreement, final court approval, the timing of confirmatory discovery and the
drafting and execution of a stipulation of settlement. Sheridan provides
physician services to hospitals, ambulatory surgical facilities and in-office
based settings as well as management services to physician practices. Sheridan's
common stock trades on the NASDAQ National Market (HCR).
<PAGE> 1
[Richards, Layton & Finger Letterhead]
April 20, 1999
VIA HAND DELIVERY
Joseph A. Rosenthal, Esq.
Rosenthal, Monhait, Gross & Goddess, P.A.
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
Re: Henner v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No. 17067-NC
Betz v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No. 17078-NC
Schoenfield v. Sheridan Healthcare, Inc., et al., Del. Ch.,
C.A. No. 17080-NC
Dear Mr. Rosenthal:
As we have discussed, this Memorandum of Understanding
constitutes the agreement of the parties with respect to settlement and
dismissal with prejudice of the above-referenced actions.
Memorandum of Understanding
1. There are now pending in the Court of Chancery, County of
New Castle, State of Delaware (the "Court"), three purported shareholder class
actions styled Henner v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No.
17067-NC; Betz v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A. No.
17078-NC, and Schoenfield v. Sheridan Healthcare, Inc., et al., Del. Ch., C.A.
No. 17080-NC (collectively, the "Actions").
2. The Actions challenge certain actions allegedly taken or
not taken by Sheridan Healthcare, Inc. ("Sheridan" or the "Company"), directors
of Sheridan, and Vestar Capital Partners, Inc. ("Vestar") in connection with the
Agreement and Plan of Merger dated as of March 24, 1999 (the "Merger Agreement")
providing for the offer by Vestar/Sheridan, Inc. ("Purchaser" or "Vestar/
Sheridan"), to purchase all of the outstanding shares of common stock of the
Company, and the subsequent merger (the "Merger") of Purchaser into Sheridan,
under which Sheridan would become a wholly-owned subsidiary of Vestar/Sheridan
Holdings, Inc. ("Parent").
<PAGE> 2
Joseph A. Rosenthal, Esq.
April 20, 1999
Page 2
3. Following extensive discussions and arm's length
negotiations among counsel for the parties to the Actions, the parties reached
an agreement in principle to settle the Actions and dismiss the Actions with
prejudice (the "Settlement"). The principal terms of the Settlement are as
follows:
<PAGE> 3
Joseph A. Rosenthal, Esq.
April 20, 1999
Page 3
A. Parent, Purchaser and the Company will amend the Merger
Agreement to reduce the Termination Fee from $6,400,000 to $5,000,000.
B. Purchaser and Parent will disclose additional information
in a supplement to the following Offer to Purchase regarding the reasons for the
reduction of the consideration paid in the Merger following Vestar's due
diligence.
C. The Company will promptly issue a press release announcing
the reduction in the Termination Fee set forth in P. 3(A).
D. The parties to the Action will attempt in good faith to
agree upon and execute an appropriate Stipulation of Settlement (the
"Stipulation"), which will expressly provide, inter alia, for the certification
of a stockholder class for settlement purposes under Chancery Court Rules
23(b)(1) and/or (b)(2) of a class of all holders of common stock or Class A
common stock of the Company from and after March 26, 1999 including any and all
of their respective successors in interest, predecessors, representatives,
trustees, executors, administrators, heirs, assigns or transferees, immediate
and remote, and any person or entity acting for or on behalf of, or claiming
under any of them, and each of them, and excluding the defendants in the Actions
and all persons or entities related to or affiliated with the defendants (the
"Certification").
E. Upon final Court approval of the Certification and of the
Settlement, plaintiffs' counsel will petition the court for an award of
attorneys fees and expenses, which will be paid by the Company. Plaintiffs'
counsel has agreed to submit a request for, and the defendants have agreed not
to oppose, a request for court approval of not more than $320,000 in attorneys
fees, inclusive of all expenses.
F. The deadline for defendants to answer or otherwise move
with respect to plaintiffs' Complaints in each of the Actions has been extended
without date pending the parties' joint submission to the Court as soon as
practicable of a stipulation dismissing the Actions with prejudice according to
the terms set forth herein.
G. The consummation of the Settlement is subject to: (a) the
drafting and execution of the Stipulation; (b) the completion by plaintiffs of
appropriate discovery in the Actions reasonably satisfactory to plaintiffs'
counsel as has been discussed between counsel for the parties; (c) successful
consummation of the Merger; and (d) final Court approval (as defined below) of
the Settlement and dismissal of the Actions with prejudice and without awarding
costs to any party (except as provided in subparagraph D above). As used herein,
"final Court approval" of the Settlement means that the Court of Chancery has
entered an order approving the Settlement and
<PAGE> 4
Joseph A. Rosenthal, Esq.
April 20, 1999
Page 4
that such order is finally affirmed on appeal or is no longer subject to appeal.
The Memorandum of Understanding shall be null and void and of no force and
effect should any of these conditions not be met and, in that event, this
Memorandum of Understanding shall neither be deemed to prejudice in any way the
positions of the parties with respect to the Actions nor entitle any party to
recover any costs or expenses incurred in connection with the implementation of
the Memorandum of Understanding.
Counsel for the parties have reached this Settlement on the
terms and subject to the conditions set forth herein, on behalf of defendants
and plaintiffs, and the purported class of persons on behalf of whom plaintiffs
have brought the Actions.
Dated: April 20, 1999
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By /s/ Joseph A. Rosenthal
--------------------------------------
Joseph A. Rosenthal
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiffs Stanley Henner,
Robert Betz and Bob Schoenfield
RICHARDS, LAYTON & FINGER
By /s/ Jesse A. Finkelstein
--------------------------------------
Jesse A. Finkelstein
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Defendant Vestar Capital
Partners, Inc.
<PAGE> 5
Joseph A. Rosenthal, Esq.
April 20, 1999
Page 5
By /s/ A. Gilchrist Sparks, III
--------------------------------------
A. Gilchrist Sparks, III
1201 Market Street
P.O. Box 1347
Wilmington, DE 19899
(302) 658-9200
Attorneys for Defendants
Sheridan Healthcare, Inc.,
Mitchell Eisenberg, Lewis Gold,
Henry E. Golembesky, Jamie
Hopping, Neil A. Natkow
