The details of a $6 billion deal for Kinetic Concepts Inc. (NYSE:KCI) are spelled out in a regulatory filing, including a provision that allows KCI to seek other offers.
A private equity firm and two Canadian pension funds agreed to pony up about $6.3 billion, including acquired debt, for the San Antonio, Texas-based wound management company yesterday. The $68.50-per-share price represents a 6 percent premium on KCI’s $64.49 closing price on Wall Street July 12 and a 16 percent premium on the ‘s closing price July 5, the day before rumors spread on The Street that KCI was in play.
One of the deal‘s provisions, a so-called "go-shop" period, allows KCI to try and raise the ante for the deal by soliciting other bids. The go-shop window closes at 11:59 p.m. August 21, according to the filing with the federal Securities & Exchange Commission.
That isn’t likely to mollify stockholders mulling a lawsuit to block the buyout. Law firms are already trolling the waters, seeking "to determine whether Kinetic Concepts and its board breached their fiduciary duties by entering into the agreement without properly shopping for a deal that would provide better value for shareholders," as one put it in a press release.
It was an open secret last week that KCI was on the auction block, with private equity monolith Blackstone Group and competitor Kohlberg Kravis Roberts & Co. in the running. The Blackstone news prompted Collins Stewart analyst Tao Levy to tell The Associated Press that KCI "would probably fetch between $73 and $76 per share" from rival PE bidders.
The deal that was eventually struck didn’t reach that price, but it did come with a commitment from the owners of about 11 percent of KCI’s shares — James R. Leininger, Cecelia Anne Leininger and J&E Investments LP — to approve the buyout. It also includes provisions for termination fees ranging from $51.8 million (if another suitor surfaces) to $155.4 million (covering all other circumstances. And if Apax and its Canadian partners get cold feet and back out, they’ll owe KCI a $317.2 million kill fee.
To pay for the deal, the consortium has lined up about $1.74 billion from equity backers and $4.95 billion in loans from Bank of America, Merrill Lynch, Pierce, Fenner & Smith Inc., Credit Suisse and Morgan Stanley Senior Funding.