Health Grades, Inc. (Nasdaq:HGRD) (“HealthGrades”) today
announced the extension of the offer period for the previously
announced tender offer for all of the outstanding shares of common
stock of HealthGrades for $8.20 per share in cash, without interest
and less any applicable withholding taxes, until 9:00 AM, New York
City time, on Thursday, October 7, 2010, and certain modifications
to its merger agreement with Mountain Acquisition Corp. and
Mountain Merger Sub Corp., both affiliates of Vestar Capital
Partners V, L.P. (“Vestar”), including those that will provide
additional time for the submission and consideration of alternative
acquisition proposals.
As previously announced, on August 10, 2010, Mountain
Acquisition Corp. and Mountain Merger Sub Corp. commenced a tender
offer for all outstanding shares of common stock of HealthGrades at
a price of $8.20 per share in cash, without interest and less any
applicable withholding taxes. The tender offer was previously
scheduled to expire at 9:00 AM, New York City time, on Thursday,
September 16, 2010.
The depositary for the tender offer has advised that as of 5:00
PM, New York City time, on Wednesday, September 15, 2010,
approximately 26,246,711 HealthGrades shares had been validly
tendered and not withdrawn (excluding shares tendered by notices of
guaranteed delivery). These shares, in addition to the restricted
and option shares (net of withholding for taxes and costs of
exercise) that are committed to be sold to Mountain Merger Sub
Corp. pursuant to the previously disclosed support agreements with
certain executives of HealthGrades, represent approximately 85.30%
of the total outstanding shares of HealthGrades on a fully diluted
basis, excluding certain shares to be issued pursuant to a
non-competition agreement with one of the executives. Including the
shares to be issued pursuant to such non-competition agreement,
such tendered and committed shares represent approximately 90.19%
of the total outstanding shares of HealthGrades on a fully-diluted
basis, such that Mountain Merger Sub Corp. would be permitted to
consummate a “short-form” merger under Delaware law. Excluding
shares tendered pursuant to the support agreements, the tendered
shares represent approximately 71.42% of the total outstanding
shares on a fully-diluted basis, excluding certain shares to be
issued pursuant to the non-competition agreement, and approximately
87.38% of all shares not subject to support agreements.
The modifications announced today have been made pursuant to a
Memorandum of Understanding entered into on behalf of HealthGrades,
Mountain Acquisition Corp., Mountain Merger Sub Corp., Mountain
Acquisition Holdings, LLC and Vestar Capital Partners V, L.P.,
which outlines the terms of the parties’ agreement in principle to
settle the actions pending in the Delaware Court of Chancery
captioned Peter P. Weigard v. Hicks, C.A. et al., No. 5732-VCS, and
Tove Forgo v. Health Grades, Inc., et al., C.A. No. 5716-VCS. The
terms of the proposed settlement are subject to approval by the
Delaware Court of Chancery. Pursuant to the modified merger and
support agreements:
- A committee of the HealthGrades
Board of Directors comprised of the four independent directors (the
“Independent Committee”) has been authorized to review, consider,
recommend, negotiate and approve any Acquisition Proposals received
during the pendency of the tender offer. In this regard,
HealthGrades’ Chairman and Chief Executive Officer will not
participate in any consideration, deliberation or action by the
Independent Committee or the Board of Directors with respect to any
Acquisition Proposal that may be made.
- The initial expiration of the
tender offer has been extended to 9:00 AM, New York City time, on
October 7, 2010. The Independent Committee may cause this date to
be extended for 10 business days if an Acquisition Proposal (as
defined below, but substituting 50.1% for 15%) that the Company
Board or the Independent Committee determines in good faith
constitutes, or is reasonably likely to result in, a Superior
Proposal (as defined below) is received before the initial
expiration of the tender offer.
- The “minimum condition” of the
Vestar offer has been modified to include a requirement that a
majority of all outstanding shares not subject to support
agreements be validly tendered and not withdrawn.
- The fee payable by HealthGrades
to a Vestar affiliate in the event the merger agreement is
terminated under certain circumstances has been reduced from
$9,550,000 to $7,346,000.
- The period for notice to Vestar
before HealthGrades may enter into a Superior Proposal has been
reduced from 5 business days to 3 business days.
- Executive officers of
HealthGrades who entered into support agreements with respect to
the pending tender offer have agreed to enter into comparable
agreements with respect to any transaction that the Independent
Committee determines is a Superior Proposal and with respect to
which HealthGrades enters into a definitive agreement after
terminating the pending merger agreement.
HealthGrades will provide information to, and engage and
participate in good faith discussions and negotiations with, any
third party who makes a bona fide written Acquisition Proposal at
any time prior to the expiration of the Vestar affiliates’ tender
offer if:
- The third party enters into a
confidentiality agreement substantially in the form attached to the
merger agreement (which was filed by HealthGrades with the
Securities and Exchange Commission (the “SEC”) as Exhibit 2.1 to a
Current Report on Form 8-K filed on July 28, 2010);
- The Independent Committee
determines in good faith, after consultation with outside legal
counsel, that failure to provide information, and engage or
participate in discussions or negotiations, would violate its
fiduciary duties; and
- The Independent Committee
determines in good faith, based on the information then available
and after consultation with its independent financial advisor and
outside legal counsel, that the Acquisition Proposal constitutes,
or is reasonably likely to result in, a Superior Proposal.
An “Acquisition Proposal” is defined to
be any inquiry, proposal or offer relating to any transaction that
would result in a third party beneficially owning more than 15% of
HealthGrades’ equity interests or assets representing more than 15%
of HealthGrades’ net revenues, net income, cash flow, or assets.
A “Superior Proposal” is defined to be a bona fide
Acquisition Proposal (with each reference to “15%” replaced with
“50.1%”) not resulting from a breach by HealthGrades of the merger
agreement, which the Independent Committee determines in good faith
(1) is reasonably likely to be consummated in accordance with its
terms and (2) would result in a transaction that is more favorable
to the HealthGrades stockholders from a financial point of view
than the transactions contemplated by the Vestar merger agreement.
If the Independent Committee concludes in good faith that it has
received a Superior Proposal, then it may amend or withdraw its
recommendation of the Vestar merger agreement and/or may authorize
HealthGrades to terminate the Vestar merger agreement, pay a
$7,346,000 termination fee to Vestar, and enter into a definitive
agreement with respect to the Superior Proposal, so long as
HealthGrades first:
- Provides 3 business days written
notice to Vestar of the terms and conditions of the Superior
Proposal; and
- Negotiates with Vestar during
such 3-business day period to provide Vestar with the opportunity
to propose adjustments to the Vestar merger agreement such that the
third party’s proposal would no longer constitute a Superior
Proposal.
Citigroup Global Markets Inc. is serving as financial advisor to
HealthGrades. Shearman & Sterling LLP, Faegre & Benson LLP
and Morris, Nichols, Arsht & Tunnell LLP are serving as legal
counsel to HealthGrades.
HealthGrades has directed its advisors to be available to
receive inquiries from any other parties interested in a possible
acquisition of HealthGrades and, as appropriate, to provide
information and, in conjunction with the Independent Committee,
enter into discussions and negotiations with such parties in
connection with any such indication of interest.
About HealthGrades
HealthGrades is the leading independent healthcare ratings
organization, providing quality ratings, profiles and cost
information on the nation’s hospitals, physicians, nursing homes
and prescription drugs. Millions of patients and many of the
nation’s largest employers, health plans and hospitals rely on
HealthGrades’ quality ratings, advisory services and
decision-support resources. The HealthGrades network of websites,
including HealthGrades.com and WrongDiagnosis.com, is a top-ten
health property according to ComScore and is the Internet’s leading
destination for patients choosing providers. More information on
the company can be found at www.healthgrades.com.
Additional Information and Where to Find It
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell securities. An affiliate of Vestar
has filed a Schedule TO Tender Offer Statement (including
amendments thereto and an offer to purchase, a related letter of
transmittal, and other offer documents) with the SEC, and
HealthGrades has filed a Schedule 14D-9 Solicitation/Recommendation
Statement (including amendments thereto), with respect to the
offer. Holders of shares of HealthGrades are urged to read the
relevant tender offer documents because they contain important
information that holders of HealthGrades securities should consider
before making any decision regarding tendering their securities.
Those materials and all other documents filed by Vestar, Mountain
Acquisition Corp. or Mountain Merger Sub Corp. with the SEC are
available at no charge on the SEC’s web site at www.sec.gov. The
Schedule TO Tender Offer Statement, Schedule 14D-9
Solicitation/Recommendation Statement and related materials may be
obtained for free by directing such requests to Innisfree M&A
Incorporated, 501 Madison Avenue, 20th Floor, New York, New York
10022, Toll-Free Telephone: (888) 750-5834.
In addition, HealthGrades files annual and special reports and
other information with the SEC. You may read and copy any reports
or other information filed by HealthGrades at the SEC public
reference room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on
the public reference room. HealthGrades’ filings with the SEC are
also available to the public from commercial document-retrieval
services and at the website maintained by the SEC at
www.sec.gov.
Safe Harbor Statement
This press release contains forward-looking statements,
including those relating to the anticipated acquisition of
HealthGrades by an affiliate of Vestar. These forward-looking
statements may be identified by words such as “anticipate,”
“expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,”
“target,” “project,” “could,” “should,” “may,” “will,” “would,”
“continue,” “forecast,” and other similar expressions. Each of
these forward-looking statements involves risks and uncertainties.
Actual results or developments may differ materially from those,
express or implied, in these forward-looking statements. Various
factors may cause differences between current expectations and
actual results or developments, including risks and uncertainties
associated with the anticipated acquisition. These risks and
uncertainties associated include, among others, uncertainties as to
how many of HealthGrades’ stockholders will tender their shares
pursuant to the tender offer, uncertainties as to whether competing
offers will be made, and the possibility that various closing
conditions to the tender offer or the subsequent merger may not be
satisfied or waived, and the risk that stockholder litigation in
connection with the tender offer and subsequent merger may result
in significant costs of defense, indemnification and liability.
Other factors that may cause HealthGrades’ actual results or
developments to differ materially from those expressed or implied
in the forward-looking statements in this press release are
discussed in HealthGrades’ filings with the SEC, including the
“Risk Factors” sections of HealthGrades’ periodic reports on Form
10-K and Form 10-Q filed with the SEC. Copies of HealthGrades’
filings with the SEC may be obtained at the “Investor Relations”
section of HealthGrades’ website at www.healthgrades.com or at
www.sec.gov. All forward-looking statements in this announcement
are qualified in their entirety by this cautionary statement.
Unless required by law, Health Grades does not undertake to update
its forward-looking statements.
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