KCI: ConvaTec officially calls it quits

October 3, 2011 By MassDevice staff Leave a Comment

It’s official: ConvaTec’s bid for rival Kinetic Concepts Inc. (NYSE:KCI) is over, according to a KCI filing with the federal Securities & Exchange Commission.

ConvaTec slipped in an 11-hour offer for the San Antonio-based wound care giant, hoping to trump a $6.3 billion offer from Apax Partners and two Canadian pension funds. The ConvaTec offer crumbled, however, after a key financial plank for its deal was removed.

Today KCI made it official with the SEC filing, saying "Party A" (its name for ConvaTec in filings dealing with the merger proposals) on Sept. 28 "notified [KCI] that it no longer intended to make a definitive acquisition proposal to acquire [KCI]."

"As a result, no other acquisition proposal … is currently outstanding," according to the filing. "The company therefore anticipates consummating the merger with [Apax] at the previously announced acquisition price of $68.50 per share, pending shareholder approval, regulatory approval and other conditions."

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Apax and a pair of Canadian pension funds agreed July 12 to buy KCI for a 6 percent premium over its closing price that day. The London-based PE firm and its partners plan to finance the buyout with about $5 billion in debt, backed by lenders Bank of America Corp., Credit Suisse Group AG and Morgan Stanley. The ConvaTec bid just beat the expiration of a 40-day “go-shop” period during which KCI could solicit other offers.

But the last-minute play came with questions about how the merger would be financed. ConvaTec, which is backed by Nordic Capital Partners and Avista Capital Partners, came to the game armed only with letters from Goldman Sachs Group and Jefferies Group averring that the banks were “highly confident” that ConvaTec will be able to win backers for the deal.

That confidence was dashed when a third party to ConvaTec deal, a pharmaceutical firm that had agreed to buy a KCI subsidiary, bailed out of the negotiations.

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