Surgical Care Affiliates, Inc. (NASDAQ:SCAI) Files An 8-K Entry into a Material Definitive Agreement
Item1.01 Entry into a Material Definitive Agreement.
On January7, 2017, Surgical Care Affiliates, Inc., a Delaware
corporation (SCA or the Company), entered into an Agreement and
Plan of Reorganization (the Merger Agreement) with UnitedHealth
Group Incorporated, a Delaware corporation (Parent or
UnitedHealth Group), and Parents wholly owned subsidiaries,
Spartan Merger Sub 1, Inc., a Delaware corporation (Purchaser),
and Spartan Merger Sub2, LLC, a Delaware limited liability
company (Merger Sub 2).
The Offer and the Mergers; Transaction
Consideration
to the Merger Agreement, and upon the terms and subject to the
conditions thereof, Purchaser will commence an exchange offer
(the Offer) to purchase all of the issued and outstanding shares
of common stock, par value $0.01 per share, of the Company (the
Shares), with each Share accepted by Purchaser in the Offer to be
exchanged for the right to receive, at the election of Parent,
either:
i. |
(x) $11.40 in cash (the Minimum Cash Consideration) and (y)a number of shares of Parent common stock equal to (A) $57.00 minus the Minimum Cash Consideration, divided by (B)the volume weighted average of the closing sale prices per share of Parent common stock on the New York Stock Exchange on each of the five full consecutive trading days ending on and including the third business day prior to the closing (the Parent Trading Price) (the stock consideration calculated in accordance with this clause (y), the Maximum Stock Consideration); or |
ii. |
(x)an amount in cash greater than the Minimum Cash Consideration and not to exceed $27.93 (such amount, the Alternative Cash Consideration, and each of the Alternative Cash Consideration and the Minimum Cash Consideration, as applicable, being referred to herein as the Cash Consideration) and (y)a number of shares of Parent common stock equal to (A) $57.00 minus the Alternative Cash Consideration, divided by (B)the Parent Trading Price (the stock consideration calculated in accordance with this clause (y), the Alternative Stock Consideration, and each of the Alternative Stock Consideration and the Maximum Stock Consideration, as applicable, being referred to herein as the Stock Consideration); |
plus cash in lieu of any fractional shares (as further described
below), in each case, without interest, but subject to any
applicable withholding of taxes (together with the applicable
Stock Consideration and the applicable Cash Consideration, the
Transaction Consideration).
If the conditions of the Offer are satisfied and the Offer
closes, Parent would acquire any remaining Shares by a merger of
Purchaser with and into the Company (the First Merger), with the
Company surviving the First Merger as a wholly owned indirect
subsidiary of Merger Sub 2. Immediately following the First
Merger, the Company, as the surviving company of the First
Merger, will be merged with and into Merger Sub 2 (the Second
Merger and together with the First Merger, the Mergers), with
Merger Sub 2 surviving the Second Merger as a wholly owned direct
subsidiary of Parent. The Merger Agreement contemplates that the
First Merger will be effected to Section 251(h) of the General
Corporation Law of the State of Delaware (the DGCL), which
permits completion of the First Merger upon the acquisition by
Purchaser of one Share more than 50% of the number of Shares that
are then issued and outstanding. Accordingly, no vote of the
Company stockholders will be required in connection with the
First Merger if Parent and Purchaser consummate the Offer.
The Company and Parent intend, for U.S. federal income tax
purposes, that the Offer and the Mergers, taken together, will
qualify as a reorganization within the meaning of Section368(a)
of the Internal Revenue Code of 1986, as amended (the Code).
The obligations of Parent and Purchaser to consummate the Offer
are subject to the satisfaction of or, if permissible, waiver of
certain conditions including, but not limited to, (i)a majority
of the Shares having been validly tendered and not properly
withdrawn prior to the expiration of the Offer (such condition,
the Minimum Condition), (ii)the expiration or termination of any
waiting period applicable to the Offer or Mergers under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the HSR Act), (iii) Parents Registration Statement on Form S-4
with respect to the shares of Parent common stock to be issued in
the Offer or the First Merger having been declared effective by
the U.S. Securities and Exchange Commission (the SEC), (iv) the
approval of listing on the New York Stock Exchange of the shares
of Parent common stock to be issued in the Offer or the First
Merger, (v)
the accuracy of the representations and warranties, and
compliance with the covenants, of the Company contained in the
Merger Agreement, in each case subject to certain qualifications,
(vi)the absence of any injunction by any court or other tribunal
of competent jurisdiction, or any applicable law, that would make
the Offer or the Mergers illegal, (vii)the delivery of a written
opinion of Cleary Gottlieb Steen Hamilton LLP to the Company, and
the delivery of a written opinion of Hogan Lovells US LLP to
Parent, in each case in form and substance reasonably
satisfactory to the applicable recipient, to the effect that, on
the basis of certain facts, representations and assumptions set
forth or referred to in such opinion, the Offer and the Mergers,
taken together, will qualify as a reorganization within the
meaning of Section 368(a) of the Code (the Tax Opinion
Conditions), (viii) receipt of certain required approvals and
delivery of certain notices for the certificates of need and
licenses to operate for the Companys facilities and (ix)other
customary conditions (collectively, the Offer Conditions).
Certain of the Offer Conditions, such as the Minimum Condition,
cannot be waived by Purchaser without the Companys consent.
Purchaser is obligated to waive the Tax Opinion Conditions if
requested by the Company. Consummation of the Offer or the First
Merger is not subject to any financing conditions.
In the First Merger, each outstanding Share not tendered in the
Offer and accepted for payment, other than Shares owned by
Parent, the Company (in the treasury of the Company),
subsidiaries of either Parent or the Company or by stockholders
who have validly exercised their appraisal rights under Delaware
law, will be converted into the right to receive the Transaction
Consideration. No fractional shares of Parent common stock will
be issuable in the Offer or the First Merger, and each Company
stockholder who otherwise would be entitled to receive a fraction
of a share of Parent common stock to the Offer or the First
Merger will be paid an amount in cash (without interest)
determined by multiplying (i)the Parent Trading Price, rounded to
the nearest one-hundredth of a cent by (ii)the fraction of a
share (after aggregating all Shares held by such stockholder and
accepted for payment by Purchaser to the Offer or otherwise held
by such stockholder at the time the First Merger becomes
effective, as applicable, and rounded to the nearest one
thousandth when expressed in decimal form) of Parent common stock
to which such stockholder would otherwise be entitled.
Treatment of Company Equity Awards; Other Employee
Benefits Matters
to the Merger Agreement, each option to purchase Shares that is
outstanding immediately prior to the effective time of the First
Merger (the Effective Time) will be cancelled and converted into
an option to purchase a number of shares of Parent common stock
equal to the product of (x)the number of Shares subject to such
option and (y) $57.00 divided by the Parent Trading Price (the
Equity Award Conversion Ratio), at an exercise price per share
equal to (A)the exercise price per Share of such option
immediately prior to the Effective Time divided by (B)the Equity
Award Conversion Ratio. Each Company restricted stock unit
(Company RSU) outstanding immediately prior to the Effective Time
will be cancelled and converted into a restricted stock unit
denominated in shares of Parent common stock (Parent RSU). The
number of shares of Parent common stock subject to each Parent
RSU will be equal to the product of (x)the number of Shares
subject to such Company RSU immediately prior to the Effective
Time and (y)the Equity Award Conversion Ratio. Each Company
performance share award (Company PSA) that is outstanding as of
the effective time of the First Merger will be cancelled and
converted into a performance share award denominated in shares of
Parent common stock (Parent PSA). The number of shares of Parent
common stock subject to each Parent PSA equal to the product of
(x)the number of Shares subject to such Company PSA immediately
prior to the Effective Time, multiplied by (y)the Equity Award
Conversion Ratio. The awards will continue to be subject to the
terms and conditions applicable to the awards immediately prior
to the Effective Time, except as provided above and except that
the post-change in control protection period, during which an
individual whose employment is terminated by the Company without
cause would benefit from accelerated vesting, is extended from
two years to four years.
Prior to the Effective Time, the Companys Employee Stock Purchase
Plan (the ESPP), and each outstanding offering period then in
progress will terminate and each participants accumulated
contributions to the ESPP will be used to purchase Shares in
accordance with the terms of the ESPP (and any remaining
accumulated but unused payroll deductions will be distributed
without interest to the relevant participants). No one may elect
to participate in the ESPP after January6, 2017 and no
participant as of January6, 2017 may increase his or her payroll
deduction percentages or purchase elections after January6, 2017.
No new offerings in the ESPP will be made after January6, 2017.
to the Merger Agreement, Parent has agreed to honor all of the
existing employment and severance agreements with employees of
the Company in accordance with their terms. For one year after
the Effective Time, Parent will provide, or cause to be provided,
to employees of the Company who continue to be employed by Parent
or its subsidiaries (i)a base salary and bonus opportunities that
are no less favorable to such employee as the base salary and
bonus opportunities provided to such employee immediately prior
to the Effective Time and (ii)employee benefits that are, in the
aggregate, no less favorable than those provided immediately
prior to the Effective Time or, in Parents discretion,
substantially comparable to those made available to similarly
situated employees of Parent and its subsidiaries.
Other Terms of the Merger Agreement
The Merger Agreement includes customary representations,
warranties and covenants of each of the Company, Parent,
Purchaser and Merger Sub 2. The Company has agreed to operate its
business in the ordinary course and to refrain from engaging in
certain activities until the completion of the First Merger. The
Company and Parent have agreed to use reasonable best efforts to
consummate the Offer and the Mergers and make effective the
Mergers as soon as practicable, including using reasonable best
efforts to obtain approval of the proposed transactions under the
HSR Act.
In addition, under the terms of the Merger Agreement, the Company
has agreed not to solicit, initiate, knowingly encourage or
knowingly facilitate the making of any alternative acquisition
proposal, subject to customary exceptions permitting the Company
to respond to and support unsolicited alternative acquisition
proposals under certain circumstances. The Merger Agreement also
includes customary termination provisions for both the Company
and Parent. In certain circumstances, the Company will be
obligated to pay Parent a termination fee of $90million,
including if the Merger Agreement is terminated by Parent
following a change of recommendation by the board of directors of
the Company or as a result of the material breach by the Company
of its obligations not to solicit, initiate, knowingly encourage
or knowingly facilitate the making of any alternative acquisition
proposal, or if the Company terminates the Merger Agreement to
enter into an agreement with respect to a proposal from a third
party that the board of directors of the Company has determined
is superior to Parents, in each case, as is described in further
detail in the Merger Agreement. Under certain additional
circumstances described in the Merger Agreement, the Company will
be obligated to pay Parent a termination fee of $90million if the
Merger Agreement is terminated and, within twelve months
following such termination, the Company consummates a business
combination transaction of the type described in the Merger
Agreement or enters into a definitive agreement for such a
business combination transaction that is subsequently
consummated. The parties to the Merger Agreement are also
entitled to an injunction or injunctions to prevent breaches of
the Merger Agreement by the other party, and to enforce
specifically the terms of the Merger Agreement.
The board of directors of the Company has unanimously
(i)determined and resolved that the terms of the Offer, the
Mergers and the other transactions contemplated by the Merger
Agreement are advisable, and fair to and in the best interests
of, the Company and its stockholders, (ii)determined that it is
advisable and in the best interests of the Company and its
stockholders to enter into the Merger Agreement, and that the
Merger Agreement is advisable, (iii)approved the Merger Agreement
and the transactions contemplated thereby, on the terms and
conditions set forth in the Merger Agreement and (iv)resolved to
recommend that the Companys stockholders accept the Offer and
tender their Shares to Purchaser to the Offer.
The foregoing summary of the principal terms of the Merger
Agreement does not purport to be complete and is qualified in its
entirety by reference to the full copy of the Merger Agreement
filed as Exhibit 2.1 hereto and incorporated herein by reference.
The summary and the copy of the Merger Agreement are intended to
provide information to investors regarding the terms of the
Merger Agreement and are not intended to modify or supplement any
factual disclosures about the Company or Parent in its public
reports filed with the SEC. In particular, the Merger Agreement
and related summary are not intended to be, and should not be
relied upon as, disclosures regarding any facts and circumstances
relating to any party to the Merger Agreement. The Merger
Agreement includes representations, warranties and covenants of
the Company, Parent, Purchaser and Merger Sub 2 made solely for
the benefit of the parties to the Merger Agreement. The
assertions embodied in those representations and warranties were
made solely for purposes of the contract among the Company,
Purchaser, Parent and Merger Sub 2 and may be subject to
important qualifications and limitations agreed to by the
Company, Purchaser, Parent and Merger Sub 2 in connection with
the negotiated terms. Moreover, some of those representations and
warranties may not be accurate or complete as of any specified
date, may be subject to a contractual standard of materiality
different from those generally applicable to the Companys or
Parents SEC filings and were used for purposes of allocating
risk among the Company, Purchaser, Parent and Merger Sub 2 rather
than establishing matters as facts. Investors should not rely on
the representations, warranties and covenants or any description
thereof as characterizations of the actual state of facts of the
Company, Parent, Purchaser, Merger Sub 2 or any of their
respective subsidiaries or affiliates.
Tender and Support Agreement
On January7, 2017, concurrently with the execution of the Merger
Agreement, TPG FOF V-A, L.P., TPG FOF V-B, L.P. and TPG Partners
V, L.P. (each, a TPG Stockholder) entered into a tender and
support agreement (the Tender and Support Agreement) with Parent
and Purchaser, to which, among other things and subject to the
terms and conditions therein, each TPG Stockholder agreed to
tender all Shares of which such TPG Stockholder is the beneficial
or record owner, representing in the aggregate approximately
30.4% of the outstanding Shares, into the Offer.
Item5.02Departure of Directors or Certain Officers;
Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
On January6, 2017, the board of directors of the Company approved
an amendment to all outstanding equity-based awards to extend the
post-change in control protection period, during which an
individual whose employment is terminated by the Company without
cause would benefit from accelerated vesting, from two years to
four years effective upon the consummation of the First Merger.
Item5.03Amendments to Articles of Incorporation or
Bylaws; Change in Fiscal Year.
On January6, 2017, the board of directors of the Company adopted
an amendment to the Companys Bylaws (the Bylaws), which amendment
took effect upon adoption by the board of directors of the
Company. Specifically, a new Section8.8 was added to ArticleVIII
of the Bylaws to provide that, unless the Company consents in
writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware, or, if the Court of Chancery
of the State of Delaware does not have jurisdiction, the federal
district court for the District of Delaware or other state courts
of the State of Delaware (collectively, the Delaware Courts),
will be the sole and exclusive forum for (i)any derivative action
or proceeding brought on behalf of the Company, (ii)any action
asserting a claim of breach of a fiduciary duty owed by any
director, officer or other employee or stockholder of the Company
to the Company or the Companys stockholders, (iii)any action
asserting a claim arising to any provision of the DGCL or the
Companys certificate of incorporation or Bylaws or as to which
the DGCL confers jurisdiction on the Court of Chancery of the
State of Delaware, or (iv)any action asserting a claim governed
by the internal affairs doctrine of the State of Delaware. The
new provision further provides that any stockholder of the
Company will be deemed to have consented to the provision. The
foregoing description is qualified in its entirety by reference
to the marked copy of the Bylaws, which is filed herewith as
Exhibit 3.1 and incorporated herein by reference.
Item8.01Other Events.
Joint Press Release
On January9, 2017, the Company and Parent issued a joint press
release announcing entry into the Merger Agreement. A copy of the
press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
Cautionary Statement Regarding Forward Looking
Statements
This communication may contain statements that constitute
forward-looking statements, including, for example, information
related to UnitedHealth Group, SCA and the proposed acquisition
of SCA by UnitedHealth Group. Generally the words believe,
expect, intend, estimate, anticipate, plan, project, should and
similar expressions identify forward-looking statements, which
generally are not historical in nature. Such statements reflect
the current analysis of existing information and involve
substantial risks and uncertainties that could cause actual
results to
differ materially from those expressed or implied by such
statements. The following factors, among others, could cause
actual results to differ materially from those described in these
forward-looking statements: the possibility that various
conditions to the consummation of the Offer and the Mergers may
not be satisfied or waived, including the receipt of regulatory
clearances related to the mergers; uncertainty as to how many
shares of SCA common stock will be tendered into the Offer; the
risk that the Offer and the Mergers will not close within the
anticipated time periods, or at all; the failure to complete or
receive the anticipated benefits from UnitedHealth Groups
acquisition of SCA; the possibility that the parties may be
unable to successfully integrate SCAs operations into those of
UnitedHealth Group; such integration may be more difficult,
time-consuming or costly than expected; revenues following the
transaction may be lower than expected; operating costs, customer
loss and business disruption (including, without limitation,
difficulties in maintaining relationships with employees,
customers, clients, suppliers or physicians) may be greater than
expected following the transaction; the retention of certain key
employees at SCA may not be achieved; the parties may be unable
to meet expectations regarding the timing, completion and
accounting and tax treatments of the transactions; UnitedHealth
Group and SCA are subject to intense competition; factors that
affect UnitedHealth Groups ability to generate sufficient funds
to maintain its quarterly dividend payment cycle; the effects of
local and national economic, credit and capital market
conditions; and the other risks and uncertainties relating to
UnitedHealth Group and SCA described in their respective Annual
Reports on Form 10-K for the fiscal year ended December31, 2015,
and in their subsequent Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, all of which are filed with the U.S.
Securities and Exchange Commission (the SEC) and available at
www.sec.gov.
SCA assumes no obligation to update the information in this
communication, except as otherwise required by law. Readers are
cautioned not to place undue reliance on these forward-looking
statements or information, which speak only as of the date
hereof.
Additional Information and Where to Find
It
This communication relates to a pending business combination
transaction between UnitedHealth Group and SCA. The Offer
referenced in this communication has not yet commenced. This
communication is for informational purposes only and is neither
an offer to sell or exchange, nor a solicitation of an offer to
buy or exchange, any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, sale or
exchange would be unlawful prior to registration or qualification
under the securities laws of any such jurisdiction.
UnitedHealth Group intends to file a registration statement on
Form S-4 related to the transaction with the SEC and may file
amendments thereto. UnitedHealth Group and a wholly-owned
subsidiary of UnitedHealth Group intend to file a tender offer
statement on Schedule TO (including a prospectus/offer to
exchange, a related letter of transmittal and other exchange
offer documents) related to the transaction with the SEC and may
file amendments thereto. SCA intends to file a
solicitation/recommendation statement on Schedule 14D-9 with the
SEC and may file amendments thereto. SCA and UnitedHealth Group
may also file other documents with the SEC regarding the
transaction. This communication is not a substitute for any
registration statement, Schedule TO, Schedule 14D-9 or any other
document which SCA or UnitedHealth Group may file with the SEC in
connection with the transaction. Investors and security holders
are urged to read the registration statement, the Schedule TO
(including the prospectus/offer to exchange, related letter of
transmittal and other exchange offer documents), the
solicitation/recommendation statement on Schedule 14D-9 and the
other relevant materials with respect to the transaction
carefully and in their entirety when they become available before
making any decision regarding exchanging their shares, because
they will contain important information about the transaction.
The prospectus/offer to exchange, the related letter of
transmittal and certain other exchange offer documents, as well
as the solicitation/recommendation statement, will be made
available to all holders of SCAs stock at no expense to them. The
exchange offer materials and the solicitation/recommendation
statement will be made available for free at the SECs website at
www.sec.gov. Additional copies of the exchange offer materials
and the solicitation/recommendation statement may be obtained for
free by contacting UnitedHealth Groups Investor Relations
department at (800) 328-5979. Additional copies of the
solicitation/recommendation statement may be obtained for free by
contacting SCAs Investor Relations department at (800) 768-0094.
In addition to the SEC filings made in connection with the
transaction, each of UnitedHealth Group and SCA files annual,
quarterly and current reports and other information with the SEC.
You may read and copy any reports or other such filed information
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. UnitedHealth Groups and
SCAs filings with the SEC are also available to the public from
commercial document-retrieval services and at the website
maintained by the SEC at http://www.sec.gov.
Item9.01
Financial Statements and Exhibits.
(d)
Exhibits
| 2.1 |
Agreement and Plan of Reorganization, dated January7, 2017, among UnitedHealth Group Incorporated, Spartan Merger Sub1, Inc., Spartan Merger Sub 2, LLC and Surgical Care Affiliates, Inc. Schedules to the Agreement and Plan of Reorganization have been omitted to Item601(b)(2) of Regulation S-K. The registrant will furnish copies of any such schedules to the U.S. Securities and Exchange Commission upon request. |
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| 3.1 |
Amended and Restated By-Laws of Surgical Care Affiliates, Inc. |
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| 99.1 |
Joint Press Release issued by UnitedHealth Group Incorporated and Surgical Care Affiliates, Inc. dated January9, 2017. |
to the
requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
| Surgical Care Affiliates, Inc. | ||
| By: |
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Date: January9,
2017
EXHIBIT
INDEX
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| 2.1 |
Agreement and Plan of Reorganization, dated January7, 2017, among UnitedHealth Group Incorporated, Spartan Merger Sub 1, Inc., Spartan Merger Sub 2, LLC and Surgical Care Affiliates, Inc. Schedules to the Agreement and Plan of Reorganization have been omitted |
About Surgical Care Affiliates, Inc. (NASDAQ:SCAI)
Surgical Care Affiliates, Inc. (Surgical Care Affiliates) is a provider of solutions to physicians and health systems. The Company operates a network of outpatient surgery facilities in the United States, which consists of over 190 ambulatory surgery centers (ASCs) and approximately seven surgical hospitals. The Company’s network of facilities includes ASCs, surgical hospitals and hospital surgery departments. The Company owns and operates facilities in partnership with over 50 health systems and approximately 2,800 physician partners. Physicians at its facilities provide surgical services in a range of specialties, including orthopedics, ophthalmology, gastroenterology, pain management, otolaryngology (ear, nose and throat, or ENT), urology, spine and gynecology, as well as other general surgery procedures. The Company’s portfolio includes facilities in Alabama, Alaska, Arizona, Sacramento, San Diego, San Francisco, Colorado, Connecticut, Florida, Georgia and Hawaii. Surgical Care Affiliates, Inc. (NASDAQ:SCAI) Recent Trading Information
Surgical Care Affiliates, Inc. (NASDAQ:SCAI) closed its last trading session up +7.76 at 56.51 with 408,927 shares trading hands.