UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨ | Preliminary Proxy Statement |
¨ | Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Under Rule 14a-12 |
LIFE TECHNOLOGIES CORPORATION
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
¨ | No fee required |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
x | Fee paid previously with preliminary materials. |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing party: |
(4) | Date Filed: |
MERGER PROPOSEDYOUR VOTE IS VERY IMPORTANT
July 22, 2013
Dear Stockholder:
A special meeting of stockholders of Life Technologies Corporation, a Delaware corporation (Life Technologies or the Company), will be held on August 21, 2013, at 8:00 a.m. local time, at the offices of the Company, 5781 Van Allen Way, Carlsbad, California 92008. You are cordially invited to attend.
On April 14, 2013, we entered into an Agreement and Plan of Merger (the merger agreement) with Thermo Fisher Scientific Inc., a Delaware corporation (Thermo Fisher), and Polpis Merger Sub Co., a Delaware corporation and a wholly owned subsidiary of Thermo Fisher (Merger Sub), providing for, subject to the satisfaction or waiver of specified conditions, the acquisition of the Company by Thermo Fisher at a price of $76.00 per share in cash, subject to adjustment as described below. Subject to the terms and conditions of the merger agreement, Merger Sub will be merged with and into the Company (the merger), with the Company surviving the merger as a wholly owned subsidiary of Thermo Fisher. At the special meeting, we will ask you to adopt the merger agreement.
At the effective time of the merger, each share of the Companys common stock (Company common stock) issued and outstanding immediately prior to the effective time, other than shares owned by the Company or Thermo Fisher or their respective wholly owned subsidiaries and shares owned by stockholders who have properly exercised and perfected appraisal rights under Delaware law, will be converted into the right to receive $76.00 in cash, without interest and less any applicable withholding taxes. If the merger does not close by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), and this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price per share will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date.
The proxy statement accompanying this letter provides you with more specific information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement. We encourage you to carefully read the accompanying proxy statement and the copy of the merger agreement attached as Annex A thereto.
The board of directors of the Company (the Board) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board approved the merger agreement, declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders of the Company and recommended that the stockholders of the Company vote for adoption of the merger agreement. Accordingly, the Board unanimously recommends a vote FOR the proposal to adopt the merger agreement.
Whether or not you plan to attend the special meeting and regardless of the number of shares you own, your careful consideration of, and vote on, the merger agreement is important and we encourage you to vote promptly. The merger cannot be completed unless the merger agreement is adopted by stockholders holding at least a majority of the outstanding shares of Company common stock. The failure to vote will have the same effect as a vote against the proposal to adopt the merger agreement.
After reading the accompanying proxy statement, please make sure to vote your shares by promptly voting electronically or telephonically as described in the accompanying proxy statement, by completing, dating, signing and returning your proxy card, or by attending our special meeting of stockholders in person. Instructions regarding all three methods of voting are provided on the proxy card. If you hold shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares.
I look forward to seeing you at our special meeting.
Very truly yours,
Gregory T. Lucier
Chairman and Chief Executive Officer
The merger has not been approved or disapproved by the Securities and Exchange Commission or any state securities commission. Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits or fairness of the merger or upon the adequacy or accuracy of the information contained in this document or the accompanying proxy statement. Any representation to the contrary is a criminal offense.
The accompanying proxy statement is dated July 22, 2013 and is first being mailed to our stockholders on or about July 23, 2013.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 2013
To Our Stockholders:
A special meeting of stockholders of Life Technologies Corporation (Life Technologies or the Company) will be held on August 21, 2013, at 8:00 a.m. local time, at the offices of the Company, 5781 Van Allen Way, Carlsbad, California 92008, for the following purposes:
1. | To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of April 14, 2013 (the merger agreement), by and among the Company, Thermo Fisher Scientific Inc., a Delaware corporation (Thermo Fisher), and Polpis Merger Sub Co., a Delaware corporation and a wholly owned subsidiary of Thermo Fisher. |
2. | To consider and vote on a non-binding, advisory proposal to approve the compensation that may be paid or become payable to the Companys named executive officers in connection with, or following, the consummation of the merger (this non-binding, advisory proposal relates only to contractual obligations of the Company in existence prior to consummation of the merger that may result in a payment to the Companys named executive officers in connection with, or following, the consummation of the merger and does not relate to any new compensation or other arrangements between the Companys named executive officers and Thermo Fisher or, following the merger, the surviving corporation and its subsidiaries). |
3. | To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. |
For more information concerning the special meeting, the merger agreement, the merger and the other transactions contemplated by the merger agreement, please review the accompanying proxy statement and the copy of the merger agreement attached as Annex A thereto.
The board of directors of the Company (the Board) carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board approved the merger agreement, declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders of the Company and recommended that the stockholders of the Company vote for adoption of the merger agreement.
The Board unanimously recommends a vote FOR the proposal to adopt the merger agreement, FOR the non-binding compensation proposal and FOR the approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.
Stockholders of record at the close of business on July 18, 2013 are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.
By Order of the Board of Directors,
John A. Cottingham
Chief Legal Officer & Secretary
Carlsbad, California |
July 22, 2013
IMPORTANT: Please vote telephonically or electronically for the matters before our stockholders as described in the accompanying proxy statement, or promptly fill in, date, sign and return the enclosed proxy card in the accompanying pre-paid envelope to ensure that your shares are represented at the meeting. You may revoke your proxy before it is voted. If you attend the meeting, you may choose to vote in person even if you have previously sent in your proxy card.
Page |
1 |
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER |
9 |
15 |
16 | ||
16 | ||
16 | ||
16 | ||
17 | ||
17 | ||
17 | ||
17 | ||
18 | ||
18 | ||
18 | ||
19 | ||
19 | ||
19 | ||
20 | ||
20 | ||
20 | ||
21 | ||
21 | ||
21 | ||
22 | ||
22 | ||
22 | ||
37 | ||
Reasons for Recommending the Adoption of the Merger Agreement |
38 | |
42 | ||
Opinion of Deutsche Bank Securities Inc. (Financial Advisor to the Independent Members of the Board) |
43 | |
Opinion of Moelis & Company LLC (Financial Advisor to the Company) |
46 | |
Summary of Material Financial Analyses of Deutsche Bank and Moelis |
48 | |
53 | ||
53 | ||
54 | ||
Interests of the Companys Directors and Executive Officers in the Merger |
55 | |
70 | ||
72 | ||
72 |
i
73 | ||
73 | ||
75 | ||
75 | ||
Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws |
75 | |
76 | ||
76 | ||
76 | ||
77 | ||
77 | ||
78 | ||
82 | ||
84 | ||
85 | ||
86 | ||
86 | ||
87 | ||
87 | ||
87 | ||
88 | ||
89 | ||
89 | ||
90 | ||
91 | ||
92 | ||
93 | ||
93 | ||
93 | ||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
94 | |
97 | ||
101 | ||
102 | ||
103 | ||
104 |
Annex A | Agreement and Plan of Merger, dated as of April 14, 2013 |
Annex B | Opinion of Deutsche Bank Securities Inc. (Financial Advisor to the Independent Members of the Board) |
Annex C | Opinion of Moelis & Company LLC (Financial Advisor to the Company) |
Annex D | Section 262 of the General Corporation Law of the State of Delaware |
ii
LIFE TECHNOLOGIES CORPORATION
5791 Van Allen Way
Carlsbad, California 92008
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 2013
PROXY STATEMENT
This proxy statement contains information relating to a special meeting of stockholders of Life Technologies Corporation, which we refer to as Life Technologies, the Company, we, us or our. The special meeting will be held on August 21, 2013, at 8:00 a.m. local time, at the offices of the Company, 5781 Van Allen Way, Carlsbad, California 92008. We are furnishing this proxy statement to stockholders of the Company as part of the solicitation of proxies by the Companys board of directors, which we refer to as the Board, for use at the special meeting and at any adjournments or postponements thereof. This proxy statement is dated July 22, 2013 and is first being mailed to our stockholders on or about July 23, 2013.
This summary term sheet highlights selected information in this proxy statement and may not contain all of the information about the merger that is important to you. We have included page references in parentheses to direct you to more complete descriptions of the topics presented in this summary term sheet. You should carefully read this proxy statement in its entirety, including the annexes and the other documents to which we have referred you, for a more complete understanding of the matters being considered at the special meeting. You may obtain, without charge, copies of documents incorporated by reference into this proxy statement by following the instructions under the section of this proxy statement entitled Where You Can Find Additional Information beginning on page 104.
The Parties
(page 16)
Life Technologies is a global biotechnology company that is committed to providing the most innovative products and services to leading customers in the fields of scientific research, genetic analysis and applied sciences. With a presence in more than 180 countries, the Companys portfolio of over 50,000 end-to-end solutions is secured by more than 5,000 patents and licenses that span the entire biological spectrumscientific exploration, molecular diagnostics, 21st century forensics, regenerative medicine and agricultural research. Life Technologies has approximately 10,000 employees and had revenues of $3.8 billion in 2012. The Companys corporate headquarters are located in Carlsbad, California.
Thermo Fisher Scientific Inc., which we refer to as Thermo Fisher, is the world leader in serving science. Its mission is to enable its customers to make the world healthier, cleaner and safer. With revenues of $12.5 billion in 2012, Thermo Fisher has approximately 39,000 employees and serves customers within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as in environmental and process control industries. Thermo Fishers corporate headquarters are located in Waltham, Massachusetts.
Polpis Merger Sub Co., which we refer to as Merger Sub, was formed by Thermo Fisher solely for the purpose of completing the merger. Upon the consummation of the merger, Merger Sub will cease to exist.
The Merger
(page 22)
The Company, Thermo Fisher and Merger Sub entered into an Agreement and Plan of Merger, which we refer to as the merger agreement, on April 14, 2013. Under the terms of the merger agreement, subject to the
satisfaction or waiver of specified conditions, Merger Sub will be merged with and into the Company, which we refer to as the merger. The Company will survive the merger as a wholly owned subsidiary of Thermo Fisher.
Upon the consummation of the merger, each share of the Companys common stock, par value $0.01 per share, which we refer to as Company common stock, that is issued and outstanding immediately prior to the effective time of the merger, other than shares owned by the Company or Thermo Fisher or their respective wholly owned subsidiaries and shares owned by stockholders who have properly exercised and perfected appraisal rights under the Delaware law, will be converted into the right to receive $76.00 in cash, without interest and less any applicable withholding taxes. If the merger does not close by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), and this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price per share will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date. We refer to this additional amount, if payable, as the additional per share consideration and, together with the $76.00 in cash to be paid in the merger, the merger consideration.
The Special Meeting
(page 17)
The special meeting will be held on August 21, 2013. At the special meeting, you will be asked to, among other things, vote for the adoption of the merger agreement. Please see the section of this proxy statement entitled The Special Meeting for additional information on the special meeting, including how to vote your shares of Company common stock.
Stockholders Entitled to Vote; Vote Required to Adopt the Merger Agreement
(page 18)
You may vote at the special meeting if you owned any shares of Company common stock at the close of business on July 18, 2013, the record date for the special meeting. As of the close of business on the record date, there were 172,659,776 shares of Company common stock outstanding and entitled to vote, held by 3,832 stockholders of record. You may cast one vote for each share of Company common stock that you held on the record date. The adoption of the merger agreement by the Companys stockholders requires the affirmative vote of stockholders holding at least a majority of the outstanding shares of Company common stock as of the close of business on the record date.
Recommendation of the Board; Reasons for Recommending the Adoption of the Merger Agreement
(page 37; page 38)
After careful consideration, the Board determined to approve the merger agreement and recommend the adoption of the merger agreement by the Companys stockholders based on its belief that the merger agreement and the transactions contemplated thereby, including the merger, provide the Companys stockholders with higher and more certain value than any other strategic alternatives available to the Company. Accordingly, the Board unanimously recommends a vote FOR the proposal to adopt the merger agreement. The Board also unanimously recommends a vote FOR the non-binding compensation proposal and FOR the approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.
For a discussion of the material factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement entitled The MergerReasons for Recommending the Adoption of the Merger Agreement beginning on page 38.
2
Opinions of Financial Advisors
(page 43 and Annex B for Deutsche Bank; page 46 and Annex C for Moelis)
Deutsche Bank Securities Inc., which we refer to as Deutsche Bank, financial advisor to the independent members of the Board, rendered its opinion to the Board that, as of April 14, 2013 and based upon and subject to the assumptions, limitations, qualifications and conditions set forth in its opinion, the merger consideration to be received by the holders of Company common stock (other than Thermo Fisher and its affiliates) in the merger was fair from a financial point of view to such holders.
The Board also received a written opinion, dated April 14, 2013, from the Companys financial advisor, Moelis & Company LLC, which we refer to as Moelis, as to the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration to be received by the stockholders of Company common stock (other than Thermo Fisher and its affiliates).
The full text of the written opinions of Deutsche Bank and Moelis, both dated April 14, 2013, which set forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with each opinion, is included in this proxy statement as Annex B and Annex C, respectively, and is incorporated herein by reference. The summary of the opinions of Deutsche Bank and Moelis set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinions. The opinions of Deutsche Bank and Moelis were addressed to, and for the use and benefit of, the Board (in its capacity as such) in connection with its consideration of the merger. Neither Deutsche Banks opinion nor Moelis opinion constitutes a recommendation as to how any holder of Company common stock should vote with respect to the merger. The opinions of Deutsche Bank and Moelis were limited solely to the fairness, from a financial point of view, of the merger consideration to be received by the holders of Company common stock (other than Thermo Fisher and its affiliates), and neither Deutsche Bank nor Moelis expressed any opinion as to the underlying business decision of the Company to engage in the merger or the relative merits of the merger as compared to any alternative transactions or business strategies that might have been available to the Company.
The Company has agreed to pay Deutsche Bank fees, which are currently estimated to be approximately $30,000,000, for its services as financial advisor to the independent members of the Board, of which $2,000,000 became payable upon the delivery of Deutsche Banks opinion (or would have become payable upon Deutsche Bank advising the independent members of the Board that it was unable to render an opinion) and has been paid, and the remainder of which is contingent upon consummation of the merger. The Company has agreed to pay Moelis fees, which are currently estimated to be approximately $25,000,000 in the aggregate, of which $2,000,000 became payable in connection with the delivery of its opinion, regardless of the conclusion reached therein, and has been paid, and the remainder of which is contingent upon completion of the merger.
For a more complete description, please see the sections of this proxy statement entitled The MergerOpinion of Deutsche Bank Securities Inc. (Financial Advisor to the Independent Members of the Board), The MergerOpinion of Moelis & Company LLC (Financial Advisor to the Company) and The MergerSummary of Material Financial Analyses of Deutsche Bank and Moelis. Please also see Annexes B and C to this proxy statement.
Certain Effects of the Merger
(page 53)
Upon the consummation of the merger, Merger Sub will be merged with and into the Company, and the Company will continue to exist following the merger as a wholly owned subsidiary of Thermo Fisher.
Following the consummation of the merger, shares of Company common stock will no longer be traded on the NASDAQ Global Select Market (NASDAQ) or any other public market, and the registration of shares of Company common stock under the Securities Exchange Act of 1934, as amended (the Exchange Act), will be terminated.
3
Effects on the Company If Merger Is Not Completed
(page 53)
In the event that the proposal to adopt the merger agreement does not receive the required approval from the Companys stockholders, or if the merger is not completed for any other reason, the Companys stockholders will not receive any payment for their shares of Company common stock in connection with the merger. Instead, the Company will remain an independent public company and stockholders will continue to own their shares of Company common stock. Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Thermo Fisher a termination fee. Please see the section of this proxy statement entitled The Merger AgreementTermination Fee beginning on page 92.
Post-Closing Arrangements
(page 89)
The merger agreement states that Thermo Fisher intends to maintain the Life Technologies name as a brand of the combined company following the closing of the merger, and to nominate at least one member of the Board, selected by Thermo Fisher, for appointment to Thermo Fishers board of directors effective at the effective time of the merger.
Treatment of Equity Awards
(page 77)
At the effective time of the merger:
| each outstanding stock option to purchase shares of Company common stock, which we refer to as an Option, whether vested or unvested, will be canceled and will entitle the holder thereof to receive an amount in cash equal to the product of (x) the total number of shares of Company common stock subject to such Option times (y) the excess, if any, of the merger consideration over the exercise price per share of Company common stock subject to such Option; |
| each outstanding restricted stock unit, which we refer to as an RSU, that is nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended, which we refer to as an NQDC RSU, will be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger or, with respect to NQDC RSUs granted in 2013, upon consummation of the merger, in each case, in accordance with the terms of the applicable equity award agreement; |
| each outstanding RSU that is not an NQDC RSU and is scheduled to vest prior to January 1, 2015 based solely on the continued service of the holder, which we refer to as a Pre-2015 Vesting RSU, will vest in full and will be canceled in exchange for the right to receive an amount in cash equal to the merger consideration; |
| each outstanding RSU that is not an NQDC RSU and is scheduled to vest on or after January 1, 2015 based solely on the continued service of the holder, which we refer to as a Post-2014 Vesting RSU, will be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger in accordance with the terms of the applicable equity award agreement; |
| each outstanding RSU that is subject to performance-based vesting, which we refer to as a PRSU, will vest in full at the greater of the target RSU award level and the level achieved based on the Companys performance as of the end of the most recently completed fiscal year in the applicable performance period, except that PRSUs granted in the fiscal year in which the merger is consummated will vest at the target RSU award level, in each case, in accordance with the terms of the applicable equity award agreement, and will be canceled in exchange for the right to receive an amount in cash equal to the merger consideration; and |
4
| each stock unit credited to a participants account under the Companys Deferred Compensation Plan, which we refer to as a Share Equivalent Unit, will vest (to the extent unvested) and be converted into the right to receive an amount in cash equal to the merger consideration, and be paid in accordance with the terms of the Companys Deferred Compensation Plan. |
Interests of the Companys Directors and Executive Officers in the Merger
(page 55)
Certain of the Companys directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Companys stockholders generally. The members of the Board were aware of and considered these interests in reaching the determination to approve the merger agreement and declare the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, and in recommending that the Companys stockholders vote for the adoption of the merger agreement.
Conditions to the Merger
(page 90)
Each partys obligation to consummate the merger is subject to the satisfaction, on or prior to the date of closing, of the following conditions:
| the adoption of the merger agreement by the holders of a majority of the outstanding shares of Company common stock; |
| the expiration of the waiting period (and any extension thereof) or the granting of early termination applicable to the consummation of the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), and the receipt of antitrust approvals in certain other jurisdictions; and |
| the absence of any order issued by any governmental authority of competent authority or any law that is in effect and prohibits, restrains or makes illegal the consummation of the merger. |
Each partys obligation to consummate the merger is also subject to certain additional conditions, including:
| subject to certain materiality qualifiers, the accuracy of the representations and warranties of the other party; and |
| performance in all material respects by the other party of its obligations under the merger agreement. |
Thermo Fishers obligation to consummate the merger is also conditioned on there not having been any effect, change, event, circumstance or occurrence since the date of the merger agreement that has had or would reasonably be expected to have a material adverse effect on the Company and its subsidiaries. The consummation of the merger is not conditioned upon Thermo Fishers receipt of financing.
Before the closing, each of the Company and Thermo Fisher may waive any of the conditions to its obligation to consummate the merger even though one or more of the conditions described above has not been met, except where waiver is not permitted by applicable law.
Regulatory Approvals
(page 72 and page 86)
The consummation of the merger is subject to review under the HSR Act, as well as notification under and compliance with applicable foreign antitrust laws. As described above in the section entitled Conditions to the Merger, the obligations of Thermo Fisher and the Company to consummate the merger are subject to receipt of clearance under the HSR Act and the receipt of antitrust approvals in certain other jurisdictions.
5
The merger agreement generally requires each party to take all actions necessary to resolve objections that may be asserted under any antitrust law with respect to the transactions contemplated by the merger agreement, subject to certain exceptions, including that Thermo Fisher is not required to, and the Company is not permitted to, take any action or agree or commit to take any action, or agree to any condition or restriction, that would reasonably be expected to have a material adverse effect on Thermo Fisher or on the Company and its subsidiaries (including, after the closing, the surviving corporation and its subsidiaries), in each case measured on a scale relative to Thermo Fisher and its subsidiaries, taken as a whole.
In the event that the merger has not closed by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), then the end date for completing the merger will be automatically extended from January 14, 2014, to July 14, 2014, unless an earlier date is agreed in writing by the Company and Thermo Fisher, and if this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price payable per share in the merger will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date.
No Solicitation by the Company
(page 84)
The merger agreement generally restricts the Companys ability to solicit takeover proposals from third parties, or engage in discussions or negotiations with, or provide information to, third parties regarding any takeover proposal. Under certain circumstances, however, and in compliance with certain obligations contained in the merger agreement, the Company is permitted to engage in negotiations with, and provide information to, third parties making an unsolicited takeover proposal that the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or would reasonably be expected to lead to a transaction that is reasonably capable of being consummated and is more favorable from a financial point of view to the Companys stockholders than the merger. Under certain circumstances, the Company is permitted to terminate the merger agreement prior to obtaining approval of the merger agreement by the Companys stockholders, in order to enter into an alternative transaction in response to an unsolicited takeover proposal that the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, is reasonably capable of being consummated and is more favorable from a financial point of view to the Companys stockholders than the merger, upon payment by the Company of a $485,000,000 termination fee to Thermo Fisher.
Termination of the Merger Agreement
(page 91)
The merger agreement may be terminated at any time prior to the effective time of the merger in the following circumstances:
| by mutual written consent of the Company and Thermo Fisher; |
| by either Thermo Fisher or the Company, if: |
¡ | the merger is not consummated on or before January 14, 2014, except that if, on January 14, 2014, certain required antitrust approvals have not been obtained or a governmental authority of competent authority has issued an order or enacted a law that is in effect and prohibits, restrains or makes illegal the consummation of the merger (and such prohibition or restraint is in respect of an antitrust law), but all other closing conditions have been satisfied (other than those conditions that by their terms are to be satisfied at the closing), then the deadline will be automatically extended to July 14, 2014, or such earlier date as may be agreed in writing by the Company and Thermo Fisher, |
6
provided that neither Thermo Fisher nor the Company may rely on this provision to terminate the merger agreement if such partys failure to fulfill any obligation under the merger agreement materially contributed to the failure of the merger to be consummated before the deadline; |
¡ | any governmental authority of competent authority issues a final nonappealable order or enacts a law that prohibits, restrains or makes illegal the consummation of the merger; or |
¡ | at a duly convened meeting of the Companys stockholders, or any adjournment or postponement thereof, the Companys stockholders fail to adopt the merger agreement; |
| by Thermo Fisher: |
¡ | in the event of certain breaches of the merger agreement by the Company; or |
¡ | prior to the adoption of the merger agreement by the Companys stockholders, if the Board effects an adverse recommendation change; |
| by the Company: |
¡ | in the event of certain breaches of the merger agreement by Thermo Fisher or Merger Sub; or |
¡ | prior to the adoption of the merger agreement by the Companys stockholders, in connection with entering into an agreement with respect to a superior proposal (subject to the payment of a termination fee). |
Termination Fee
(page 92)
Upon termination of the merger agreement under certain specified circumstances, the Company will be required to pay Thermo Fisher a termination fee of $485,000,000.
Appraisal Rights
(page 97 and Annex D)
Under Delaware law, holders of Company common stock who do not vote in favor of adoption of the merger agreement will have the right to seek appraisal and receive the judicially determined fair value of their shares of Company common stock in lieu of receiving the merger consideration if the merger closes, but only if they perfect their appraisal rights by precisely complying with the required procedures under Section 262 of the General Corporation Law of the State of Delaware (the DGCL). This appraisal value could be more than, the same as or less than the merger consideration that would have otherwise been received for those shares.
To exercise appraisal rights under Delaware law, stockholders must submit a written demand for appraisal to the Company prior to the vote on the proposal to adopt the merger agreement, must not vote in favor of the proposal to adopt the merger agreement and must continue to hold the shares of Company common stock of record through the effective time of the merger. Failure to comply strictly with the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights. The text of the Delaware appraisal rights statute, Section 262 of the DGCL, is reproduced in its entirety as Annex D to this proxy statement. We encourage you to read these provisions carefully and in their entirety.
Litigation Relating to the Merger
(page 73)
Since the announcement of the merger on April 15, 2013, the Company and certain of its current and former directors have been named as defendants in four putative class action lawsuits brought by and on behalf of
7
stockholders of the Company in the Court of Chancery of the State of Delaware and four putative class action lawsuits brought by and on behalf of stockholders of the Company in the Superior Court of California, County of San Diego. Thermo Fisher has been named as a defendant in seven of these eight lawsuits. The complaints are substantively similar, and each alleges that the Companys directors breached their fiduciary duties in connection with the merger and seeks, among other things, to enjoin the merger. All four of the California actions have been dismissed without prejudice at the plaintiffs request. The four Delaware actions were consolidated in May 2013, and on June 26, 2013, the defendants in the consolidated Delaware actions filed motions to dismiss the consolidated amended complaint.
The Company and its directors believe that the claims in each of these lawsuits are without merit, and they intend to vigorously defend all pending actions relating to the merger.
Material U.S. Federal Income Tax Consequences
(page 70)
The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, if you are a U.S. holder (defined below in the section of this proxy statement entitled The MergerMaterial U.S. Federal Income Tax Consequences of the Merger), you will recognize gain or loss equal to the difference between the amount of cash you receive in the merger and your adjusted tax basis in the shares of Company common stock converted into cash in the merger. If you are a non-U.S. holder (defined below in the section of this proxy statement entitled The MergerMaterial U.S. Federal Income Tax Consequences of the Merger), the merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States, but may be a taxable transaction to you under non-U.S. federal income tax laws, and you are encouraged to seek tax advice regarding such matters. Because individual circumstances may differ, we recommend that you consult your own tax advisor to determine the particular tax effects to you.
You should read the section of this proxy statement entitled The MergerMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 70 for a more complete discussion of the material U.S. federal income tax consequences of the merger.
Additional Information
(page 104)
You can find more information about the Company in the periodic reports and other information we file with the U.S. Securities and Exchange Commission (the SEC). The information is available at the SECs public reference facilities and at the website maintained by the SEC at www.sec.gov.
8
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not address all questions that may be important to you as a stockholder. You should read the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.
Q: | Why am I receiving this proxy statement? |
A: | On April 14, 2013, the Company entered into the merger agreement with Thermo Fisher and Merger Sub. You are receiving this proxy statement in connection with the solicitation of proxies by the Board in favor of the adoption of the merger agreement. |
Q: | As a stockholder, what will I receive in the merger? |
A: | If the merger is completed, you will be entitled to receive $76.00 in cash, without interest and less any applicable withholding taxes, subject to adjustment as described in the following sentence, for each share of Company common stock that you own immediately prior to the effective time of the merger. If the merger does not close by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), and this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price per share will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date. |
The exchange of shares of Company common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Please see the section of this proxy statement entitled The MergerMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 70 for a more detailed description of the United States federal income tax consequences of the merger. You should consult your own tax advisor for a full understanding of how the merger will affect your federal, state, local and/or non-U.S. taxes.
Q: | What will happen to outstanding Company equity compensation awards in the merger? |
A: | For information regarding the treatment of the Companys equity awards, please see the section of this proxy statement entitled The Merger AgreementTreatment of Equity Awards beginning on page 77. |
Q: | When and where is the special meeting of our stockholders? |
A: | The special meeting will be held on August 21, 2013, at 8:00 a.m. local time, at the offices of the Company, 5781 Van Allen Way, Carlsbad, California 92008. |
Q: | Who is entitled to vote at the special meeting? |
A: | Only holders of record of Company common stock as of the close of business on July 18, 2013, the record date for the special meeting, are entitled to vote the shares of Life Technologies stock they held on the record date at the special meeting. As of the close of business on the record date, there were 172,659,776 shares of Company common stock outstanding and entitled to vote, held by 3,832 stockholders of record. Each stockholder is entitled to one vote for each share of Company common stock held by such stockholder on the record date on each of the proposals presented in this proxy statement. |
9
Q: | What proposals will be considered at the special meeting? |
A: | At the special meeting, you will be asked to consider and vote on the following proposals: |
| a proposal to adopt the merger agreement; |
| a non-binding, advisory proposal to approve the compensation that may be paid or become payable to the Companys named executive officers in connection with, or following, the consummation of the merger (this non-binding, advisory proposal relates only to contractual obligations of the Company in existence prior to consummation of the merger that may result in a payment to the Companys named executive officers in connection with, or following, the consummation of the merger and does not relate to any new compensation or other arrangements between the Companys named executive officers and Thermo Fisher or, following the merger, the surviving corporation and its subsidiaries), which we refer to as the non-binding compensation proposal; and |
| a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. |
Q: | What vote of our stockholders is required to approve each of the proposals? |
A: | The adoption of the merger agreement by our stockholders requires the affirmative vote of stockholders holding at least a majority of the outstanding shares of Company common stock as of the close of business on the record date. Abstentions, failures to vote and broker non-votes will have the same effect as a vote AGAINST the proposal to adopt the merger agreement. |
The approval of the non-binding compensation proposal requires the approval by a majority of the votes cast affirmatively or negatively on that proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and broker non-votes will have no effect on the outcome of non-binding compensation proposal.
The approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement, requires the approval by a majority of the votes cast affirmatively or negatively on that proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and broker non-votes will have no effect on the outcome of adjournment proposal.
Q: | How does the Board recommend that I vote? |
A: | The Board unanimously recommends a vote FOR the proposal to adopt the merger agreement, FOR the non-binding compensation proposal and FOR the approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. |
For a discussion of the factors that the Board considered in determining to recommend the adoption of the merger agreement, please see the section of this proxy statement entitled The MergerReasons for Recommending the Adoption of the Merger Agreement beginning on page 38. In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that some of the Companys directors and executive officers have interests that may be different from, or in addition to, the interests of the Companys stockholders generally. Please see the section of this proxy statement entitled The MergerInterests of the Companys Directors and Executive Officers in the Merger beginning on page 55.
10
Q: | How do the Companys directors and executive officers intend to vote? |
A: | The Companys directors and executive officers have informed us that they intend, as of the date hereof, to vote all of their shares of Company common stock in favor of the matters before our stockholders as described in the proxy statement. As of the close of business on July 18, 2013, the record date for the special meeting, the Companys directors and executive officers owned, in the aggregate, 4,221,892 shares of Company common stock, or collectively approximately 2.4% of the outstanding shares of Company common stock. |
Q: | Do any of the Companys directors or executive officers have any interests in the merger that are different from, or in addition to, my interests as a stockholder? |
A: | In considering the recommendation of the Board, you should be aware that certain of the Companys directors and executive officers have interests in the merger that may be different from, or in addition to, your interests as a stockholder. The members of the Board were aware of and considered these interests, among other matters, in evaluating and reaching the determination to approve the merger agreement and in recommending to the Companys stockholders that they adopt the merger agreement. |
The interests of the Companys directors generally include the right to accelerated vesting and cash-out of the directors unvested RSUs and accelerated cash-out of the directors Options, vested RSUs and certain deferred compensation amounts.
The interests of the Companys executive officers include the rights to:
| accelerated cash-out of the executive officers vested Options; |
| accelerated vesting and cash-out of the executive officers unvested Options, Pre-2015 Vesting RSUs, PRSUs and, solely with respect to Messrs. Hoffmeister and Cottingham, NQDC RSUs granted in 2013; |
| accelerated vesting with respect to the executive officers Post-2014 Vesting RSUs and NQDC RSUs (other than NQDC RSUs granted in 2013 to Messrs. Hoffmeister and Cottingham) in the event of a qualifying termination of employment following the consummation of the merger; |
| accelerated vesting and payment of the executive officers cash-based performance units; |
| certain severance payments in the event of a qualifying termination of employment following the adoption of the merger agreement by the Companys stockholders; |
| for executive officers with vested and unvested account balances under the Companys Deferred Compensation Plan (all executive officers other than Mr. Andrews), vesting and accelerated cash-out of all account balances under the Companys Deferred Compensation Plan (including Share Equivalent Units and other deferred compensation amounts) in accordance with the terms of the merger agreement and the Companys Deferred Compensation Plan; |
| receipt of 2013 annual bonuses if employed by the Company and its subsidiaries as of December 31, 2013, and payment of such bonuses at no less than target level in the event the merger is consummated prior to determination by the Compensation and Organizational Development Committee of the Board of achievement of applicable performance goals; and |
| solely with respect to Ms. Richard, the ability to participate in a retention bonus program that was established by the Company in connection with the merger. |
The Companys directors and executive officers also have the right to indemnification and insurance coverage following the closing of the merger.
11
For more information, please see the section of this proxy statement entitled The MergerInterests of the Companys Directors and Executive Officers in the Merger beginning on page 55.
Q: | How do I cast my vote if I am a stockholder of record? |
A: | If you are a stockholder with shares registered in your name, you may vote in person at the special meeting or by submitting a proxy for the special meeting via the internet, by telephone or by completing, signing, dating and mailing the enclosed proxy card in the envelope provided. For more detailed instructions on how to vote using one of these methods, please see the section of this proxy statement entitled The Special MeetingVoting Procedures beginning on page 19. |
If you are a stockholder of record and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote in favor of the proposal to adopt the merger agreement, the non-binding compensation proposal and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
Q: | How do I cast my vote if my shares of Company common stock are held in street name by my broker, bank, trust or other nominee? |
A: | If you are a stockholder with shares held in street name, which means your shares are held in an account at a broker, bank, trust or other nominee, you must follow the instructions from your broker, bank, trust or other nominee in order to vote. |
Q: | What will happen if I abstain from voting or fail to vote on any of the proposals? |
A: | If you abstain from voting, fail to cast your vote in person or by proxy or fail to give voting instructions to your broker, bank, trust or other nominee, it will have the same effect as a vote AGAINST the proposal to adopt the merger agreement. |
Assuming a quorum is present at the special meeting, abstentions, failures to vote and broker non-votes will have no effect on the outcome of the non-binding compensation proposal and the proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.
Q: | Can I change my vote after I have delivered my proxy? |
A: | Yes. If you are a stockholder with shares registered in your name, once you have given your proxy vote for the matters before our stockholders as described in the proxy statement, you may revoke it at any time prior to the time it is voted, by delivering to the Secretary of the Company at the Companys principal offices either a written document revoking the proxy or a duly executed proxy with a later date, or by attending the special meeting and voting in person. Merely attending the special meeting will not, by itself, revoke a proxy. |
If you are a stockholder with shares held in street name, you should follow the instructions of your broker, bank, trust or other nominee regarding the revocation of proxies. If your broker, bank, trust company or other nominee allows you to submit a proxy via the internet or by telephone, you may be able to change your vote by submitting a new proxy via the internet or by telephone or by mail.
Q: | What should I do if I receive more than one set of voting materials? |
A: | You may receive more than one set of voting materials, including multiple copies of this proxy statement or multiple proxy or voting instruction cards. For example, if you hold your shares of Company common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage |
12
account in which you hold shares of Company common stock. If you are a stockholder of record and your shares of Company common stock are registered in more than one name, you will receive more than one proxy card. Please submit each proxy and voting instruction card that you receive. |
Q: | If I am a holder of stock certificates representing Company common stock, should I send in my stock certificates now? |
A: | No. Promptly after the effective time of the merger, each registered holder of a certificate that represented shares of Company common stock will be sent a letter of transmittal describing the procedure for surrendering such certificate in exchange for the merger consideration. You will receive your cash payment after the paying agent receives your stock certificates and any other documents requested in the instructions. You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal. |
Q: | Am I entitled to exercise appraisal rights instead of receiving the merger consideration for my shares of Company common stock? |
A: | Yes. Stockholders who do not vote in favor of adoption of the merger agreement will have the right to seek appraisal and receive the judicially determined fair value of their shares of Company common stock in lieu of receiving the merger consideration if the merger closes, but only if they perfect their appraisal rights by precisely complying with the required procedures under Section 262 of the DGCL. This appraisal value could be more than, the same as or less than the merger consideration that would otherwise have been received for those shares. Please see the section of this proxy statement entitled Appraisal Rights beginning on page 97 and the text of the Delaware appraisal rights statute, Section 262 of the DGCL, which is reproduced in its entirety as Annex D to this proxy statement. |
Q: | When is the merger expected to be completed? |
A: | We are working toward completing the merger as promptly as possible. We currently expect the merger to close early in 2014, but we cannot be certain when or if the conditions to the merger will be satisfied or, to the extent permitted, waived. The merger cannot be completed until the conditions to closing are satisfied, including the adoption of the merger agreement by the Companys stockholders at the special meeting and the receipt of certain regulatory approvals. |
Q: | What happens if the merger is not completed? |
A: | If the merger agreement is not adopted by our stockholders, or if the merger is not completed for any other reason, our stockholders will not receive any payment for their Company common stock pursuant to the merger agreement. Instead, we will remain as a public company and the Company common stock will continue to be registered under the Exchange Act and listed and traded on the NASDAQ Global Select Market. Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Thermo Fisher a termination fee. Please see the section of this proxy statement entitled The Merger AgreementTermination Fee beginning on page 92. |
Q: | What is householding and how does it affect me? |
A: | The SEC permits companies to send a single set of certain disclosure documents to stockholders who share the same last name and address, unless contrary instructions have been received, but only if the applicable company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate notice of the meeting and proxy card. This practice, known as householding, is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources. |
If you received a householded mailing and you would like to have additional copies of this proxy statement mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to
13
Investor Relations via e-mail at ir@lifetech.com or by mail to Investor Relations, Life Technologies Corporation, 5791 Van Allen Way, Carlsbad, CA 92008, or call at (760) 603-7208. We will promptly send additional copies of this proxy statement upon receipt of such request.
Q: | Who can help answer my questions? |
A: | If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact AST Phoenix Advisors, which is acting as the Companys proxy solicitation agent in connection with the merger, toll free at (800) 591-8250. Banks and brokers may call collect at (212) 493-3910. |
14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Any statements in this proxy statement about expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance that are not historical facts, including statements regarding the expected timing, completion and effects of the merger, are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as believe, anticipate, should, intend, plan, will, expect(s), estimate(s), project(s), positioned, strategy, outlook and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are the following: the parties ability to consummate the transactions contemplated by the merger agreement in a timely manner or at all; the ability of the parties to satisfy the conditions to the completion of the merger, including the receipt of approval by the Companys stockholders; the ability to obtain regulatory approvals and other governmental consents for the merger on the terms expected and on the anticipated schedule; the Companys ability to maintain relationships with employees and third parties following the announcement of the merger agreement; and the ability of third parties to fulfill their obligations relating to the transactions contemplated by the merger agreement, including providing financing under current financial market conditions. Additional information and other factors are contained in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on February 28, 2013, the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2013, filed with the SEC on May 2, 2013, and recent Current Reports on Form 8-K filed with the SEC from time to time. Because the factors referred to above and other factors, including general industry and economic conditions, could cause actual results or outcomes to differ materially from those expressed or implied in any forward-looking statements, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date hereof, based on information available to the Company as of the date hereof, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after such date.
15
Life Technologies Corporation, which we refer to as Life Technologies or the Company, is a global biotechnology company that is committed to providing the most innovative products and services to leading customers in the fields of scientific research, genetic analysis and applied sciences. The Company began operations as a California partnership in 1987 and incorporated in California in 1989. In 1997, the Company reincorporated as a Delaware corporation. On November 21, 2008, Invitrogen Corporation, a predecessor company to Life Technologies, completed the acquisition of Applied Biosystems, Inc., and changed the name of the surviving company to Life Technologies Corporation. Life Technologies has approximately 10,000 employees, has a presence in more than 180 countries, and possesses a rapidly growing intellectual property estate. The Company had revenues of $3.8 billion in 2012. The Companys portfolio of over 50,000 end-to-end solutions is secured by more than 5,000 patents and licenses that span the entire biological spectrumscientific exploration, molecular diagnostics, 21st century forensics, regenerative medicine and agricultural research. The principal executive offices of the Company are located at 5791 Van Allen Way, Carlsbad, California 92008, and its telephone number is (760) 603-7200.
Thermo Fisher Scientific Inc., which we refer to as Thermo Fisher, is the world leader in serving science. Thermo Fishers mission is to enable its customers to make the world healthier, cleaner and safer. Thermo Fisher is a Delaware corporation and was incorporated in 1956. In November 2006, Thermo Electron Corporation, the predecessor company to Thermo Fisher, merged with Fisher Scientific International Inc. to create Thermo Fisher. With revenues of $12.5 billion in 2012, Thermo Fisher has approximately 39,000 employees and serves customers within pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as in environmental and process control industries. Thermo Fisher serves its customers through three premier brands, Thermo Scientific, Fisher Scientific and Unity Lab Services. The principal executive offices of Thermo Fisher are located at 81 Wyman Street, Waltham, Massachusetts 02451, and its telephone number is (781) 622-1000.
Polpis Merger Sub Co., which we refer to as Merger Sub, was formed on April 12, 2013, by Thermo Fisher solely for the purpose of completing the merger. Merger Sub is wholly owned by Thermo Fisher and has not engaged in any business except for activities incidental to its formation and in connection with the merger and the other transactions contemplated by the merger agreement. Upon the consummation of the merger, Merger Sub will cease to exist. The principal executive offices of Merger Sub are located at 81 Wyman Street, Waltham, Massachusetts 02451, and its telephone number is (781) 622-1000.
16
We are furnishing this proxy statement to the Companys stockholders as part of the solicitation of proxies by the Board for use at the special meeting and at any adjournments or postponements thereof.
The special meeting will be held on August 21, 2013, at 8:00 a.m. local time, at the offices of the Company, 5781 Van Allen Way, Carlsbad, California 92008.
If you plan to attend the meeting, please note that you will need to present government-issued identification showing your name and photograph (i.e., a drivers license or passport), and, if you are an institutional investor, professional evidence showing your representative capacity for such entity, in each case to be verified against our stockholder list as of the record date for the meeting. In addition, if your shares are held in the name of a bank, broker or other financial institution, you will need a valid proxy from such entity or a recent brokerage statement or letter from such entity reflecting your stock ownership as of the record date for the meeting.
Purpose of the Special Meeting
The special meeting is being held for the following purposes:
| to consider and vote on a proposal to adopt the merger agreement (see the section of this proxy statement entitled The Merger Agreement beginning on page 75); |
| to consider and vote on a non-binding, advisory proposal to approve the compensation that may be paid or become payable to the Companys named executive officers in connection with, or following, the consummation of the merger (this non-binding, advisory proposal relates only to contractual obligations of the Company in existence prior to consummation of the merger that may result in a payment to the Companys named executive officers in connection with, or following, the consummation of the merger and does not relate to any new compensation or other arrangements between the Companys named executive officers and Thermo Fisher or, following the merger, the surviving corporation and its subsidiaries), which we refer to as the non-binding compensation proposal (see the section of this proxy statement entitled The MergerInterests of the Companys Directors and Executive Officers in the MergerNon-Binding Compensation Proposal beginning on page 69); and |
| to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement. |
A copy of the merger agreement is attached as Annex A to this proxy statement.
The Board carefully reviewed and considered the terms and conditions of the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board approved the merger agreement, declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders of the Company and recommended that the stockholders of the Company vote for adoption of the merger agreement. Accordingly, the Board unanimously recommends a vote FOR the proposal to adopt the merger agreement.
The Board also unanimously recommends a vote FOR the non-binding compensation proposal and FOR the approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.
17
Record Date and Stockholders Entitled to Vote
Only holders of record of Company common stock as of the close of business on July 18, 2013, the record date for the special meeting, are entitled to vote the shares of Life Technologies stock they held on the record date at the special meeting. As of the close of business on the record date, there were 172,659,776 shares of Company common stock outstanding and entitled to vote, held by 3,832 stockholders of record. Each stockholder is entitled to one vote for each share of Company common stock held by such stockholder on the record date on each of the proposals presented in this proxy statement. For ten days prior to the special meeting, a complete list of the stockholders of record on July 18, 2013, will be available at our principal offices, located at 5791 Van Allen Way, Carlsbad, California 92008, for examination during ordinary business hours by any stockholder.
The Companys Seventh Amended and Restated Bylaws (the Bylaws) provide that a majority of all the outstanding shares of Company common stock entitled to vote, whether present in person or represented by proxy, constitutes a quorum for the transaction of business at any meeting of the Companys stockholders. Votes for and against and abstentions will be counted for purposes of determining the presence of a quorum. Broker non-votes will not be counted for purposes of determining the presence of a quorum unless the broker has been instructed to vote on at least one of the proposals presented in this proxy statement.
A broker non-vote occurs when (i) your shares are held by a broker, bank, trust or other nominee (we refer to those organizations collectively as broker), in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in street name) and (ii) a broker submits a proxy card for your shares of Company common stock held in street name, but does not vote on a particular proposal because the broker has not received voting instructions from you and does not have the authority to vote on that matter without instructions. Brokers will not have authority to vote with respect to the proposal to adopt the merger agreement, the non-binding compensation proposal or the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.
In the event that a quorum is not present at the special meeting, or if there are insufficient votes to adopt the merger agreement at the time of the special meeting, we expect that the meeting will be adjourned or postponed to solicit additional proxies.
Adoption of the Merger Agreement
The adoption of the merger agreement by our stockholders requires the affirmative vote of stockholders holding at least a majority of the outstanding shares of Company common stock as of the close of business on the record date.
The failure to vote your shares of Company common stock, abstentions and broker non-votes will have the same effect as a vote AGAINST the proposal to adopt the merger agreement.
Approval of the Non-Binding Compensation Proposal
The approval of the non-binding compensation proposal requires the approval by a majority of the votes cast affirmatively or negatively on that proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and broker non-votes will have no effect on the outcome of the non-binding compensation proposal. This is an advisory vote only and will not be binding on the Company or the Board.
Approval of the Adjournment of the Special Meeting
The approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement, requires
18
the approval by a majority of the votes cast affirmatively or negatively on that proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and broker non-votes will have no effect on the outcome of the adjournment proposal.
Whether or not you plan to attend the special meeting and regardless of the number of shares you own, your careful consideration of, and vote on, the merger agreement is important and we encourage you to vote promptly.
If you are a stockholder with shares registered in your name, you may vote in person at the special meeting or by submitting a proxy using one of the following three methods:
| Vote via the Internet. Go to the web address www.proxypush.com/life and follow the instructions for internet voting shown on the proxy card mailed to you. If you vote via the internet, you should be aware that there may be incidental costs associated with electronic access, such as your usage charges from your internet access providers and telephone companies, for which you will be responsible. |
| Vote by Telephone. Dial (866) 390-5390 and follow the instructions for telephone voting shown on the proxy card mailed to you. |
| Vote by Proxy Card. If you do not wish to vote by the internet or by telephone, please complete, sign, date and mail the enclosed proxy card in the envelope provided. If you vote via the internet or by telephone, please do not mail your proxy card. |
The internet and telephone voting procedures are designed to authenticate your identity and to allow you to vote your shares for the matters before our stockholders as described in this proxy statement and confirm that your voting instructions have been properly recorded.
Votes submitted by telephone or via the internet for the matters before our stockholders as described in the proxy statement must be received by 5:00 p.m., Eastern Daylight Time, on August 20, 2013.
If you are a stockholder with shares held in street name, which means your shares are held in an account at a broker, bank, trust or other nominee, you must follow the instructions from your broker, bank, trust or other nominee in order to vote.
For additional questions about the merger, assistance in submitting proxies or voting shares of Company common stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact AST Phoenix Advisors, which is acting as the Companys proxy solicitation agent in connection with the merger, toll free at (800) 591-8250. Banks and brokers may call collect at (212) 493-3910.
If you complete and submit your proxy card or voting instructions, the persons named as proxies will follow your instructions. If you are a stockholder of record and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote in favor of the proposal to adopt the merger agreement, the non-binding compensation proposal and the proposal to adjourn the special meeting, if necessary and appropriate, to solicit additional proxies.
If you are a stockholder with shares registered in your name, once you have given your proxy vote for the matters before our stockholders as described in the proxy statement, you may revoke it at any time prior to the time it is voted, by delivering to the Secretary of the Company at the Companys principal offices either a written document revoking the proxy or a duly executed proxy with a later date, or by attending the special meeting and voting in person. Merely attending the special meeting will not, by itself, revoke a proxy.
19
If you are a stockholder with shares held in street name, you should follow the instructions of your broker, bank, trust or other nominee regarding the revocation of proxies. If your broker, bank, trust company or other nominee allows you to submit a proxy via the internet or by telephone, you may be able to change your vote by submitting a new proxy via the internet or by telephone or by mail. Please note that if your shares are held in the name of a bank, broker, trust company or other nominee, you must obtain and bring to the special meeting a proxy card issued in your name from the broker, bank or other nominee to be able to vote at the special meeting.
If you plan to attend the special meeting and vote in person, you will be given a ballot at the special meeting. Please note that admission to the special meeting is limited to the Companys stockholders, a member of their immediate family or their named representatives.
For stockholders of record, upon your arrival at the meeting location, you will need to present identification to be admitted to the meeting. If you are a stockholder who is an individual, you will need to present government-issued identification showing your name and photograph (i.e., a drivers license or passport), or, if you are representing an institutional investor, you will need to present government-issued photo identification and professional evidence showing your representative capacity for such entity. In each case, we will verify such documentation with our record date stockholder list. We reserve the right to limit the number of immediate family members or representatives who may attend the special meeting. Cameras and electronic recording devices are not permitted at the special meeting.
For stockholders holding shares in street name, in addition to providing identification as outlined for record holders above, you will need a valid proxy from your broker or a recent brokerage statement or letter from your broker reflecting your stock ownership as of the record date. Otherwise, you will not be permitted to vote at or attend the special meeting.
Under Delaware law, holders of Company common stock who do not vote in favor of adoption of the merger agreement will have the right to seek appraisal and receive the judicially determined fair value of their shares of Company common stock in lieu of receiving the merger consideration if the merger closes, but only if they perfect their appraisal rights by precisely complying with the required procedures under Section 262 of the DGCL. This appraisal value could be more than, the same as or less than the merger consideration that would otherwise have been received for those shares.
To exercise appraisal rights under Delaware law, stockholders must submit a written demand for appraisal to the Company prior to the vote on the proposal to adopt the merger agreement, must not vote in favor of the proposal to adopt the merger agreement and must continue to hold the shares of Company common stock of record through the effective time of the merger. Failure to comply strictly with the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights. Please see the section of this proxy statement entitled Appraisal Rights beginning on page 97 and the text of the Delaware appraisal rights statute, Section 262 of the DGCL, which is reproduced in its entirety as Annex D to this proxy statement.
The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, telephone or electronic means, we may request banks and brokers, and other custodians, nominees and fiduciaries, to solicit their customers who have Company common stock registered in their names and will reimburse them for their reasonable, out-of-pocket costs. We may also use the services of our officers, directors, and others to solicit proxies, personally or by telephone, without additional compensation. In addition, the Company has retained AST Phoenix Advisors to solicit stockholder proxies at a total cost of approximately $15,000, plus reimbursement of reasonable out-of-pocket expenses.
20
Adjournments and Postponements
Although it is not currently expected, the special meeting may be adjourned, recessed or postponed for the purpose of soliciting additional proxies. If a quorum is present in person or represented by proxy, an adjournment of the special meeting may be made from time to time by the approval of a majority of the votes cast affirmatively or negatively on the adjournment proposal. If a required quorum is not present in person or represented by proxy, the chairman of the special meeting or the holders of a majority of the shares of Company common stock entitled to vote who are present, in person or by proxy, at the special meeting, may adjourn the meeting from time to time.
If the place, date and time, and means of remote communication, if any, are announced at the original convening of the special meeting, then no notice of an adjourned meeting need be given unless the adjournment is for more than 30 days or if, after the adjournment, a new record date is fixed for the adjourned meeting, in which case notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. At any subsequent reconvening of the special meeting at which a quorum is present in person or represented by proxy, any business may be transacted that might have been transacted at the original meeting, and all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been validly revoked or withdrawn prior to the reconvened meeting.
Voting by Company Directors and Executive Officers
As of the close of business on July 18, 2013, the record date for the special meeting, the Companys directors and executive officers owned, in the aggregate, 4,221,892 shares of Company common stock, or collectively approximately 2.4% of the outstanding shares of Company common stock. The Companys directors and executive officers have informed us that they intend, as of the date hereof, to vote all of their shares of Company common stock in favor of the matters before our stockholders as described in the proxy statement.
Certain of the Companys directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Companys stockholders generally. For more information, please see the section of this proxy statement entitled The MergerInterests of the Companys Directors and Executive Officers in the Merger beginning on page 55.
If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact AST Phoenix Advisors, which is acting as the Companys proxy solicitation agent in connection with the merger, toll free at (800) 591-8250. Banks and brokers may call collect at (212) 493-3910.
21
Life Technologies is seeking the adoption by its stockholders of the merger agreement the Company entered into on April 14, 2013 with Thermo Fisher and Merger Sub. Under the terms of the merger agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Thermo Fisher. The Board has approved the merger agreement and unanimously recommends that the Companys stockholders vote for the adoption of the merger agreement.
Upon the consummation of the merger, each share of Company common stock issued and outstanding immediately prior to the effective time, other than shares owned by the Company or Thermo Fisher or their respective wholly owned subsidiaries and shares owned by stockholders who have properly exercised and perfected appraisal rights under Delaware law, will be converted into the right to receive $76.00 in cash, without interest and less any applicable withholding taxes. If the merger does not close by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), and this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price per share will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date.
The Board and the Companys senior management continually review and consider various strategic opportunities with the goal of maximizing long-term stockholder value. As part of this ongoing process, the Board also conducts an annual review of strategic alternatives available to the Company. Over the last few years, these strategic opportunities have included consideration of proposals from a number of third parties who have approached the Company regarding possible strategic transactions.
In the summer of 2011, a private equity firm (Sponsor A) contacted David Hoffmeister, the Companys Chief Financial Officer, to express interest in a potential acquisition of the Company. Sponsor A called Mr. Hoffmeister again in the fall of 2011, and Mr. Hoffmeister attended a dinner with two representatives of Sponsor A in November 2011.
In September 2011, Marc Casper, the chief executive officer of Thermo Fisher, submitted a letter to the Company stating that Thermo Fisher had a strong interest in entering into formal discussions regarding a potential business combination with the Company. The letter proposed a valuation of $58.00 per share of the Companys common stock (which represented a 43% premium over the Companys closing stock price of $40.54 on September 15, 2011) and stated that Thermo Fisher would propose consideration consisting of a combination of stock and cash. The Board carefully reviewed and considered the indication of interest in light of the Companys other strategic alternatives. The Board determined that execution of the Companys strategic plan as a standalone company was likely to provide significantly greater value to stockholders than the proposal in Thermo Fishers indication of interest. Upon instruction from the Board, the Companys senior management contacted Thermo Fisher and responded accordingly.
In January 2012, Greg Lucier, the Companys chief executive officer, and Mr. Hoffmeister had an introductory meeting with representatives of Sponsor A.
In the spring of 2012, one of the independent members of the Board suggested that Mr. Hoffmeister have an introductory meeting with another private equity firm (Sponsor B). A representative of Sponsor B then contacted Mr. Hoffmeister, and in early June 2012 Mr. Hoffmeister met with a representative of Sponsor B for an introductory dinner. Later in June 2012, Sponsor B provided to the Companys management a presentation
22
regarding Sponsor Bs experience with private equity transactions in the healthcare industry. The presentation identified key aspects of a potential private equity transaction involving the Company and contained an illustrative comparison of a range of potential offer prices, from $42.69 per share (which represented no premium over the Companys stock price at the time of the presentation) to $59.77 per share (which represented a 40% premium over the Companys stock price at the time of the presentation).
In June 2012, Messrs. Lucier and Hoffmeister invited representatives of Sponsor A to make a presentation to the Board at its next meeting regarding key aspects of private equity transactions and the potential feasibility of a private equity transaction involving the Company.
From time to time, Mr. Lucier had discussions with the chief executive officer of a strategic party (Strategic Party A). In the summer of 2012, the chief executive officer of Strategic Party A indicated during a discussion with Mr. Lucier that Strategic Party A would be interested in exploring a potential transaction with the Company.
On July 23 and 24, 2012, the Board held regularly scheduled meetings in Newport Beach, California, in connection with its annual strategic review, at which all members of the Board were present. Members of the Companys senior management also attended portions of the meetings. During the July 23 meeting, Mr. Hoffmeister led a discussion of the Companys financial model and the financial aspects of the Companys strategic plan. The Board then invited representatives of Sponsor A to make a presentation to the Board regarding a potential leveraged buyout of the Company. During the presentation, the Sponsor A representatives stated that Sponsor A believed, based on a review of publicly available information regarding the Company, that an offer price of $56.00 to $59.00 per share could be supported. The Sponsor A representatives noted that the $56.00 to $59.00 range represented a premium of 30% to 37% over the Companys then-current stock price, which closed at $42.75 per share on July 23, 2012. The Board asked numerous questions regarding the presentation and determined to discuss Sponsor As presentation further in executive session during its strategic review meeting the following day. During the July 24 meeting, the Board continued its review and discussion with the Companys senior management of a variety of topics relating to the Companys strategic direction, including strategic priorities in certain key segments of the Companys business, the competitive landscape for the Companys business, macro trends and challenges, the Companys financial performance, growth initiatives, potential M&A activity and alternatives for the creation of stockholder value. In an executive session of the Board, the independent members of the Board discussed a number of considerations relating to Sponsor As presentation, including its merits and risks compared to other alternatives available to the Company, whether and when to contact other potential acquirors, the proper governance process for carefully considering the presentation, the need for independent legal and investment banking advice, the potential disruption to the Companys business and the time required for any process. After discussion, the independent members of the Board instructed the Boards Presiding Director, Ronald A. Matricaria, to interview outside law firms qualified to serve as independent legal counsel.
The Companys in-house counsel prepared for Mr. Matricaria a list of outside counsel having the appropriate resources and expertise to advise the independent directors in a potential strategic transaction involving a sale of the Company. Mr. Matricaria then conducted an independent dialogue with representatives of certain law firms identified for this purpose. As part of that process, on July 25, 2012, Mr. Matricaria contacted a representative of Cravath, Swaine & Moore LLP (Cravath) to discuss, among other things, Cravaths independence and experience. Cravath had not previously been engaged by the Company.
On August 2, 2012, the Board held a special telephonic meeting, which was attended by all but one of the members of the Board. Members of the Companys senior management and representatives of Cravath and Moelis also attended portions of the meeting. Moelis had served as a financial advisor to the Company in numerous transactions over the past several years, including the 2008 combination of Invitrogen Corporation and Applied Biosystems, Inc., which resulted in the formation of Life Technologies. During this meeting, the independent members of the Board determined to retain Cravath as independent legal counsel to the Board, after considering the qualifications, expertise, reputation and independence of Cravath. During an executive session of
23
the independent directors and representatives of Cravath, the Cravath representatives reviewed with the Board various considerations regarding the Boards review of the Companys strategic options, including the Boards fiduciary duties, the role and responsibilities of the Companys management, potential conflicts of interest for the Companys management, the independent directors roles and the importance of independent financial advisors. The Board then discussed Sponsor As presentation with the Companys management and the Cravath representatives and identified certain key items for further investigation, including how a potential transaction with Sponsor A compared to the Companys other strategic alternatives, strategic consolidation in the industries in which the Company operates, the Companys value and the appropriate process. During this discussion, the Board discussed the September 2011 proposal from Thermo Fisher. At the Boards request, representatives of Moelis made a presentation to the Board relating to the potential transaction proposed by Sponsor A. Mr. Matricaria then led a discussion of possible actions the Board could take in relation to Sponsor As presentation and the benefits and risks related to such actions, including the impact an exploratory process might have on the Companys business, the potential for information leaks and opportunities and risks relating to the Companys strategic plan. After discussion, the Board determined to engage an independent financial advisor to assist the Board in reviewing the Companys strategic plan and strategic alternatives and to develop updated preliminary financial analyses of the Company. The independent directors agreed that Mr. Matricaria and another independent member of the Board, Balakrishnan S. Iyer, would select the independent financial advisor and oversee its activity and that the advisor would be asked to provide a report at the October Board meeting. The Board also instructed Mr. Matricaria to inform Sponsor A that the Board intended to conduct a full review of the Companys strategic alternatives before responding to Sponsor As presentation. Following the Board meeting, the independent directors discussed with the Companys senior management the roles, responsibilities and restrictions applicable to management in the Boards strategic review.
Following the August 2 Board meeting, at the request of Messrs. Matricaria and Iyer, the Companys senior management evaluated a number of investment banks and provided to Messrs. Matricaria and Iyer a list of three investment banks the Companys management had identified as potential financial advisors to the Board, based on an assessment of the banks reputations and independence. Deutsche Bank was one of the three banks. Members of the Companys business development team and other members of Company management had previously spoken with representatives of Deutsche Bank on several occasions to discuss acquisition opportunities and strategic alternatives, but Deutsche Bank had not previously been engaged by the Company in connection with any financial advisory or financing matters.
Messrs. Matricaria and Iyer then called a representative of Cravath to discuss the three investment banks identified by the Companys management and certain considerations relating to selection of a potential financial advisor, including the advantages and disadvantages of engaging a large investment bank as compared to a boutique firm. With respect to Deutsche Bank, they discussed the likelihood that Deutsche Banks capital markets expertise could provide a valuable perspective in the event that the Company decided to proceed with a transaction involving significant financing, including a leveraged buyout, but they also considered potential conflicts of interest that Deutsche Bank might have in light of its previous business dealings with various financial sponsors. They also discussed the fact that, if retained as an advisor, Deutsche Bank would not be available to serve as a financing source for potential acquirors of the Company. After discussion, Messrs. Matricaria and Iyer decided to invite representatives of Deutsche Bank to make a presentation to the Board, following which presentation the Board could decide whether to engage Deutsche Bank as a financial advisor. Accordingly, in late August 2012, Mr. Hoffmeister contacted representatives of Deutsche Bank to invite them to make a presentation to the Board at its next meeting regarding strategic alternatives available to the Company. At this time, the Company did not inform Deutsche Bank about Sponsor As July 23 presentation to the Board or the prior Thermo Fisher offer.
On October 25, 2012, the Board held a regularly scheduled meeting at the Companys headquarters in Carlsbad, California, at which all members of the Board were present. Members of the Companys senior management and representatives of Deutsche Bank attended portions of the meeting and representatives of Cravath participated in portions of the meeting by phone. During this meeting, representatives of Deutsche Bank reviewed with the Board, among other things, factors affecting the market value of the Company common stock
24
and a variety of potential strategic opportunities and challenges for the Company, including executing on the Companys business plan, returning capital to stockholders, adjusting the capital structure of the Company, engaging in acquisitions and selling the Company. The Deutsche Bank representatives also reviewed with the Board certain preliminary financial analyses relating to the Company. Following this discussion, the Board met with the Companys senior management and representatives of Cravath to discuss potentially retaining one or both of Deutsche Bank and Moelis to assist the Board in evaluating the Companys strategic alternatives. After considering Deutsche Banks and Moelis respective qualifications, expertise and reputation, including in particular Deutsche Banks extensive resources and capital markets expertise and Moelis historic relationship with the Company and focus on M&A advisory services, the Board determined to proceed with Deutsche Bank as a financial advisor to the independent members of the Board and Moelis as a financial advisor to the Company in connection with reviewing the Companys strategic alternatives. The Board directed representatives of Deutsche Bank and Moelis to work with the Companys management and Cravath to continue to explore the strategic alternatives available to the Company, including by promptly developing a timeline and a list of actions items for exploring a potential sale of the Company.
On November 2, 2012, the Board held a special telephonic meeting, which was attended by all but one of the members of the Board. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis attended portions of the meeting. The Board and the advisors discussed the need to design a process that would maximize value to stockholders by creating competitive tension among potential bidders, while maintaining confidentiality and reserving the flexibility to revise the timeline and modify or terminate the exploratory process based on the overall goals of the Board and the interests of stockholders. Representatives of Deutsche Bank and Moelis led a discussion of a proposed process and timeline for exploring a potential sale of the Company. The Board and the advisors discussed potential benefits and risks associated with approaching potential strategic buyers at this stage, including the possibility that strategic buyers could outbid financial sponsors in anticipation of post-closing synergies, the potential competitive disadvantages resulting from approaching strategic parties at this stage, the increased risk of leaks to the market, the potential business damage from a failure to consummate a transaction and the fact that potential strategic buyers would likely be able to evaluate and negotiate a transaction faster than financial buyers. In light of these and other factors, the independent members of the Board determined that it was in the best interests of the Company and its stockholders to approach a limited number of potential private equity buyers to explore their interest in a potential acquisition of the Company, but to maintain the flexibility to approach potential strategic buyers at a later point if the Board believed it would maximize stockholder value. The Board discussed with the advisors the fact that financial buyers would likely need to form equity consortiums to fund an acquisition of a company with Life Technologies market capitalization, the feasibility and challenges involved in obtaining debt financing and the best process to maximize competition among potential acquirors in light of the equity and debt financing dynamics. The Board determined to contact three potential lead financial sponsors at this stage, with the understanding that one or more of the sponsors may seek to partner with others at a later date because it might be difficult for each of the three sponsors to form a separate consortium capable of acquiring the Company. The Deutsche Bank and Moelis representatives reviewed with the Board information relating to several private equity firms that might be in a position to act as a lead financial sponsor for a possible acquisition of the Company, based on an assessment of such firms likely interest in a transaction, available capital and experience in the healthcare industry. After discussion, the Board instructed Deutsche Bank and Moelis to approach Sponsor A, Sponsor B and another private equity firm (Sponsor C) and solicit proposals from such parties regarding a potential leveraged buyout of the Company.
In early November 2012, members of the Board and representatives of Cravath discussed the role of the Board in managing the day-to-day activities relating to the process of evaluating the Companys strategic alternatives. In particular, the Board considered whether a committee of independent directors should be formed or appointed to oversee day-to-day activities in order to facilitate a timely response to developments as they arise. On November 10, 2012, the Board delegated to its Governance and Nominating Committee (the Governance and Nominating Committee) the authority to oversee the process for evaluating the Companys strategic alternatives and the related activities of the Companys management and the advisors, to the extent consistent
25
with the process approved by the Board. The Governance and Nominating Committee was a standing committee composed of the following independent directors: Raymond V. Dittamore, Balakrishnan S. Iyer, Ronald A. Matricaria and Dr. Per A. Peterson. Notwithstanding this delegation, the Board instructed the Governance and Nominating Committee that all major decisions, including any decision to approve a transaction or to terminate the Companys strategic review process, were reserved for consideration by the full Board.
On November 21, 2012, the Governance and Nominating Committee received an update from representatives of Deutsche Bank, Moelis and Cravath regarding the strategic review process and the steps that had been taken since the November 2 Board meeting, including the preparation by the Companys senior management of the Companys 2013 Annual Operating Plan. Taking into account the recommendation of the advisors and the Companys management, the Governance and Nominating Committee determined to revise the timeline for the strategic review process. Later in November, the Company held informational calls to update the other members of the Board.
On November 30, December 3 and December 4, 2012, representatives of Deutsche Bank and Moelis contacted Sponsor A, Sponsor B and Sponsor C on a confidential basis regarding the potential financial buyers interest in a possible acquisition of the Company. Sponsor B declined to pursue discussions regarding a potential transaction. Sponsor C executed a confidentiality agreement with the Company on December 5, 2012.
The confidentiality agreement the Company executed with Sponsor C on December 5, 2012, contained terms customary for the exploration of a potential sale of a public company, including a customary standstill provision. Except as noted below in this Background of the Merger section, the confidentiality agreements that the Company subsequently executed with other financial and strategic parties, as described below, were similar in all material respects to the agreement with Sponsor C. The confidentiality agreements prohibited the potential buyers from disclosing non-public information concerning the Company (including the fact that the Company had entered into the confidentiality agreement) to any third party advisors or to prospective debt or equity financing sources without the Companys prior consent, subject to certain exceptions. The confidentiality agreements also generally prohibited the potential buyers from engaging any potential debt financing source on an exclusive basis.
On December 13, 2012, representatives of Deutsche Bank and Moelis reported to the Governance and Nominating Committee that Sponsor B had declined to pursue a potential transaction, and Mr. Hoffmeister reported that Sponsor A had, prior to being contacted by Deutsche Bank and Moelis on December 3, engaged in discussions with three other financial firms regarding the formation of a consortium to explore a potential acquisition of the Company.
Later on December 13, 2012, the Board held a regularly scheduled meeting at the Companys headquarters in Carlsbad, California, which was attended by all but one of the members of the Board. Members of the Companys senior management attended portions of the meeting and representatives of Cravath, Deutsche Bank and Moelis participated in portions of the meeting by phone. During this meeting, Mr. Lucier and other members of the Companys senior management led a discussion of the Companys financial model and strategic plan, including a discussion of results and projections relating to the Ion Torrent Proton sequencer and a review of potential acquisition opportunities available to the Company. Mr. Dittamore, the chairman of the Governance and Nominating Committee, provided the Board an update on the status of discussions with Sponsor A, Sponsor B and Sponsor C, including that Sponsor B had declined to pursue a potential transaction. After discussion with the advisors and members of the Companys senior management, the Board instructed representatives of Deutsche Bank and Moelis to approach a fourth private equity firm (Sponsor D) to explore its interest in a possible transaction. The Board also instructed the advisors to permit Sponsor A to form a consortium with the three other financial firms with whom it had engaged in discussions (collectively, the Sponsor A Consortium), subject to the execution by each member of the Sponsor A Consortium of a confidentiality agreement acceptable to the Company. In the interest of protecting confidentiality by limiting the number of parties involved in the exploratory process, the Board determined not to permit Sponsor C and Sponsor D to form consortiums at this time, but to revisit this decision should either of these financial parties request to form a consortium or in the event that discussions with either of these parties progressed to a more advanced stage.
26
Between December 14, 2012, and December 21, 2012, each member of the Sponsor A Consortium and Sponsor D executed a confidentiality agreement with the Company.
During the first two weeks of January 2013, the Sponsor A Consortium, Sponsor C and Sponsor D were provided with access to an electronic data room that contained limited non-public information regarding the Company, and representatives of each of these parties attended presentations by the Companys senior management.
On January 8, 2013, Mr. Casper, the chief executive officer of Thermo Fisher, called Mr. Lucier to express interest in a potential combination of Thermo Fisher and the Company. Following the call, Mr. Casper delivered a letter confirming Thermo Fishers strong interest in entering into formal discussions with the Company. The letter noted that Thermo Fisher intended to provide consideration consisting of a combination of stock and cash, but it did not contain a specific offer price or valuation range.
On January 13, 2013, the Governance and Nominating Committee held a special telephonic meeting. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participated. During this meeting, Mr. Lucier and representatives of Deutsche Bank and Moelis provided an update to the Governance and Nominating Committee regarding the January 8 call and letter from Thermo Fisher and the current status of discussions with the Sponsor A Consortium, Sponsor C and Sponsor D. The Governance and Nominating Committee considered the timing and nature of a potential response to Thermo Fishers letter, including whether the Company should respond promptly to Thermo Fisher seeking a specific indication of the price and mix of consideration that Thermo Fisher would be willing to pay or if it was preferable to wait until the Company had received preliminary indications of interest from the potential financial buyers. After discussion with representatives of Cravath, Deutsche Bank and Moelis, the Governance and Nominating Committee instructed Mr. Lucier to call Mr. Casper and inform him that Thermo Fishers January 8 letter would be presented to the Board for consideration at a meeting in early February. Subsequently, the Company held informational calls to update the other members of the Board.
After the close of business on January 17, 2013, the Financial Post and other news organizations reported that the Company had started a process to explore a potential sale of itself. These reports also noted that the Company had retained Deutsche Bank and Moelis in connection with this process. Prior to the publication of these reports, the Companys stock price closed at $54.97 on January 17, 2013.
Promptly following the release of these news reports, on the evening of January 17, 2013, Mr. Matricaria convened a conference call of the Board to discuss the reports and consider an appropriate response. All but one of the members of the Board, as well as members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis, participated in the call. The Board and the advisors discussed the likely impact the reports could have on the Companys stock price, the Companys employees and the strategic review process. After discussion of these and other considerations, the Board decided to issue a public statement in response to the January 17 news reports. The Board also instructed the advisors and members of the Companys senior management to take additional precautions aimed at preserving the confidentiality of the strategic review process.
Before the opening of business on January 18, 2013, the Board issued a statement confirming that the Board had retained Deutsche Bank and Moelis to assist in its annual strategic review. The statement noted that the Board had not decided on any specific course of action.
The Companys stock price opened at $61.23 on January 18, 2013, an 11.4% increase from the closing price on the previous day.
Later on January 18, 2013, a representative of Deutsche Bank sent letters to Sponsor A, Sponsor C and Sponsor D, inviting each of them to submit a written, preliminary and non-binding proposal for a potential acquisition of the Company. The letters requested that proposals be submitted by February 6, 2013.
27
On January 19, 2013 and during the following week, representatives of a potential strategic buyer (Strategic Party B) contacted Deutsche Bank and Moelis on several occasions to express Strategic Party Bs preliminary interest in a potential transaction with the Company. Strategic Party Bs advisors indicated that Strategic Party B was primarily interested in an acquisition of the Companys sequencing business, but may also be interested in an acquisition of the entire Company. Subsequently, the chairman of Strategic Party Bs board of directors called Mr. Lucier to confirm Strategic Party Bs preliminary interest.
On January 21, 2013, the chief executive officer of another potential strategic buyer (Strategic Party C) called Mr. Lucier and stated that if the Company was undertaking an auction process, Strategic Party C would be interested in participating.
On January 23, 2013, the Governance and Nominating Committee held a special telephonic meeting. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participated. In an executive session of the independent directors and representatives of Cravath, the Cravath representatives led a discussion regarding whether there were any potential conflicts of interest with respect to the financial advisors. Among other things, the Cravath representatives reviewed with the Governance and Nominating Committee certain information provided by Deutsche Bank and Moelis regarding historical investment banking fees that each had earned from the Sponsor A Consortium, Sponsor C and Sponsor D as well as factors that may result in or mitigate potential conflicts of interest. Following this discussion, the Committee determined to continue its use of Deutsche Bank and Moelis. Representatives of Deutsche Bank and Moelis and members of the Companys senior management then reviewed with the Governance and Nominating Committee the expressions of interest from potential buyers since the January 18 news release, including the preliminary indications of interest from Strategic Party B and Strategic Party C. The Governance and Nominating Committee discussed whether to approach these or other potential strategic acquirors to explore their interest in a potential acquisition of the Company and discussed a variety of considerations, including the impact of approaching strategic parties on the strategic review process and the likelihood that potential strategic buyers would be able to evaluate and negotiate a transaction more quickly than financial parties. Following this discussion, the Governance and Nominating Committee elected not to pursue discussions with potential strategic acquirors at this time. The Governance and Nominating Committee determined that it was in the best interests of the Company and its stockholders to continue discussions with the Sponsor A Consortium, Sponsor C and Sponsor D based on the existing strategic review process and timeline, but that the process and timeline was subject to reconsideration by the full Board at its next meeting.
On January 24, 2013, a member of management of a potential strategic buyer (Strategic Party D) contacted Dr. Peterson, a member of the Governance and Nominating Committee, and expressed interest in a partnership arrangement involving the Companys sequencing business. Subsequently during the same week, another individual from Strategic Party D called Mr. Lucier to express interest in engaging in preliminary discussions with the Company regarding a potential transaction.
During the weeks following the January 17 news reports, the chief executive officer of a strategic party (Strategic Party E) contacted Mr. Lucier to propose a potential merger-of-equals transaction involving Strategic Party E. During this time period, Mr. Lucier and Paul Grossman, the Companys Senior Vice President of Strategy and Corporate Development, engaged in several discussions with the chief executive officer of Strategic Party E regarding the proposal.
On January 30, 2013, Strategic Party A submitted a written indication of interest in a potential acquisition of the Company. Subsequently, the chief executive officer of Strategic Party A called Mr. Lucier to confirm Strategic Party As interest. Also on January 30, Strategic Party As financial advisor called Deutsche Bank and Moelis and indicated that, subject to the completion of due diligence, Strategic Party A would be prepared to obtain financing to consummate an all-cash acquisition of the Company or, in the alternative, would be willing to consummate a stock-for-stock merger.
During the three weeks following the January 17 news reports, four other strategic parties contacted the Company, Deutsche Bank or Moelis to express preliminary interest in acquiring particular portions or segments
28
of the Companys business. None of these parties indicated an interest in acquiring the entire Company. In addition, during this time period, a number of private equity firms and other financial firms contacted the Company or its financial advisors to express preliminary interest in participating in an acquisition of the Company by partnering with a consortium of other financial sponsors. Only one of these private equity firms (Sponsor E) indicated that it may be willing to lead a consortium in a potential transaction. One of the financial firms that expressed preliminary interest in joining a consortium was a significant stockholder of the Company.
On February 6, 2013, each of the Sponsor A Consortium, Sponsor C and Sponsor D submitted a written, non-binding indication of interest in a potential acquisition of the Company. The Sponsor A Consortium proposed a purchase price of $61.00 per share in cash, Sponsor C proposed a valuation range of $61.00 to $64.50 per share in cash and Sponsor D proposed a purchase price of $65.00 per share in cash. Each of these preliminary indications of interest was subject to the completion of due diligence, among other conditions.
On February 7, 2013, the Governance and Nominating Committee held a special telephonic meeting, which was attended by all but one of the members of the committee. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participated. During this meeting, representatives of Deutsche Bank and Moelis reviewed with the Governance and Nominating Committee the February 6 indications of interest from the financial parties involved in the exploratory process, including a discussion of the leverage assumptions on which the indications of interest were based, and the perceived ability of each of the financial parties to form a consortium of financial firms capable of consummating a transaction. Representatives of Deutsche Bank and Moelis and members of the Companys senior management also provided an update regarding their discussions with other financial and strategic parties over the preceding weeks. The Governance and Nominating Committee considered whether to include potential strategic buyers in the exploratory process, in the event that the Board decided to continue discussions with the potential financial buyers. After discussion, the Governance and Nominating Committee instructed the Cravath representatives to work with the Companys financial advisors to prepare various analyses with respect to several potential strategic acquirors, including certain of the strategic parties that had contacted the Company and the advisors over the preceding weeks. In an executive session of the independent directors and representatives of Cravath, the Governance and Nominating Committee discussed various potential organizational changes to the Companys business should the Board determine that continued execution of the Companys standalone plan was in the best interests of the Companys stockholders.
On February 10, 2013, the Board held a special meeting at the Companys headquarters in Carlsbad, California, which was attended, in person or by phone, by all members of the Board. Members of the Companys senior management and representatives of Deutsche Bank and Moelis attended portions of the meeting, and representatives of Cravath participated by phone. In an executive session of the independent directors and representatives of Cravath, the Cravath representatives reviewed the fiduciary duties of the Board and the discussion among Cravath and the members of the Governance and Nominating Committee regarding whether there were any potential conflicts of interest with respect to the financial advisors. Representatives of Deutsche Bank and Moelis then reviewed with the Board the February 6 indications of interest from the financial parties involved in the exploratory process and provided an update to the Board regarding recent inbound communications from other financial and strategic parties. Representatives of Deutsche Bank and Moelis also reviewed certain preliminary financial analyses relating to the Company. The Companys management reviewed various communications they received from the Companys stockholders regarding a potential transaction. The Board and the advisors then discussed various strategic alternatives, including continuing to explore a potential transaction with a financial buyer, exploring a potential transaction with a strategic buyer and potentially adjusting the Companys strategic plan as a standalone company. The Board and the advisors discussed whether any outreach to potential strategic acquirors should also include strategic parties that had not contacted the Company in the preceding weeks. In assessing the need for such further outreach, the Board considered the fact that various news media had reported that the Company was soliciting interest in a potential transaction, that the Board had issued a statement on January 18 confirming that it was conducting a strategic review and the likelihood that a strategic party with serious interest in a transaction would fail to contact the Company following the media reports and the Boards January 18 statement. The Board also discussed the benefits of protecting
29
confidentiality and minimizing disruption to the Companys business by limiting the number of parties involved in the exploratory process. After extensive discussion, the Board determined to contact each of the strategic parties that had expressed interest in acquiring the entire Company, and instructed Deutsche Bank and Moelis to seek pricing indications from Thermo Fisher, Strategic Party A, Strategic Party B and Strategic Party C, subject to the advisors and the Companys senior management first developing a plan to maintain the confidentiality of all non-public information of a sensitive or competitive nature to be shared with such parties. The Board also instructed the advisors to continue exploring a potential transaction with a financial party and to assist management in further developing the Companys standalone alternatives.
During the first two weeks of February 2013, Mr. Lucier and other members of the Companys management continued to engage in preliminary discussions with Strategic Party E regarding a possible merger-of-equals transaction. During this time period, representatives of Deutsche Bank and Moelis were in contact with representatives of Thermo Fisher, Strategic Party A, Strategic Party B and Strategic Party C.
On February 11, 2013, Dr. Peterson called the chairman of Strategic Party D to assess Strategic Party Ds interest in a potential transaction. Strategic Party Ds chairman indicated that he was unaware of the outreach by members of his management team to Mr. Lucier regarding a partnership arrangement or other transaction with the Company. Based on this conversation, the Governance and Nominating Committee determined that the Company should wait for additional communication from Strategic Party D to determine whether Strategic Party D was interested in an acquisition of the Company. The Company did not hear from Strategic Party D again.
On February 13, 2013, a representative of Deutsche Bank sent letters to Thermo Fisher, Strategic Party A, Strategic Party B and Strategic Party C, inviting each of them to submit a written, preliminary and non-binding proposal for a potential acquisition of the Company. The letters requested that proposals be submitted by February 22, 2013. The strategic parties were not provided with access to any non-public information concerning the Company at that time. In addition, each of the letters included a provision intended to restrict the potential strategic buyer from publicly disclosing the fact that the Company had invited it to submit a proposal.
On February 14, 2013, Strategic Party E executed a confidentiality agreement with the Company. The confidentiality agreement contained terms customary for the exploration of a potential merger-of-equals transaction, including a mutual standstill provision. The Company and Strategic Party E subsequently exchanged a limited amount of non-public information concerning each party pursuant to the confidentiality agreement.
On February 20, 2013, Reuters and other news organizations reported that a sale of the Company was looking less likely, based on reports that an increase in the Companys stock price had left Thermo Fisher skeptical about a deal and offers from private equity firms would need to be increased significantly to win approval of the Board. The Companys stock price closed at $58.13 on February 20, an 8.3% decrease from the closing price of $63.36 on the previous day.
Also on February 20, 2013, Strategic Party Bs financial advisors informed representatives of Deutsche Bank that Strategic Party B continued to be interested in acquiring the Companys sequencing business, but was not willing to acquire the entire Company.
On February 22, 2013, Strategic Party A submitted a written, non-binding proposal to acquire the Company for cash, at a valuation range of $64.00 to $68.00 per share. Strategic Party A proposed a transaction pursuant to which Strategic Party B would become the owner of the Companys sequencing business, and Strategic Party A would become the owner of the balance of the Companys business, with all costs and risk of separating the sequencing business to be borne by Strategic Party A and Strategic Party B. The proposal was based on publicly available information concerning the Company, and was subject to the completion of due diligence and further discussions among the Company, Strategic Party A and Strategic Party B, among other conditions.
Also on February 22, 2013, a member of Strategic Party Cs senior management informed representatives of Moelis that Strategic Party C continued to be interested in participating in the process, but was not willing to propose a purchase price for the Company based solely on publicly available information.
30
On February 25, 2013, Thermo Fisher submitted a written, non-binding proposal to acquire the Company at a valuation range of $65.00 to $68.00 per share. Thermo Fisher proposed that the consideration would be delivered predominantly in cash, with some component in stock. The proposal was based on publicly available information concerning the Company and was subject to the completion of due diligence, among other conditions.
On February 26, 2013, the Governance and Nominating Committee held a special meeting at the Companys headquarters in Carlsbad, California, which was attended by all members of the committee. Members of the Companys senior management attended the meeting and representatives of Cravath, Deutsche Bank and Moelis participated by phone. During this meeting, representatives of Deutsche Bank, Moelis and Cravath reviewed with the Governance and Nominating Committee the preliminary indications of interest from Strategic Party A and Thermo Fisher and provided an update regarding discussions with potential financial buyers involved in the exploratory process. The Governance and Nominating Committee considered various alternatives for moving forward, including whether to allow the strategic parties to conduct further diligence on the Company in order to refine their proposals. The Governance and Nominating Committee discussed possible ways to mitigate the inherent risks presented by allowing potential strategic buyers to access non-public information concerning the Company as part of a due diligence process. In light of Strategic Party Bs apparent decision to partner with Strategic Party A rather than submit its own proposal, the Governance and Nominating Committee considered potential benefits and risks associated with selling part, but not all, of the Companys business, including the potential to capture a premium that Strategic Party B may be willing to pay for the Companys sequencing business, balanced against the likely negative impact on employee morale, negative tax consequences and separation costs.
On February 27, 2013, the Board held a regularly scheduled meeting at the Companys headquarters in Carlsbad, California, which was attended by all members of the Board. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis attended portions of the meeting. The Board engaged in an extensive discussion regarding the Companys strategic review process. Representatives of Deutsche Bank, Moelis and Cravath described the current status of discussions with potential buyers. Members of the Companys senior management led a review of potential alternative strategic plans for the Companys operation on a standalone basis aimed at enhancing stockholder value. Members of the Companys senior management also led the Board in a discussion of the merger-of-equals opportunity with Strategic Party E, including a review of Strategic Party Es business and product lines, possible synergies and certain financial, regulatory and timing considerations relating to a potential combination with Strategic Party E. The Board considered whether to continue its exploration of a possible transaction with potential financial or strategic buyers and, after discussion, instructed representatives of Deutsche Bank and Moelis to seek binding offers from the potential financial and strategic buyers by mid-April, at which time the Board would reconvene to review the final proposals and determine whether and how to conclude its strategic review process. In an executive session of the independent directors and representatives of Cravath, the independent directors discussed the Companys annual equity grants and other compensation matters, and considered various alternatives with respect to such matters in the context of a possible transaction.
Subsequent to the February 27 Board meeting, members of the Companys management contacted representatives of Strategic Party E, and both parties agreed to put on hold talks regarding a potential transaction.
During the first week of March, Sponsor C informed Deutsche Bank and Moelis that it was no longer interested in pursuing a potential transaction. Sponsor E, which had initially indicated that it was willing to lead a consortium or join an existing consortium, and another financial firm agreed to join a consortium led by Sponsor D (collectively, the Sponsor D Consortium). Sponsor E and the other new member of the Sponsor D Consortium executed confidentiality agreements with the Company on March 3, 2013 and March 6, 2013, respectively. During this time period, the Company permitted the Sponsor A Consortium and the Sponsor D Consortium to engage in discussions with prospective debt financing sources regarding a potential transaction. Later in March, a new financial firm joined the Sponsor A Consortium as an equity partner and, after executing a confidentiality agreement with the Company, was also provided with access to the electronic data room.
31
On March 2, 2013, Mr. Lucier contacted the chairman of Strategic Party Bs board of directors, who stated that Strategic Party B would like to be included in the process and was willing to execute a customary confidentiality agreement.
On March 4, 2013, a member of Strategic Party Cs senior management orally informed Deutsche Bank and Moelis that Strategic Party C would be interested in acquiring the Company at a valuation of $62.00 to $63.00 per share.
Also on March 4, 2013, Thermo Fisher executed a confidentiality agreement with the Company.
On March 6, 2013, the Governance and Nominating Committee held a special telephonic meeting. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis participated in portions of the meeting. During this meeting, Mr. Lucier reported on his March 2 conversation with Strategic Party Bs chairman and, after discussion, the Governance and Nominating Committee determined to include Strategic Party B in the process and provided direction to the representatives of Deutsche Bank, Moelis and Cravath regarding the timing and nature of non-public information to be provided to Strategic Party B and the nature of the confidentiality agreement to be entered into with Strategic Party B. Representatives of Deutsche Bank then reported on the March 4 oral indication of interest from Strategic Party C and, after discussion, the Governance and Nominating Committee instructed Mr. Lucier to contact the chief executive officer of Strategic Party C to assess Strategic Party Cs degree of interest in acquiring the Company. Subsequently, the Company held informational calls to update the other members of the Board.
On March 7, 2013, Mr. Lucier spoke with the chief executive officer of Strategic Party C, who indicated that Strategic Party C had a strong interest in participating in the process and potentially completing a transaction. Strategic Party C subsequently executed a confidentiality agreement with the Company on March 14, 2013.
On March 11 and March 14, 2013, Strategic Party A and Strategic Party B, respectively, executed confidentiality agreements with the Company. In accordance with instructions from the Governance and Nominating Committee, Strategic Party A and Strategic Party B executed separate confidentiality agreements and were generally treated as separate bidders in the process. In light of the fact that Strategic Party As February 22 proposal was based on an assumption that Strategic Party B would acquire the Companys sequencing business, the terms of the confidentiality agreements permitted Strategic Party A and Strategic Party B to engage in discussions with one another regarding a proposed acquisition of the Company.
During the month of March 2013, each of Thermo Fisher, Strategic Party A and Strategic Party C was provided with access to an electronic data room that contained non-public information regarding the Company, and representatives of each of these parties attended presentations by the Companys senior management. Strategic Party B was also provided with access to an electronic data room, but only a limited amount of non-public information regarding the Company was made available to Strategic Party B in the data room. Strategic Party B was not invited to attend presentations by the Companys senior management in light of Strategic Party Bs lack of interest in acquiring the entire Company. Throughout the month, each of these parties and the potential financial buyers conducted due diligence investigations of the Company, which included the review of numerous documents and participation in numerous calls and meetings with the Companys senior management and with representatives of Deutsche Bank, Moelis and Cravath.
On March 13, 2013, the Governance and Nominating Committee held a special telephonic meeting, with members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participating, during which certain updates were provided to the Governance and Nominating Committee and the participants engaged in a discussion regarding the potential buyers access to potential debt financing sources.
On March 15, 2013, the Compensation and Organizational Development Committee of the Board (the C&OD Committee) held a special telephonic meeting. Members of the Companys senior management also participated. At the request of the C&OD Committee, members of the Companys senior management described
32
the current change-in-control agreements between the Company and certain members of the Companys management. The C&OD Committee discussed the importance of retaining the Companys employees and keeping them engaged throughout the Boards strategic review process. After discussion, the C&OD Committee approved the Companys entry into new change-in-control agreements with certain employees, and provided direction to the Companys senior management with respect to other matters concerning employee retention.
Also on March 15, 2013, Sponsor D informed representatives of Moelis that the Sponsor D Consortium was no longer interested in pursuing a potential transaction.
On March 20, 2013, a representative of Deutsche Bank distributed a draft merger agreement prepared by Cravath to Sponsor A, Thermo Fisher, Strategic Party A and Strategic Party C.
On March 21, 2013, the Governance and Nominating Committee held a special telephonic meeting, with members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participating, during which the participants engaged in further discussion regarding the status of potential buyers access to potential debt financing sources and the relationship of that access to the overall strategic review process.
On March 22, 2013, a representative of Sponsor A informed a representative of Deutsche Bank that one of the members of the Sponsor A Consortium was no longer interested in pursuing a potential transaction. After numerous discussions over the next several days, Sponsor D (whose consortium had withdrawn from the process on March 15) joined the Sponsor A Consortium on March 25, 2013.
Starting on March 25, 2013, representatives of Strategic Party C spoke with representatives of Deutsche Bank and Moelis on several occasions. During these conversations, Strategic Party C indicated that it would be challenging for Strategic Party C to bid for the entire Company on its own and that it would need a partner in order to make such a bid.
On March 28 and 29, 2013, the Company held informational calls to update the members of the Board regarding developments since the Boards February 27 meeting, and on March 29, 2013, the Governance and Nominating Committee held a special telephonic meeting. During these calls, the members of the Board considered whether to extend the planned timeline for submission of final, binding offers from the potential buyers. After discussion, the members of the Board determined to maintain the existing timeline. During this time period, certain independent directors approached Mr. Dittamore, the chairman of the Governance and Nominating Committee, seeking additional information regarding the Companys strategic plan for operation as a standalone company. Mr. Hoffmeister and other members of the Companys senior management subsequently held two conference calls with these independent directors to answer their questions and provide additional details about the alternative standalone plans the Companys management, with the assistance of Deutsche Bank and Moelis, had developed with the aim of enhancing stockholder value.
On March 29, 2013, a representative of Deutsche Bank sent letters to Sponsor A (on behalf of the Sponsor A Consortium), Thermo Fisher, Strategic Party A and Strategic Party C, inviting each of them to submit a written, final, fully-financed and binding offer to acquire the Company. The letters requested that each potential buyer submit a mark-up of the draft merger agreement (which had been distributed on March 20) by April 5, 2013, and a final offer by April 9, 2013. A representative of Deutsche Bank sent to Strategic Party B a copy of Strategic Party As letter concurrently with distribution of such letter to Strategic Party A.
On April 5, 2013, a representative of Thermo Fishers outside legal counsel, Wachtell, Lipton, Rosen & Katz (Wachtell), sent a revised draft of the merger agreement on behalf of Thermo Fisher. On the same date, representatives of the Sponsor A Consortiums outside legal counsel sent a revised draft of the merger agreement on behalf of the Sponsor A Consortium.
33
On April 9, 2013, representatives of JP Morgan submitted a written proposal on behalf of Thermo Fisher pursuant to which Thermo Fisher offered to acquire the Company for $71.00 per share, payable in cash. Representatives of Strategic Party As financial advisor submitted a written proposal on behalf of Strategic Party A pursuant to which Strategic Party A offered to acquire the Company for $70.00 per share, with 85% of the total purchase price payable in cash and 15% payable in shares of Strategic Party As stock. Strategic Party As proposal contained a collar mechanism applicable to the stock component of the consideration in the event of increases or decreases in the value of Strategic Party As stock during the period between the signing of a definitive agreement and the closing of the proposed transaction. Subsequently on the same day, representatives of Strategic Party As financial advisor sent a revised draft of the merger agreement on behalf of Strategic Party A. Also on April 9, 2013, the Sponsor A Consortium submitted a written offer to acquire the Company for $65.00 per share, payable in cash. Each of these three proposals included a description of the potential buyers financing arrangements and was accompanied by copies of debt commitment letters signed by the applicable lenders. Strategic Party C did not submit a proposal or a revised draft of the merger agreement.
On April 10, 2013, the Governance and Nominating Committee held a special telephonic meeting to review the April 9 proposals. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participated. During this meeting, representatives of Deutsche Bank and Moelis reviewed the offers from Thermo Fisher, Strategic Party A and the Sponsor A Consortium and representatives of Cravath compared the terms of the revised merger agreement drafts submitted by the respective bidders. The Governance and Nominating Committee considered the dollar amounts of the bids, the respective forms of consideration offered by the potential buyers, the perceived deal certainty and market risk associated with the proposals and the potential remedies available to the Company if the potential buyers were unable to complete a transaction. After discussion, the Governance and Nominating Committee determined that, because the prices offered by Thermo Fisher and Strategic Party A were so close in value$71.00 per share and $70.00 per share, respectivelythe advisors should promptly contact each of the three bidders and seek to obtain enhanced offers. The Governance and Nominating Committee determined that the Company would not contact or engage in further discussions with Strategic Party C, given that Strategic Party C had not submitted a proposal by the April 9 deadline.
Later on April 10, 2013, representatives of Deutsche Bank and Moelis contacted representatives of Sponsor A and the respective financial advisors to Thermo Fisher and Strategic Party A, and requested that each of them submit an improved offer by the evening of April 12, 2013, for the Boards consideration at a meeting scheduled for April 13, 2013.
Concurrently on April 10, 2013, representatives of Cravath contacted the respective outside legal counsels to Thermo Fisher, Strategic Party A and the Sponsor A Consortium and requested that each of them submit a revised draft of the merger agreement as part of the improved offer. The representatives of Cravath highlighted specific provisions in each potential buyers mark-up of the merger agreement that should be improved.
On April 11, 2013, representatives of Strategic Party As outside legal counsel contacted representatives of Cravath for further guidance on how to enhance Strategic Party As draft merger agreement. In the early morning of April 12, 2013, representatives of Strategic Party As outside legal counsel sent to representatives of Cravath a revised draft of the merger agreement. Throughout the day, representatives of Cravath and representatives of Strategic Party As outside legal counsel had a number of discussions regarding the revised draft, and the Cravath representatives identified several provisions that needed further improvement.
On the evening of April 12, 2013, representatives of JP Morgan submitted a revised written proposal on behalf of Thermo Fisher pursuant to which Thermo Fisher offered to acquire the Company for $73.00 per share, payable in cash. The proposal requested that the Company execute an exclusivity agreement with Thermo Fisher on the afternoon of April 13, 2013, so that Thermo Fisher and the Company could jointly work to announce the signing of a definitive agreement on April 15, 2013. Also on the evening of April 12, 2013, representatives of Wachtell submitted a revised draft of the merger agreement. This revised draft included, among other things, a ticking fee provision pursuant to which the consideration payable to stockholders would increase in the event the transaction took longer than nine months to close by reason of the failure to obtain required antitrust approvals.
34
Later on the same night, representatives of Strategic Party As financial advisor submitted a revised written, best and final proposal on behalf of Strategic Party A pursuant to which Strategic Party A offered to acquire the Company for $75.00 per share, with 86% of the total purchase price payable in cash and 14% payable in shares of Strategic Party As stock. The proposal stated that Strategic Party As offer would terminate if, following the start of the Board meeting scheduled for April 13, 2013, the Company or the advisors engaged in negotiations or discussions with any other bidder, or if the Company did not engage with Strategic Party A on an exclusive basis by the end of the April 13 Board meeting. Strategic Party As revised proposal was accompanied by a revised draft of the merger agreement.
Following receipt of the revised proposals from Thermo Fisher and Strategic Party A, representatives of Deutsche Bank, Moelis and Cravath held a conference call to compare the proposals and decide what actions, if any, to take in advance of the Board meeting scheduled for the following day. The advisors discussed the all-cash nature of Thermo Fishers proposal and other terms of Thermo Fishers offer that were more favorable than Strategic Party As proposal, as well as the advisors view that Thermo Fisher was capable of increasing its offer price. The advisors also considered Strategic Party As request for exclusivity commencing at the start of the Board meeting and the fact that Strategic Party As financial advisors had indicated that $75.00 was Strategic Party As best and final offer, whereas it was unclear if Thermo Fishers bid was its best and final offer. After discussion, the advisors determined that a representative of Cravath would promptly contact Thermo Fishers advisors.
Accordingly, early on the morning of April 13, 2013, a representative of Cravath called a representative of JP Morgan and informed the JP Morgan representative that there was a significant gap among the bids and Thermo Fisher was not the lead bidder. The Cravath representative also indicated that it was possible that the Company would not be communicating with Thermo Fisher once the next days Board meeting began.
On the morning of April 13, 2013, the C&OD Committee held a special meeting at the Companys headquarters in Carlsbad, California, which was attended by all members of the C&OD Committee. Members of the Companys senior management attended portions of the meeting and representatives of Cravath participated by phone. During this meeting, the C&OD Committee reviewed and discussed a proposal to establish a new change-in-control severance arrangement applicable to certain of the Companys employees who are not party to change-in-control agreements, proposed amendments to certain existing change-in-control agreements and proposed retention, transaction and integration award pools. The Cravath representatives then led a discussion regarding the estimated amounts that may be payable to the directors and executive officers of the Company in the event of a change of control of the Company.
Later on the morning of April 13, 2013, the Board held a special meeting at the Companys headquarters in Carlsbad, California, which was attended by all members of the Board. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis attended portions of the meeting. In an executive session of the Board, the Cravath representatives reviewed with the Board the fiduciary duties of the Board. The Cravath representatives also reviewed with the Board updated information provided by Deutsche Bank and Moelis regarding historical investment banking fees that each had earned from members of the Sponsor A Consortium as well as information provided by Deutsche Bank and Moelis regarding historical investment banking fees that each had earned from Thermo Fisher, Strategic Party A and Strategic Party B, and discussed with the Board the potential conflicts of interest (and mitigating factors) with respect to Deutsche Bank and Moelis.
During the April 13 Board meeting, Mr. Casper called Mr. Lucier and informed Mr. Lucier that Thermo Fisher had decided to increase its offer price to $76.00 per share, payable in cash. Mr. Casper indicated in the course of this conversation that this represented Thermo Fishers best and final offer. Mr. Casper also reiterated Thermo Fishers request for a limited period of exclusivity during which the parties could finalize the terms of a transaction. Promptly following Mr. Caspers call to Mr. Lucier, representatives of JP Morgan and Barclays contacted representatives of Deutsche Bank and Moelis to confirm Thermo Fishers improved proposal.
35
Representatives of Deutsche Bank, Moelis and Cravath then reviewed with the Board the material terms of the latest proposals that had been received from Thermo Fisher, Strategic Party A and the Sponsor D Consortium. The Board compared the $76.00 per share proposal from Thermo Fisher and the $75.00 per share proposal from Strategic Party A to the April 9 proposal from the Sponsor A Consortium. Representatives of Deutsche Bank and Moelis reported that the Sponsor A Consortium had failed to submit an increased bid by the April 12 deadline, but had indicated orally that the Sponsor A Consortium may have the ability to moderately increase the $65.00 per share proposal if a moderate increase would cause the proposal to be successful. The Board and the advisors considered whether the favorable aspects of the proposal made it worth considering as an alternative to the proposals from Thermo Fisher and Strategic Party A, and determined that the price disparity was too great. At the request of the Board, Deutsche Bank and Moelis then led the Board in a comparison of the proposals from Thermo Fisher and Strategic Party A, including the type of consideration, the operation of the ticking fee provision included in Thermo Fishers proposal and the operation of the collar mechanism applicable to the stock component of Strategic Party As proposal. The Board and the advisors compared the risks associated with the proposals from Thermo Fisher and Strategic Party A, including potential regulatory risk and the provisions in the respective merger agreements applicable to regulatory matters, the risk that either potential buyers financing becomes unavailable and the remedies available to the Company in that circumstance, as well as the market risk relating to the portion of the consideration Strategic Party A proposed to pay in stock. The Board also reviewed with the advisors and the Companys management the Companys business model and various alternatives for continued operation as a standalone company. After discussion of these and other factors, and taking into account the considerations discussed with Deutsche Bank and Moelis, the Board determined that the $76.00 all-cash proposal from Thermo Fisher was superior to the Companys other alternatives. The Board and the advisors then considered whether it would be beneficial to seek further price improvements from the potential buyers and discussed the potential benefits and risks of doing so, including the risk of losing the current offer from Thermo Fisher given Thermo Fishers request for a limited period of exclusivity. The Board and the advisors also discussed the advantages and disadvantages of seeking the inclusion of shares of Thermo Fisher common stock as part of the consideration mix, including valuation uncertainty and Thermo Fishers possible interest in offering shares. After these discussions, the Board instructed Deutsche Bank, Moelis and Cravath to continue to negotiate with Thermo Fisher regarding certain key terms and to report back to the Board. After discussion in an executive session of the Board, the Board authorized the entry into an exclusivity agreement with Thermo Fisher for a limited period of time, subject to the prior resolution of certain open items relating to Thermo Fishers proposal.
Promptly following the April 13 Board meeting, at the instruction of the Board, Mr. Lucier called Mr. Casper to discuss several open items relating to Thermo Fishers proposal and draft merger agreement.
On the afternoon of April 13, 2013, the Companys advisors resolved the remaining open key terms, and the Company executed an exclusivity agreement with Thermo Fisher. Under the exclusivity agreement, the Company agreed not to engage in any negotiations or discussions with any other third party regarding a potential acquisition of the Company, from the time of execution of the agreement until 4:00 p.m. Eastern Time on April 15, 2013.
Later on April 13, 2013, a representative of Cravath sent a revised draft of the merger agreement to representatives of Wachtell. During the evening of April 13 and throughout the following day, representatives of Cravath and Wachtell exchanged additional drafts of the merger agreement and the other transaction documents and engaged in negotiations of the terms of such documents. Members of the Companys and Thermo Fishers respective management teams participated in these negotiations.
On the afternoon of April 14, 2013, a representative of Strategic Party As financial advisor submitted a revised written proposal on behalf of Strategic Party A pursuant to which Strategic Party A increased its offer price to $76.00. The proposed consideration mix was unchanged from Strategic Party As April 12 proposal, but Strategic Party A offered to improve the terms of the collar mechanism applicable to the stock component. Because the Company was subject to the exclusivity agreement with Thermo Fisher, Deutsche Bank and Moelis did not respond to this proposal.
36
Later on the evening of April 14, 2013, the Board held a special telephonic meeting, which was attended by all but one of the members of the Board. Members of the Companys senior management and representatives of Cravath, Deutsche Bank and Moelis also participated in portions of the meeting. In advance of the meeting, representatives of Cravath had distributed to the Board a memorandum summarizing the key terms of the draft merger agreement with Thermo Fisher. During the meeting, representatives of Deutsche Bank and Moelis reviewed with the Board the key terms of the latest proposals from Thermo Fisher, Strategic Party A and the Sponsor A Consortium. The Deutsche Bank, Moelis and Cravath representatives led the Board in a comparison of the proposals from Thermo Fisher and Strategic Party A, including the consideration mix, the more favorable merger agreement provisions that had been negotiated with Thermo Fisher (including the ticking fee provision) and Thermo Fishers status as a larger, financially stronger company than Strategic Party A. Representatives of Cravath then reviewed in detail the provisions of the proposed merger agreement and other transaction documents relating to Thermo Fishers offer. Representatives of Deutsche Bank and Moelis made a presentation to the Board regarding certain financial analyses relating to the Company and the proposed merger consideration offered by Thermo Fisher. At the request of the Board, representatives of Deutsche Bank and Moelis each delivered an oral opinion (each subsequently confirmed in writing) that, based upon and subject to certain assumptions, limitations, qualifications and conditions set forth in their respective opinions, as of the date of the Board meeting, the proposed merger consideration was fair, from a financial point of view, to the holders of Company common stock, other than Thermo Fisher and its affiliates. After careful consideration, the members of the Board present at the meeting then unanimously approved the merger agreement, declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders of the Company, and recommended that the stockholders of the Company vote for the adoption of the merger agreement. The Board also approved certain compensation arrangements in connection with the transaction, including a new change-in-control severance arrangement applicable to certain of the Companys employees who are not party to change-in-control agreements, amendments to certain existing change-in-control agreements and the establishment of retention, transaction and integration award pools.
On April 14, 2013, following the Board meeting, representatives of Cravath and Wachtell and members of management of each of the Company and Thermo Fisher finalized the merger agreement and other transaction documents, and thereafter the merger agreement was executed and delivered by the parties.
On the morning of April 15, 2013, the Company and Thermo Fisher publicly announced entry into the merger agreement via a joint press release.
At the special meeting of the Board on April 14, 2013, after careful consideration, including detailed discussions with the Companys management and its legal and financial advisors, all of the directors present at the meeting (with one director being absent due to personal reasons, but having previously and subsequently expressed his support for the merger) unanimously:
| approved the merger agreement; |
| declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders; |
| directed that the adoption of the merger agreement be submitted to a vote at a meeting of the stockholders of the Company; and |
| recommended that the stockholders of the Company vote for the adoption of the merger agreement. |
37
Reasons for Recommending the Adoption of the Merger Agreement
The Board determined to approve the merger agreement and recommend the adoption of the merger agreement by the Companys stockholders based on its belief that the merger agreement and the transactions contemplated thereby, including the merger, provide the Companys stockholders with higher and more certain value than any other strategic alternatives available to the Company.
As described above in the section entitled Background of the Merger, prior to and in reaching this determination, the Board consulted with and received the advice of financial advisors and outside legal counsel, discussed certain issues with the Companys senior management and considered a variety of factors weighing positively in favor of the merger, including the following material factors:
| the $76.00 per share price to be paid in cash in respect of each share of Company common stock, which represents a 38.3% premium over the closing price of the Company common stock on January 17, 2013 (the last trading day prior to the news reports that the Company had hired Deutsche Bank and Moelis to solicit interest for an acquisition of the Company), an 11.8% premium over the closing price of the Company common stock on April 12, 2013 (the last trading day prior to the Boards approval of the merger agreement) and a valuation of the Company at a multiple of 13.7 times the Companys EBITDA for the period from April 1, 2012 through March 31, 2013; |
| the Boards understanding of the business, operations, financial condition, earnings and prospects of the Company; |
| the financial analyses presented to the Board by Deutsche Bank and Moelis, and the Boards assessment, taking into account these financial analyses, of the Companys value on a standalone basis relative to the $76.00 per share in cash to be paid in the merger; |
| the respective opinions of Deutsche Bank and Moelis, dated April 14, 2013, to the Board that, based upon and subject to certain assumptions, limitations, qualifications and conditions set forth in the opinions, as of such date, the merger consideration to be paid by Thermo Fisher was fair, from a financial point of view, to the holders of Company common stock, other than Thermo Fisher and its affiliates, as more fully described below in the sections entitled Opinion of Deutsche Bank Securities Inc. (Financial Advisor to the Independent Members of the Board) and Opinion of Moelis & Company LLC (Financial Advisor to the Company); |
| the strategic review process conducted by the Board with the assistance of Deutsche Bank and Moelis prior to entering into the merger agreement, which included: |
¡ | a review of a variety of possible strategic alternatives other than a sale of the Company, including the possibility of continuing to operate the Company under various alternative standalone plans; |
¡ | a review of the range of possible benefits to the Companys stockholders of these strategic alternatives and the timing and the likelihood of accomplishing the goals of any of these alternatives; and |
¡ | an assessment by the Board, taking into account, among other things, analyses prepared by Deutsche Bank and Moelis, that none of these strategic alternatives was reasonably likely to present superior opportunities for the Company, or reasonably likely to create greater value for the Companys stockholders, than the merger; |
38
| the Boards belief, taking into account, among other things, advice from Deutsche Bank, Moelis and Cravath, that the value and terms of the merger agreement and the transactions contemplated thereby, taken as a whole, are more favorable to the Company and its stockholders than the value and terms available from any other potential acquiror of the Company, based on, among other things: |
¡ | an assessment of numerous potential buyers; |
¡ | the fact that on January 17, 2013, various news organizations reported that the Company was soliciting interest in an acquisition of the Company, and that on January 18, 2013, the Board issued a statement confirming that the Board had retained Deutsche Bank and Moelis to assist in its annual strategic review, each of which gave potential acquirors an opportunity to approach the Company or its advisors to propose a possible acquisition; |
¡ | contact by the Board, either directly or through the Companys management or advisors, with over 15 financial and strategic parties over the course of the Boards strategic review process; |
¡ | extensive negotiations by the Board (either directly or through the Companys management or advisors) of potential alternative transactions with several potential financial buyers and potential strategic buyers other than Thermo Fisher; |
¡ | the fact that the consideration to be paid by Thermo Fisher is all cash, which provides certainty of value and liquidity to the Companys stockholders immediately upon the closing of the merger, in comparison to the risks and uncertainty that would be inherent in engaging in a transaction in which all or a portion of the consideration is payable in stock; |
¡ | the fact that the price and the all-cash consideration Thermo Fisher will pay to the Companys stockholders was the result of negotiations and several price increases by Thermo Fisher from its initial proposed valuation range of $65.00 to $68.00 per share, payable in a combination of stock and cash; |
¡ | the fact that the merger is not subject to approval by Thermo Fishers stockholders; and |
¡ | Thermo Fishers large market capitalization and financial strength, the absence of a financing condition in the merger agreement, the Companys ability to seek specific performance to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement and the fact that Thermo Fisher has executed a commitment letter with affiliates of JP Morgan and Barclays that provides for a commitment for a $12.5 billion 364-day unsecured bridge loan facility; |
| the provisions of the merger agreement that permit the Company to explore an unsolicited superior proposal, including: |
¡ | the provisions of the merger agreement that allow the Company to engage in negotiations with, and provide information to, third parties under certain circumstances in response to an unsolicited takeover proposal that the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or would reasonably be expected to lead to a transaction that is reasonably capable of being consummated and is more favorable from a financial point of view to the Companys stockholders than the merger; and |
¡ | the provisions of the merger agreement that allow the Company, under certain circumstances (subject to compliance with certain requirements set forth in the merger agreement and the payment of a termination fee to Thermo Fisher), to terminate the merger agreement prior to obtaining approval of the merger agreement by the Companys stockholders, in order to enter into an alternative transaction in response to an unsolicited takeover proposal that the Board |
39
determines in good faith, after consultation with its financial advisors and outside legal counsel, is reasonably capable of being consummated and is more favorable from a financial point of view to the Companys stockholders than the merger; |
| the belief that the terms of the merger agreement, taken as a whole, provide a high degree of protection against risk that the consummation of the merger is delayed or that the merger cannot be completed in connection with antitrust regulatory approvals, based on, among other things: |
¡ | the fact that the conditions required to be satisfied prior to completion of the merger, such as antitrust clearance and the receipt of approval of the merger agreement by the Companys stockholders, are expected to be fulfilled; |
¡ | the covenants contained in the merger agreement obligating each of the parties to use reasonable best efforts to cause the merger to be consummated and to take all actions necessary to resolve objections under any antitrust laws, subject to certain exceptions; |
¡ | the provision of the merger agreement that allows the end date for completing the merger to be extended to July 14, 2014, if the merger has not been completed by the initial January 14, 2014 deadline because certain required antitrust approvals have not been obtained or because of the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (which prohibition or restraint is in respect of an antitrust law); and |
¡ | the ticking fee provision of the merger agreement pursuant to which, if the merger does not close by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), and this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price per share will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date; |
| the belief that the terms of the merger agreement, taken as a whole, including the parties representations, warranties and covenants, and the conditions to the parties respective obligations, are reasonable; and |
| the fact that a vote of the Companys stockholders entitled to vote on the merger is required under Delaware law to adopt the merger agreement, and that stockholders who do not vote in favor of the adoption of the merger agreement and otherwise comply with Section 262 of the DGCL will have the right to demand appraisal of the fair value of their shares under Delaware law if the merger is approved and consummated. |
In the course of its deliberations, the Board also considered a variety of risks and other countervailing factors related to the merger agreement and the merger, including the following material factors:
| the fact that the merger might not be consummated in a timely manner or at all, due to a failure of certain conditions, including the approval of the transaction by antitrust regulatory authorities, and the difficulty Thermo Fisher would have in completing the merger if the financing outlined in the commitment letter Thermo Fisher has executed with affiliates of JP Morgan and Barclays becomes unavailable; |
| that the stockholders of the Company will have no ongoing equity interest in the combined company following the merger, meaning that the stockholders will not participate in Thermo Fishers or the Companys future earnings or growth, or benefit from any synergies relating to the merger; |
40
| the restrictions on the conduct of the Companys business prior to the consummation of the merger, which may delay or prevent the Company from undertaking business opportunities that may arise or any other action that it might otherwise take with respect to the operations of the Company; |
| the risks and costs to the Company if the merger does not close in a timely manner or at all, including the potential negative impact on the Companys ability to retain key employees, the diversion of management and employee attention and the potential disruptive effect on the Companys day-to-day operations and the Companys relationships with third parties; |
| the risk that the parties may incur significant costs and delays resulting from seeking governmental consents and approvals necessary for completion of the merger; |
| the provisions of the merger agreement that restrict the Companys ability to solicit or participate in discussions or negotiations regarding alternative business combination transactions, subject to specified exceptions, and that require the Company to provide Thermo Fisher with an opportunity to propose revisions to the merger agreement prior to being able to terminate the merger agreement to accept a superior proposal; |
| the possibility that the Companys obligation to pay Thermo Fisher a termination fee of $485,000,000 upon the termination of the merger agreement under certain circumstances could discourage other potential acquirors from making an alternative proposal to acquire the Company; |
| the significant costs involved in connection with negotiating the merger agreement and completing the merger, and that if the merger is not consummated the Company may be required to bear such costs; and |
| the fact that an all cash transaction would be taxable to the Companys stockholders that are U.S. holders for U.S. federal income tax purposes. |
In addition to considering the factors described above, the Board also identified and considered a variety of other factors relevant to the merger, including the following:
| the relationships between Deutsche Bank and Moelis, on the one hand, and the Company and Thermo Fisher, on the other hand, and the fact that Deutsche Bank and Moelis each disclosed to the Board information regarding such relationships, including with respect to prior investment banking fees received from each potential buyer participating in the Companys strategic review process, including Thermo Fisher; and |
| the fact that the Companys directors and executive officers have interests in the merger that may be different from, or in addition to, those of the Companys stockholders generally, including those interests that are a result of employment and compensation arrangements with the Companys executive officers, as described more fully below in the section entitled Interests of the Companys Directors and Executive Officers in the Merger. |
The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but rather includes the material factors considered by the Board. The Board collectively reached the conclusion to approve the merger agreement and declare the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, in light of the various factors described above and other factors that the members of the Board believed were appropriate. In view of the wide variety of factors considered by the Board in connection with its evaluation of the merger and the complexity of these matters, the Board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular
41
factor, was favorable or unfavorable to the ultimate determination of the Board. Rather, the Board made its recommendation based on the totality of the information available to the Board, including discussions with, and questioning of, the Companys management and the financial and legal advisors. In considering the factors discussed above, individual members of the Board may have given different weights to different factors.
This explanation of the Boards reasons for recommending the adoption of the merger agreement and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described in the section of this proxy statement entitled Cautionary Statement Regarding Forward-Looking Statements beginning on page 15.
The Board unanimously recommends a vote FOR the adoption of the merger agreement.
Prospective Financial Information
On December 26, 2012, the Companys management provided to the Board, in connection with the Boards evaluation of the strategic alternatives available to the Company, prospective financial information and forecasts concerning the Company, including projected total revenues, operating income (non-GAAP), depreciation expense, business consolidation costs and EBITDA. This prospective financial information was also provided to Deutsche Bank and Moelis in connection with their evaluation of the merger and the preparation of their fairness opinions, and was made available to Thermo Fisher and other potential buyers during the course of the Boards strategic review process. The following is a summary of this prospective financial information:
Consolidated Management Projections (in millions of dollars)
2013 |
2014 |
2015 |
2016 |
2017 |
||||||||||||||||
Total revenue |
4,035 | 4,205 | 4,403 | 4,613 | 4,918 | |||||||||||||||
Operating income (non-GAAP) |
1,196 | 1,268 | 1,350 | 1,438 | 1,560 | |||||||||||||||
Depreciation |
131 | 136 | 142 | 149 | 159 | |||||||||||||||
Business consolidation costs |
(45) | (40) | (35) | (30) | (30) | |||||||||||||||
EBITDA |
1,282 | 1,364 | 1,457 | 1,558 | 1,689 |
The summary of the prospective financial information provided to the Board and set forth above is included solely to give stockholders access to the information that was made available to the Board for its evaluation of the Companys strategic alternatives and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the merger or for any other purpose, including whether or not to seek appraisal rights with respect to the shares of Company common stock.
The Company does not as a matter of course make public projections as to future sales, earnings or other results beyond the current fiscal year. However, the management of the Company prepared the prospective financial information set forth above to assist the Board in its evaluation of the merger and the other strategic alternatives available to the Company. The information was not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or GAAP or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of the Companys management, was prepared on a reasonable basis, reflected the best estimates and judgments available to the Companys management at the time and presented, to the best of the Companys managements knowledge and belief, the expected course of action and the expected future financial performance of the Company as of the date such information was prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of future results.
None of the Companys independent auditors, nor any other independent accountants, had compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor had they expressed any opinion or any other form of assurance on such information or its achievability, and such parties assume no responsibility for, and disclaim any association with, the prospective financial information.
42
The prospective financial information set forth above reflects numerous estimates and assumptions made by the Company with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Companys business, all of which are difficult to predict and many of which are beyond the Companys control. The prospective financial information set forth above reflects subjective judgment in many respects and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the prospective financial information set forth above constitutes forward-looking information and is subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted, including, but not limited to, the Companys performance, industry performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in the Companys reports filed with the SEC. There can be no assurance that the prospective financial information set forth above will be realized or that actual results will not be significantly higher or lower than those set forth above.
The prospective financial information set forth above covers multiple years and such information by its nature becomes less reliable with each successive year. In addition, such prospective financial information reflects assumptions of the Companys management as of the time such information was prepared as to certain business decisions that were and are subject to change, and such information will be affected by the Companys ability to achieve strategic goals, objectives and targets over the applicable periods. Such information cannot, therefore, be considered a guarantee of future operating results, and the information should not be relied on as such. The inclusion of this information should not be regarded as an indication that the Company, the Board, any of their respective financial advisors or anyone who received this information then considered, or now considers, it a reliable prediction of future events, and this information should not be relied upon as such. None of the Company, the Board or any of their respective financial advisors or any of their respective affiliates assumes any responsibility for the validity, reasonableness, accuracy or completeness of the prospective financial information described above. The prospective financial information set forth above does not take into account any circumstances or events occurring after the date the forecasts were prepared, including the transactions contemplated by the merger agreement or the announcement thereof. Furthermore, such prospective financial information does not take into account the effect of any failure of the merger to occur and should not be viewed as accurate or continuing in that context. None of the Company, the Board or any of their respective financial advisors or any of their respective affiliates intends to, and each of them disclaims any obligation to, update, revise or correct the information set forth above, including if any of it is or becomes inaccurate (even in the short term). The inclusion in this proxy statement of the prospective financial information set forth above should not be deemed an admission or representation by the Company or the Board that such information is viewed by the Company or the Board as material information of the Company. Such information should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Companys public filings with the SEC.
Certain of the financial information set forth above, including non-GAAP operating income and EBITDA, may be considered non-GAAP financial measures. The Companys management provided this information to the Board because the Company believed it could be useful in evaluating the strategic alternatives available to the Company, including the merger. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies.
In light of the foregoing factors and the uncertainties inherent in the prospective financial information set forth above, stockholders are cautioned not to place undue, if any, reliance on such information or the fact that it is included in this proxy statement.
Opinion of Deutsche Bank Securities Inc. (Financial Advisor to the Independent Members of the Board)
At the April 14, 2013, meeting of the Board, Deutsche Bank delivered its oral opinion to the Board, subsequently confirmed in writing, to the effect that, as of the date of such opinion, and based upon and subject
43
to the assumptions, limitations, qualifications and conditions described in Deutsche Banks opinion, the merger consideration to be received in the merger by holders of Company common stock (other than Thermo Fisher and its affiliates) was fair, from a financial point of view, to such holders.
The full text of Deutsche Banks written opinion, dated April 14, 2013, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Deutsche Bank in connection with the opinion, is included in this proxy statement as Annex B and is incorporated herein by reference. The summary of Deutsche Banks opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. Deutsche Banks opinion was approved and authorized for issuance by a Deutsche Bank fairness opinion review committee and was addressed to, and for the use and benefit of, the Board in connection with and for purposes of its evaluation of the merger. Deutsche Bank expressed no opinion, and its opinion does not constitute a recommendation, as to how any holder of Company common stock should vote with respect to the merger. Deutsche Banks opinion was limited to the fairness, from a financial point of view, of the merger consideration to be paid in respect of each share of Company common stock to the holders of Company common stock (other than Thermo Fisher and its affiliates) as of the date of the opinion. Deutsche Banks opinion did not address any other terms of the merger or the merger agreement. Deutsche Bank was not asked to, and Deutsche Banks opinion did not, address the fairness of the merger, or any consideration received in connection therewith, to the holders of any other class of securities, creditors or other constituencies of the Company, nor did it address the fairness of the contemplated benefits of the merger. Deutsche Bank expressed no opinion as to the merits of the underlying business decision of the Company to engage in the merger or the relative merits of the merger as compared to any alternative transactions or business strategies. Also, Deutsche Bank did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of the officers, directors or employees of the Company, or any class of such persons, in connection with the merger relative to the merger consideration to be received by holders of Company common stock or otherwise.
In connection with its opinion, Deutsche Bank reviewed certain publicly available financial and other information concerning the Company, and certain internal analyses, financial forecasts and other information relating to the Company prepared by management of the Company. Deutsche Bank also held discussions with certain senior officers of the Company regarding the businesses and prospects of the Company. In addition, Deutsche Bank:
| reviewed the reported prices and trading activity for the Company common stock; |
| compared certain financial and stock market information for the Company with, to the extent publicly available, similar information for certain other companies it considered relevant whose securities are publicly traded; |
| reviewed, to the extent publicly available, the financial terms of certain recent business combinations which it deemed relevant; |
| reviewed the merger agreement; and |
| performed such other studies and analyses and considered such other factors as it deemed appropriate. |
Deutsche Bank did not assume responsibility for independent verification of, and did not independently verify, any information, whether publicly available or furnished to it, concerning the Company, including, without limitation, any financial information considered in connection with the rendering of its opinion.
Accordingly, for purposes of its opinion, Deutsche Bank, with the knowledge and permission of the Board, assumed and relied upon the accuracy and completeness of all such information. Deutsche Bank did not conduct a physical inspection of any of the properties or assets, and did not prepare, obtain or review any independent
44
evaluation or appraisal of any of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets or liabilities), of the Company, Thermo Fisher or any of their respective subsidiaries, nor did Deutsche Bank evaluate the solvency or fair value of the Company, Thermo Fisher or the combined company under any law relating to bankruptcy, insolvency or similar matters. With respect to the financial forecasts made available to Deutsche Bank and used in its analyses, Deutsche Bank assumed, with the knowledge and permission of the Board, that such forecasts had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby. In rendering its opinion, Deutsche Bank expressed no view as to the reasonableness of such forecasts and projections or the assumptions on which they are based. Deutsche Banks opinion was necessarily based upon economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Deutsche Bank expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion of which it becomes aware after the date of its opinion.
For purposes of rendering its opinion, Deutsche Bank assumed, with the knowledge and permission of the Board, that in all respects material to its analysis, the merger would be consummated in accordance with the terms of the merger agreement, without any waiver, modification or amendment of any term, condition or agreement that would be material to its analysis. Deutsche Bank also assumed, with the knowledge and permission of the Board, that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the merger would be obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents, no restrictions, terms or conditions would be imposed that would be material to its analysis. Deutsche Bank is not a legal, regulatory, tax or accounting expert and Deutsche Bank relied on the assessments made by the Company and its other advisors with respect to such issues.
The independent members of the Board selected Deutsche Bank as their financial advisor in connection with the transaction based on Deutsche Banks qualifications, expertise, reputation and experience in mergers and acquisitions. Pursuant to an engagement letter between the Company and Deutsche Bank, dated January 24, 2013, the Company has agreed to pay Deutsche Bank fees, which are currently estimated to be approximately $30,000,000, for its services as financial advisor to the independent members of the Board, of which $2,000,000 became payable upon the delivery of Deutsche Banks opinion (or would have become payable upon Deutsche Bank advising the independent members of the Board that it was unable to render an opinion) and has been paid, and the remainder of which is contingent upon consummation of the merger. The Company has also agreed to reimburse Deutsche Bank for reasonable fees and disbursements of Deutsche Banks counsel and Deutsche Banks reasonable travel and other out-of-pocket expenses incurred in connection with the merger or otherwise arising out of the retention of Deutsche Bank, in each case on the terms set forth in its engagement letter. The Company has also agreed to indemnify Deutsche Bank and certain related persons to the fullest extent lawful against certain liabilities, including certain liabilities under the federal securities laws arising out of its engagement or the merger.
Deutsche Bank is an internationally recognized investment banking firm experienced in providing advice in connection with mergers and acquisitions and related transactions. Deutsche Bank is an affiliate of Deutsche Bank AG, which, together with its affiliates, is referred to as the DB Group. One or more members of the DB Group have, from time to time, provided, and are currently providing, investment banking, commercial banking (including extension of credit) and other financial services to Thermo Fisher or its affiliates for which they have received compensation of approximately 4.2 million in respect of financial advisory, financing and commercial banking services since January 1, 2011, and for which they may receive compensation in the future including having acted as joint book-running manager with respect to an offering of 1.850% Senior Notes due 2018 (aggregate principal amount $500,000,000) and 3.150% Senior Notes due 2023 (aggregate principal amount $800,000,000) in August 2012, as a lender under Thermo Fishers five-year revolving credit facility and 364-day revolving credit facility since April 2012, as joint book-running manager with respect to an offering of 2.250% Senior Notes due 2016 (aggregate principal amount $1,000,000,000) and 3.600% Senior Notes due 2021 (aggregate principal amount $1,100,000,000) in August 2011, as documentation agent for, and as a lender under, Thermo Fishers June 2011 bridge credit agreement and revolving credit agreement and as senior co-manager
45
with respect to an offering of 2.050% Senior Notes due 2014 (aggregate principal amount $300,000,000), 3.200% Senior Notes due 2016 (aggregate principal amount $900,000,000) and 4.500% Senior Notes due 2021 (aggregate principal amount $1,000,000,000) in February 2011. In addition, one or more members of the DB Group have, from time to time, provided, and are currently providing, certain commercial banking services to the Company or its affiliates for which they have received, and in the future may receive, compensation, but have not provided any financial advisory or financing services to the Company unrelated to the merger since January 1, 2011.
The DB Group may also provide investment and commercial banking services to Thermo Fisher and Life Technologies in the future, for which we would expect the DB Group to receive compensation. In the ordinary course of business, members of the DB Group may actively trade in the securities and other instruments and obligations of Thermo Fisher, Life Technologies and their respective affiliates for their own accounts and for the accounts of their customers. Accordingly, the DB Group may at any time hold a long or short position in such securities, instruments and obligations.
Opinion of Moelis & Company LLC (Financial Advisor to the Company)
At the meeting of the Board on April 14, 2013, to evaluate and approve the merger agreement, Moelis delivered an oral opinion, which was confirmed by delivery of a written opinion, dated April 14, 2013, addressed to the Board to the effect that, as of the date of the opinion and based upon and subject to the conditions and limitations set forth in the opinion, the merger consideration to be received in the merger by holders of the Company common stock (other than Thermo Fisher and its affiliates) is fair, from a financial point of view, to such holders.
The full text of Moelis written opinion dated April 14, 2013, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. The summary of Moelis written opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. Stockholders are urged to read Moelis written opinion carefully and in its entirety. Moelis opinion was provided for the use and benefit of the Board (in its capacity as such) in its evaluation of the merger. Moelis opinion is limited solely to the fairness, from a financial point of view, of the merger consideration to be received by the holders of the Company common stock (other than Thermo Fisher and its affiliates) and does not address the Companys underlying business decision to effect the merger or the relative merits of the merger as compared to any alternative business strategies or transactions that might be available with respect to the Company. Moelis opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote or act with respect to the merger or any other matter. Moelis opinion was approved by a Moelis fairness opinion committee.
In arriving at its opinion, Moelis, among other things:
| reviewed certain publicly available business and financial information relating to the Company, including certain publicly available research analysts financial forecasts; |
| reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of the Company furnished to Moelis by the Company, including financial forecasts provided to or discussed with Moelis by the Companys management; |
| conducted discussions with members of senior management and representatives of the Company concerning the publicly available and internal information described in the foregoing, as well as the business and prospects of the Company generally; |
| reviewed publicly available financial and stock market data of certain other companies in lines of business that Moelis deemed relevant; |
46
| considered the results of efforts by or on behalf of the Company, including by Moelis at the Companys direction, to solicit indications of interest from third parties with respect to a possible acquisition of all or a portion of the Company; |
| reviewed the financial terms of certain other transactions that Moelis deemed relevant; |
| reviewed a draft, dated April 14, 2013, of the merger agreement; |
| participated in certain discussions and negotiations among representatives of the Company and Thermo Fisher and their advisors; and |
| conducted such other financial studies and analyses and took into account such other information as Moelis deemed appropriate. |
In connection with its review, Moelis did not assume any responsibility for independent verification of any of the information supplied to, discussed with or reviewed by Moelis for the purpose of its opinion and has, with the consent of the Board, relied on such information being complete and accurate in all material respects. In addition, with the Companys consent, Moelis did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of the Company, nor was Moelis furnished with any such evaluation or appraisal. With respect to the financial forecasts referred to above, Moelis assumed, at the direction of the Board, that such financial information was reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future performance of the Company.
Moelis opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Moelis as of, the date of the opinion. Moelis opinion did not address the fairness of the merger or any aspect or implication of the merger to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of the Company, other than the fairness of the merger consideration, from a financial point of view, to the holders of Company common stock (other than Thermo Fisher and its affiliates). In addition, Moelis did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration or otherwise. At the direction of the Board, Moelis was not asked to, nor did it, offer any opinion as to any terms of the merger agreement or any aspect or implication of the merger, except for the merger consideration to the extent expressly specified in Moelis opinion. In rendering its opinion, Moelis assumed, with the consent of the Board, that the final executed form of the merger agreement would not differ in any material respect from the draft that Moelis reviewed, that the merger would be consummated in accordance with its terms and that the parties to the merger agreement would comply with all the material terms of the merger agreement. Except as described in this summary, the Company and the Board imposed no other instructions or limitations on Moelis with respect to the investigations made or procedures followed by Moelis in rendering its opinion.
The Board selected Moelis as the Companys financial advisor in connection with the transaction based on Moelis substantial experience in similar transactions and familiarity with the Company. Pursuant to an engagement letter between the Company and Moelis, dated January 24, 2013, the Company has agreed to pay Moelis fees, which are currently estimated to be approximately $25,000,000, for its services as financial advisor to the Company, of which $2,000,000 became payable upon the delivery of Moelis opinion, regardless of the conclusion reached therein, and has been paid, and the remainder of which is contingent upon consummation of the merger. The Company has also agreed to reimburse Moelis for reasonable fees and disbursements of Moelis counsel and Moelis reasonable travel and other out-of-pocket expenses incurred in connection with the merger or otherwise arising out of the retention of Moelis, in each case on the terms set forth in its engagement letter. In addition, the Company has agreed to indemnify Moelis for certain liabilities, including liabilities under the federal securities laws, arising out of its engagement.
47
Moelis is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic transactions, corporate restructurings and valuations for corporate and other purposes. Moelis affiliates, employees, officers and partners may at any time own securities of the Company and Thermo Fisher. Moelis provided investment banking and other services to the Company unrelated to the merger and have received compensation for such services. In the past two years prior to the date of the opinion, Moelis acted as, among other things, financial advisor to the Company in connection with the acquisitions of Pinpoint Genomics, Inc. and Laboratoire Service International, both of which occurred in 2012, and for which Moelis received compensation of approximately $700,000 in the aggregate.
Summary of Material Financial Analyses of Deutsche Bank and Moelis
The following is a summary of the material financial analyses presented by Deutsche Bank and Moelis to the Board at its meeting held on April 14, 2013, and that were used in connection with rendering their respective opinions described above.
The following summary, however, does not purport to be a complete description of the financial analyses performed by Deutsche Bank and Moelis, nor does the order in which the analyses are described represent the relative importance or weight given to the analyses by Deutsche Bank or Moelis. Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand the analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 12, 2013, and is not necessarily indicative of current market conditions.
Historical Trading Analysis
Deutsche Bank and Moelis reviewed the historical closing trading prices for the Company common stock during the 52-week period ended January 17, 2013, the last trading day prior to publication of news reports that the Company had hired Deutsche Bank and Moelis to solicit interest for an acquisition of the Company, which ranged from a low of $39.85 per share on June 1, 2012 to a high of $54.97 per share on January 17, 2013. Deutsche Bank and Moelis also noted that the closing prices of the Company common stock on December 4, 2012, the approximate date that Deutsche Bank and Moelis began contacting financial sponsors with respect to a potential transaction, and April 12, 2013 were $48.90 per share and $68.00 per share, respectively. The closing price of the Company common stock on November 30, 2012 was $49.35.
Analyst Price Targets
Deutsche Bank and Moelis reviewed the stock price targets for the Company common stock in 19 recently published, publicly available Wall Street research analysts reports, which indicated low and high stock price targets ranging from $41.00 to $60.00 per share for reports published prior to January 17, 2013, the last trading day prior to publication of news reports that the Company had hired Deutsche Bank and Moelis to solicit interest for an acquisition of the Company, and low and high stock price targets ranging from $48.00 to $75.00 per share for reports published following such date and prior to April 12, 2013.
Selected Public Companies Analysis
Deutsche Bank and Moelis reviewed and compared certain financial information and commonly used valuation measurements for the Company with corresponding financial information and valuation measurements for the following selected publicly traded life science tools and diagnostics companies:
| Agilent Technologies Inc. |
| Bio-Rad Laboratories Inc. |
48
| Bruker Corp. |
| Illumina Inc. |
| PerkinElmer Inc. |
| Qiagen N.V. |
| Sigma-Aldrich Corp. |
| Thermo Fisher |
| Waters Corp. |
Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are U.S.-listed publicly traded companies with operations that, for purposes of analysis, may be considered similar to certain operations of the Company. Accordingly, the analysis of publicly traded companies was not simply mathematical. Rather, it involved complex considerations and qualitative judgments, reflected in the opinions of Deutsche Bank and Moelis, concerning differences in financial and operating characteristics of the selected companies and other factors that could affect the public trading value of such companies. However, Deutsche Bank and Moelis selected Agilent Technologies Inc., PerkinElmer Inc. and Thermo Fisher for particular focus due to such companies being more comparable to the Company based on their growth profiles, business mix and return on invested capital.
Based on the closing price of the Company common stock on January 17, 2013, the last trading day prior to publication of news reports that the Company had hired Deutsche Bank and Moelis to solicit interest for an acquisition of the Company, the closing price of the Company common stock on April 12, 2013, the $76.00 per share to be paid in the merger (excluding any additional per share consideration), the closing prices of the common stock (or, in the case of Bio-Rad Laboratories Inc., the class A common stock) of the other selected companies on April 12, 2013, information contained in the most recent public filings of the selected companies, analyst consensus estimates of revenue, earnings before interest, taxes, depreciation and amortization, which we refer to as EBITDA, and earnings per share, which we refer to as EPS, for the Company and the selected companies, and estimates of revenue, EBITDA and EPS for the Company provided by management of the Company, Deutsche Bank and Moelis calculated the following multiples with respect to the Company and each of the selected companies:
| total enterprise value (defined as equity value plus net indebtedness, excluding pension liabilities), which we refer to as TEV, as a multiple of estimated revenue for 2013; |
| total enterprise value, as a multiple of estimated EBITDA for 2013; and |
| price as a multiple of estimated EPS, which we refer to as P/E multiples, for 2013. |
The cash balances for the selected companies were adjusted to take into account the pro forma financial impact of recently announced acquisitions and recent stock repurchases.
49
The results of this analysis are summarized as follows:
TEV/2013E Revenue |
TEV/2013E EBITDA |
P/E (2013E) | ||||
All Selected Companies |
||||||
Mean |
3.1x | 12.3x | 19.7x | |||
Median |
2.7x | 11.7x | 17.7x | |||
Focus Group |
||||||
Mean |
2.3x | 11.3x | 15.0x | |||
Median |
2.2x | 11.3x | 14.9x | |||
Life Technologies |
||||||
Analyst Estimates |
||||||
$54.97 closing price on 1/17/13 |
3.0x | 9.3x | 12.7x | |||
Management |
||||||
$54.97 closing price on 1/17/13 |
2.9x | 9.3x | 12.5x | |||
$68.00 closing price on 4/12/13 |
3.5x | 11.1x | 15.4x | |||
$76.00 to be paid in the merger |
3.9x | 12.3x | 17.2x |
Based in part upon the trading multiples of the selected companies described above and upon estimated 2013 data provided by management of the Company, and taking into account the historical premiums and discounts at which the Company traded as compared to the selected companies, Deutsche Bank and Moelis calculated a range of estimated implied values per share of Company common stock by applying multiples of TEV to 2013 estimated revenue of 2.75x to 3.25x, multiples of TEV to 2013 estimated EBITDA of 8.5x to 10.5x, and multiples of price to 2013 estimated EPS of 11.5x to 14.5x, resulting in ranges of implied value of approximately $50.66 to $61.69 per share of Company common stock, $49.56 to $63.58 per share of Company common stock, and $50.74 to $63.97 per share of Company common stock, respectively.
Sum-of-the-Parts Discounted Cash Flow Analysis
Deutsche Bank and Moelis performed a sum-of-the-parts discounted cash flow analysis of the Company using financial forecasts and other information and data provided by the Companys management to calculate a range of implied net present values of the Company base business and its Ion Torrent business segment and an implied range of implied present values per share of Company common stock as of March 31, 2013. Deutsche Bank and Moelis believed it was appropriate to value these businesses separately because the Ion Torrent business is an emerging, high-risk and fast-growing technology business with a different profile than the Companys diversified, stable and slower-growth base business.
In performing the discounted cash flow analysis of the Companys base business, Deutsche Bank and Moelis applied a range of discount rates of 8.0% to 10.0% to (i) the Companys management estimates of the after-tax unlevered free cash flows of the base business for the period March 31, 2013 through December 31, 2017, using the midyear convention, and (ii) a range of estimated terminal values of the base business derived by applying a range of multiples of 8.0x to 10.0x to the Companys management estimates of 2017 EBITDA of the base business. In performing the discounted cash flow analysis of the Ion Torrent business segment, Deutsche Bank and Moelis applied a range of discount rates of 15.0% to 17.0% to (i) the Companys management estimates of the after-tax unlevered free cash flows of the Ion Torrent business for the period March 31, 2013 through December 31, 2026, using the midyear convention, and (ii) a range of estimated terminal values of the Ion Torrent business derived by growing the adjusted projected 2026 unlevered after-tax free cash flow of the Ion Torrent business at an annual rate of (2.0)% to 2.0% into perpetuity. Taking into account the Companys management estimates of cash balances (including short term investments, but excluding restricted cash) and indebtedness (including capital leases) as of March 31, 2013, all of which were allocated to the base business, and reducing the total valuation by $212 million in pension liabilities, this analysis resulted in a range of implied present values per share of Company common stock as of March 31, 2013 of approximately $53.26 to $70.70 per share.
50
Using the same multiples and discount rates described above, Deutsche Bank and Moelis performed a similar sum-of-the-parts discounted cash flow sensitivity analysis using upside and downside sensitivities cases to the financial forecasts for the base business and Ion Torrent business provided by the Companys management. This analysis resulted in a range of implied present values per share of Company common stock as of March 31, 2013 of approximately $45.61 to $79.83 per share.
Selected Transactions Analysis
Based on the $76.00 per share to be paid in the merger (excluding any additional per share consideration) and the Companys net debt as of March 31, 2013 as provided by management of the Company, Deutsche Bank and Moelis derived a total enterprise value of the Company of approximately $15.7 billion. Deutsche Bank and Moelis then calculated the multiples of the Companys total enterprise value to its revenue and EBITDA, respectively, for the twelve-month period ended March 31, 2013 as provided by management of the Company.
Deutsche Bank and Moelis reviewed publicly available information relating to the following selected transactions in the life science tools and diagnostics industry announced since June 2008, which we refer to as the selected transactions.
Date Announced |
Target |
Acquiror | ||
July 5, 2011 |
Immucor, Inc. | TPG Capital, L.P. | ||
February 7, 2011 |
Beckman Coulter, Inc. | Danaher Corp. | ||
February 28, 2010 |
Millipore Corp. | Merck KGaA | ||
June 11, 2008 |
Applied Biosystems Inc. | Invitrogen Corp. |
Although none of the selected transactions is directly comparable to the proposed merger, the companies in the selected transactions are those that, for purposes of analysis, may be considered similar to the proposed merger.
With respect to each selected transaction, Deutsche Bank and Moelis calculated the multiples of the targets total enterprise value to its revenue and EBITDA, respectively, for the twelve-month period, which we refer to as LTM, prior to announcement of the applicable transaction.
The results of this analysis are summarized as follows:
TEV as Multiple of | ||||||||||
LTM Revenue |
LTM EBITDA |
|||||||||
Selected Transactions |
||||||||||
Mean |
3.5x | 13.0x | ||||||||
Median |
3.6x | 12.0x | ||||||||
Proposed Merger |
4.1x | 13.7x |
Based in part upon the multiples of the selected transactions described above, Deutsche Bank and Moelis calculated ranges of estimated implied values per share of Company common stock by applying multiples 3.0x to 4.0x to the Companys revenue for the twelve-month period ended March 31, 2013 and 11.0x to 14.0x to the Companys EBITDA for the twelve-month period ended March 31, 2013, resulting in ranges of implied value of approximately $52.70 to $73.61 per share of Company common stock and $59.06 to $77.90 per share of Company common stock, respectively.
Other Information
Deutsche Bank and Moelis also noted for the Board certain additional factors that were not considered part of their financial analysis with respect to their respective opinions but were referenced for informational
51
purposes. This information included, among other things, an analysis of premiums paid in 23 selected transactions with transaction values between $5.0 billion and $20.0 billion announced since April 2009 where at least 50% of the consideration consisted of cash, including three of the four selected transactions described above. The premiums in this analysis were calculated by comparing the per share acquisition price in each transaction to the closing price of the target companys common stock for the date one day prior to the earlier of the date of announcement of the transaction or the date of release of a press report referencing a potential transaction and to the 52-week high closing price of the target companys common stock prior to such date. The mean, median, high and low premiums for the selected transactions were 46.2%, 46.3%, 91.1% and 16.5%, respectively, for the one-day prior metric and 22.9%, 19.5%, 59.3% and (43.1)%, respectively, for the 52-week high metric. Deutsche Bank and Moelis also noted that the $76.00 per share to be paid in the merger represented a premium of 11.8% to the $68.00 closing price of the Company common stock on April 12, 2013, a premium of 38.3% to the $54.97 high closing price for the Company common stock for the 52-week period ended January 17, 2013, the last trading day prior to publication of news reports that the Company had hired Deutsche Bank and Moelis to solicit interest for an acquisition of the Company, a premium of 38.3% to the $54.97 closing price of the Company common stock on January 17, 2013 and a premium of 55.4% to the $48.90 closing price of the Company common stock on December 4, 2012, the date that Deutsche Bank and Moelis initially contacted financial sponsors with respect to a potential transaction.
Miscellaneous
This summary of the analyses is not a complete description of Deutsche Banks and Moelis opinions or the analyses underlying, and factors considered in connection with, Deutsche Banks and Moelis opinions. The preparation of a fairness opinion is a complex process involving the application of subjective business and financial judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, is not readily susceptible to partial analysis or summary description. Deutsche Bank and Moelis believe that their analyses described above must be considered as a whole and that considering any portion of such analyses and of the factors considered without considering all analyses and factors could create a misleading view of the process underlying their opinions. Selecting portions of the analyses or summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying the Deutsche Bank and Moelis opinions. In arriving at their fairness determinations, Deutsche Bank and Moelis considered the results of all of their analyses and did not attribute any particular weight to any factor or analysis. Rather, they made their fairness determinations on the basis of their experience and professional judgment after considering the results of all of their analyses. No company or transaction in the analyses described above is identical to the Company or the merger.
In conducting their analysis and arriving at their opinions, Deutsche Bank and Moelis utilized a variety of generally accepted valuation methods. The analysis was prepared solely for the purpose of enabling Deutsche Bank and Moelis to provide their opinions to the Board as to the fairness, from a financial point of view, of the merger consideration to be paid in respect of each share of Company common stock to the holders of such stock (other than Thermo Fisher and its subsidiaries) as of April 14, 2013 and does not purport to be an appraisal or necessarily reflect the prices at which businesses or securities actually may be sold, which are inherently subject to uncertainty. As described above, in connection with their analysis, Deutsche Bank and Moelis made, and were provided by the management of the Company with, numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Deutsche Bank, Moelis, Life Technologies or Thermo Fisher. Analyses based on estimates or forecasts of future results are not necessarily indicative of actual past or future values or results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of Life Technologies, Thermo Fisher or their respective advisors, Deutsche Bank and Moelis do not assume responsibility if future results or actual values are materially different from these forecasts or assumptions.
The terms of the transaction, including the merger consideration, were determined through arms-length negotiations between the Company and Thermo Fisher and were approved by the Board. Although Deutsche
52
Bank and Moelis provided advice to the Board during the course of these negotiations, the decision to enter into the merger agreement was solely that of the Board. Deutsche Bank and Moelis did not recommend any specific consideration to the Company or the Board, or that any specific amount or type of consideration constituted the only appropriate consideration for the merger. As described above in the section entitled Reasons for Recommending the Adoption of the Merger Agreement, the opinions of Deutsche Bank and Moelis and their presentation to the Board were among a number of factors taken into consideration by the Board in making its determination to approve the merger agreement and the transactions contemplated by it, including the merger.
If the proposal to adopt the merger agreement receives the affirmative vote of stockholders holding at least a majority of the outstanding shares of Company common stock and the other conditions to the closing of the merger are either satisfied or (to the extent permitted by applicable law) waived, Merger Sub will be merged with and into the Company upon the terms set forth in the merger agreement. As the surviving corporation in the merger, the Company will continue to exist following the merger as a wholly owned subsidiary of Thermo Fisher.
Thermo Fisher does not currently own any interest in the Company. Following the merger, all of the Companys equity interests will be beneficially owned by Thermo Fisher and none of the Companys current stockholders will, by virtue of the merger, have any ownership interest in, or be a stockholder of, Life Technologies, the surviving corporation or Thermo Fisher after the consummation of the merger. As a result, the Companys current stockholders will no longer benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Company common stock. Following the merger, Thermo Fisher will benefit from any increase in the Companys value and also will bear the risk of any decrease in the Companys value.
Upon consummation of the merger, each share of Company common stock issued and outstanding immediately prior to the effective time of the merger, other than shares owned by the Company or Thermo Fisher or their respective wholly owned subsidiaries and shares owned by stockholders who have properly exercised and perfected appraisal rights under the DGCL, will be converted into the right to receive the merger consideration, without interest, and all shares of Company common stock so converted will, at the effective time, be canceled. Please see the section of this proxy statement entitled The Merger AgreementMerger Consideration and Conversion of Company Common Stock beginning on page 76.
For information regarding the effects of the merger on the Companys outstanding equity awards, please see the section below entitled Interests of the Companys Directors and Executive Officers in the Merger beginning on page 55 and the section of this proxy statement entitled The Merger AgreementTreatment of Equity Awards beginning on page 77.
The Company common stock is currently registered under the Exchange Act and trades on the NASDAQ Global Select Market (NASDAQ) under the symbol LIFE. Following the consummation of the merger, shares of Company common stock will no longer be traded on NASDAQ or any other public market. In addition, the registration of shares of Company common stock under the Exchange Act will be terminated and the Company will no longer be required to file periodic and other reports with the SEC with respect to the Company common stock. Termination of registration of the Company common stock under the Exchange Act will reduce the information required to be furnished by the Company to the Companys stockholders and the SEC, and would make certain provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to the Company.
Effects on the Company If Merger Is Not Completed
In the event that the proposal to adopt the merger agreement does not receive the required approval from the Companys stockholders, or if the merger is not completed for any other reason, the Companys stockholders will
53
not receive any payment for their shares of Company common stock in connection with the merger. Instead, the Company will remain an independent public company, the Company common stock will continue to be listed and traded on NASDAQ, the Company common stock will continue to be registered under the Exchange Act and the Companys stockholders will continue to own their shares of the Company common stock and will continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of Company common stock.
If the merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your shares of Company common stock, including the risk that the market price of Company common stock may decline to the extent that the current market price of the Companys stock reflects a market assumption that the merger will be completed. If the merger is not completed, there is no assurance that any other transaction acceptable to the Company will be offered or that the business, operations, financial condition, earnings or prospects of the Company will not be adversely impacted. Pursuant to the merger agreement, under certain circumstances the Company is permitted to terminate the merger agreement in order to enter into an alternative transaction. Please see the section of this proxy statement entitled The Merger AgreementTermination of the Merger Agreement beginning on page 91.
Under certain circumstances, if the merger is not completed, the Company may be obligated to pay to Thermo Fisher a termination fee. Please see the section of this proxy statement entitled The Merger AgreementTermination Fee beginning on page 92.
Thermo Fisher currently expects to finance the $13.6 billion purchase price for the merger with up to $3.25 billion of equity financing, of which the Offering described below is a part, with the remaining funding to come from the proceeds of indebtedness and cash on hand. The consummation of the merger is not conditioned upon Thermo Fishers receipt of financing.
In connection with the merger, Thermo Fisher entered into a commitment letter, dated April 14, 2013, with affiliates of J.P. Morgan and Barclays (the Commitment Letter). As previously disclosed by Thermo Fisher, on May 31, 2013, pursuant to the Commitment Letter, Thermo Fisher entered into a Bridge Credit Agreement (the Bridge Credit Agreement), which is a 364-day unsecured committed bridge facility in the principal amount of $7.5 billion, among Thermo Fisher and a certain foreign subsidiary of Thermo Fisher from time to time party thereto, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the several banks and other financial institutions or entities from time to time parties thereto, as lenders. Also as previously disclosed by Thermo Fisher, on May 31, 2013, Thermo Fisher entered into a Term Loan Agreement (the Term Loan Agreement and, together with the Bridge Credit Agreement, the Credit Agreements), which is a 3-year unsecured term loan facility in the principal amount of $5.0 billion, among Thermo Fisher and certain foreign subsidiaries of Thermo Fisher from time to time party thereto, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, and the several banks and other financial institutions or entities from time to time parties thereto, as lenders. The closing date of the Credit Agreements is conditioned on, among other things, the consummation of the merger. The commitments under the Credit Agreements automatically terminate on the earlier of the funding and disbursement of the loans to Thermo Fisher on the closing date or the End Date as defined in the merger agreement, as such date may be extended pursuant to the merger agreement.
On June 7, 2013, Thermo Fisher announced that it priced an underwritten public offering (the Offering) of its common stock, par value $1.00 per share (Thermo Common Stock), in connection with the Forward Sale Agreements described below. On June 11, 2013, Thermo Fisher announced that the underwriters exercised their over-allotment option in full in connection with the Offering. In connection with the Offering, Thermo Fisher entered into: (i) letter agreements, each dated as of June 6, 2013 (the Initial Forward Sale Agreements), with each of JPMorgan Chase Bank, National Association, London Branch and Barclays Bank PLC (each, a Forward Purchaser and collectively, the Forward Purchasers), (ii) an underwriting agreement, dated as of June 6, 2013 (the Underwriting Agreement), with J.P. Morgan Securities LLC and Barclays Capital Inc., as representatives of the several underwriters listed therein and J.P. Morgan Securities LLC and Barclays Capital Inc., each as agent
54
for an affiliate of its respective affiliated Forward Purchaser (collectively, the Forward Sellers) and (iii) letter agreements, each dated as of June 10, 2013 (the Additional Forward Sale Agreements and together with the Initial Forward Sale Agreements, the Forward Sale Agreements), with each of the Forward Purchasers, relating to the Offering of a total of 29,590,643 shares of Thermo Common Stock (the Offered Shares). Thermo Fisher did not initially receive any proceeds from the sale of the Offered Shares and will only receive proceeds from the sale upon settlement of the Forward Sale Agreements. Under the terms of the Forward Sale Agreements, the settlement of the Forward Sale Agreements must occur no later than 14 months from June 6, 2013. In the event of full physical settlement of the Forward Sale Agreements, Thermo Fisher expects to receive net proceeds of $2.46 billion from the Offering, subject to the price adjustment and other provisions of the Forward Sale Agreements.
Thermo Fisher anticipates raising up to a maximum of an additional $1.05 billion of mandatorily convertible debt, preference shares or other equity-linked securities to finance the merger.
Interests of the Companys Directors and Executive Officers in the Merger
Details of the beneficial ownership of the Companys directors and executive officers of Company common stock are set out in the section of this proxy statement entitled Security Ownership of Certain Beneficial Owners and Management beginning on page 94. In addition to their interests in the merger as stockholders, certain of the Companys directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of the Companys stockholders generally. In considering the recommendation of the Board to vote FOR the adoption of the merger agreement, you should be aware of these interests. The members of the Board were aware of and considered these interests, among other matters, in reaching the determination to approve the merger agreement and declare the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of, and fair to, the Company and its stockholders, and in recommending that the Companys stockholders vote for the adoption of the merger agreement. For purposes of all of the agreements and plans described below, the consummation of the merger or, in the case of the change-in-control agreements with the executive officers, the adoption of the merger agreement by the Companys stockholders will constitute a change-in-control of the Company.
The interests of the Companys directors generally include the right to accelerated vesting and cash-out of the directors unvested RSUs and accelerated cash-out of the directors Options, vested RSUs and certain deferred compensation amounts.
The interests of the Companys executive officers include the rights to:
| accelerated cash-out of the executive officers vested Options; |
| accelerated vesting and cash-out of the executive officers unvested Options, Pre-2015 Vesting RSUs, PRSUs and, solely with respect to Messrs. Hoffmeister and Cottingham, NQDC RSUs granted in 2013; |
| accelerated vesting with respect to the executive officers Post-2014 Vesting RSUs and NQDC RSUs (other than NQDC RSUs granted in 2013 to Messrs. Hoffmeister and Cottingham) in the event of a qualifying termination of employment following the consummation of the merger; |
| accelerated vesting and payment of the executive officers cash-based performance units; |
| certain severance payments in the event of a qualifying termination of employment following the adoption of the merger agreement by the Companys stockholders; |
| for executive officers with (vested and unvested) account balances under the Companys Deferred Compensation Plan (all executive officers other than Mr. Andrews), vesting and accelerated cash-out of all account balances under the Companys Deferred Compensation Plan (including Share Equivalent Units and other deferred compensation amounts) in accordance with the terms of the merger agreement and the Companys Deferred Compensation Plan; |
55
| receipt of 2013 annual bonuses if employed by the Company or its subsidiaries as of December 31, 2013, and payment of such bonuses at no less than target level in the event the merger is consummated prior to determination by the C&OD Committee of achievement of applicable performance goals; and |
| solely with respect to Ms. Richard, the ability to participate in a retention bonus program that was established by the Company in connection with the merger. |
The Companys directors and executive officers also have the right to indemnification and insurance coverage following effective time of the merger. Please see the section below entitled Director and Officer Indemnification and Insurance beginning on page 63 and the section of this proxy statement entitled The Merger AgreementDirector and Officer Indemnification and Insurance beginning on page 87.
Treatment of Equity Awards
As of the date of this proxy statement, certain of the Companys directors hold Options and RSUs and certain of the Companys executive officers hold Options, RSUs and PRSUs.
For information regarding beneficial ownership of Company common stock, other than the equity awards described below, by each of the Companys directors and executive officers and all of such directors and executive officers as a group, please see the section of this proxy statement entitled Security Ownership of Certain Beneficial Owners and Management beginning on page 94. The Companys directors and executive officers will be entitled to receive, for each vested share of Company common stock, the same merger consideration in cash in the same manner as other stockholders.
Treatment of Options
Pursuant to the merger agreement, each Option, whether vested or unvested, will be canceled and will entitle the holder thereof to receive an amount in cash equal to the product of (x) the total number of shares of Company common stock subject to such Option times (y) the excess, if any, of the merger consideration over the exercise price per share of Company common stock subject to such Option.
Amounts in respect of Options will be paid to holders no later than five business days after the effective time of the merger.
The table below, entitled Payments to Directors and Executive Officers in Respect of Vested Options, along with its footnotes, shows the number of outstanding vested Options held by the Companys directors and executive officers as of July 18, 2013 (taking into account any Options that are expected to vest in accordance with their terms without regard to the merger between such date and January 13, 2014), and the payments each of them can expect to receive for such vested Options. Compensation payable in respect of outstanding unvested Options held by the Companys executive officers is quantified in the tables contained in the section below entitled Quantification of Payments and Benefits beginning on page 64. As of the date of this proxy statement, the Companys directors do not hold any unvested Options.
56
Payments to Directors and Executive Officers in Respect of Vested Options
Name | Number of Vested Options |
Value from Vested Options ($)(1) | ||||||||
Directors |
||||||||||
George F. Adam, Jr. |
- | - | ||||||||
Raymond V. Dittamore |
48,000 | $1,980,940 | ||||||||
Donald W. Grimm |
48,000 | $1,980,940 | ||||||||
Balakrishnan S. Iyer |
48,000 | $1,980,940 | ||||||||
Arnold J. Levine, Ph.D.(2) |
31,486 | $1,382,003 | ||||||||
William H. Longfield(3) |
- | - | ||||||||
Bradley G. Lorimier(4) |
48,000 | $1,980,940 | ||||||||
Craig J. Mundie |
- | - | ||||||||
Ronald A. Matricaria |
48,000 | $2,178,740 | ||||||||
Ora H. Pescovitz, M.D. |
- | - | ||||||||
Per A. Peterson, Ph.D. |
1,918 | $84,123 | ||||||||
David C. UPrichard, Ph.D. |
3,000 | $132,420 | ||||||||
Executive Officers |
||||||||||
Gregory T. Lucier |
1,251,160 | $53,769,791 | ||||||||
Mark P. Stevenson |
313,140 | $13,240,950 | ||||||||
Ronald A. Andrews |
16,503 | $446,173 | ||||||||
David F. Hoffmeister |
586,518 | $25,925,700 | ||||||||
Peter M. Leddy, Ph.D. |
492,721 | $19,987,628 | ||||||||
John A. Cottingham |
164,307 | $6,813,417 | ||||||||
Kelli A. Richard |
53,120 | $1,735,948 |
(1) | Depending on when the effective time of the merger occurs, certain Options not currently shown in the table above may become vested in accordance with their terms without regard to the merger and the Companys directors or executive officers may exercise all or a portion of their vested Options. |
(2) | Dr. Levine retired from the Board effective April 24, 2013. |
(3) | Mr. Longfield retired from the Board effective April 26, 2012. |
(4) | Mr. Lorimier retired from the Board effective April 24, 2013. |
Treatment of Restricted Stock Units
Pursuant to the merger agreement, RSUs will be treated as follows in connection with the consummation of the merger:
| each Pre-2015 Vesting RSU and certain NQDC RSUs granted in 2013 will vest in full and will be canceled in exchange for the right to receive an amount in cash equal to the merger consideration; |
| each Post-2014 Vesting RSU and each NQDC RSU (other than certain NQDC RSUs granted in 2013) will be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger in accordance with the terms of the applicable equity award agreement; and |
| each PRSU will vest in full at the greater of the target RSU award level and the level achieved based on the Companys performance as of the end of the most recently completed fiscal year in the applicable performance period, except that PRSUs granted in the fiscal year in which the merger is consummated will vest at the target RSU award level, in each case, in accordance with the terms of the applicable equity award agreement, and will be canceled in exchange for the right to receive an amount in cash equal to the merger consideration. |
57
In addition, pursuant to the merger agreement, the Company has reserved the right to grant RSUs that vest based solely on the continued service of the holder of such RSUs (or cash equivalent awards) to newly hired employees and employees promoted based on job performance in the ordinary course of business consistent with past practice, which RSUs will, upon the effective time of the merger, be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger in accordance with the terms of the applicable award agreement.
The table below, entitled Payments to Directors in Respect of Vested and Unvested RSUs, along with its footnotes, shows the number of outstanding vested and unvested RSUs held by the Companys directors as of July 18, 2013, and the payments each of them can expect to receive for such awards (taking into account any RSUs that are expected to vest in accordance with their terms without regard to the merger between such date and January 13, 2014). Compensation payable in respect of outstanding unvested RSUs and PRSUs held by the Companys executive officers is quantified in the tables contained in the section below entitled Quantification of Payments and Benefits beginning on page 64. As of the date of this proxy statement, the Companys executive officers do not hold any vested RSUs or vested PRSUs. Other than Messrs. Hoffmeister and Cottingham, none of the Companys executive officers hold any vested or unvested NQDC RSUs.
Payments to Directors in Respect of Vested and Unvested RSUs
Name |
Number of Vested RSUs |
Value from Vested RSUs ($)(1) |
Number of Unvested RSUs |
Value from Unvested RSUs ($)(1) | ||||||||||||||||
George F. Adam, Jr. |
22,467 | $1,707,492 | 3,053 | $232,028 | ||||||||||||||||
Raymond V. Dittamore |
25,103 | $1,907,828 | 3,053 | $232,028 | ||||||||||||||||
Donald W. Grimm |
27,912 | $2,121,312 | 3,053 | $232,028 | ||||||||||||||||
Balakrishnan S. Iyer |
27,076 | $2,057,776 | 3,053 | $232,028 | ||||||||||||||||
Arnold J. Levine, Ph.D. |
26,276 | $1,996,976 | - | - | ||||||||||||||||
William H. Longfield |
- | - | - | - | ||||||||||||||||
Bradley G. Lorimier |
- | - | - | - | ||||||||||||||||
Craig J. Mundie |
- | - | 3,053 | $232,028 | ||||||||||||||||
Ronald A. Matricaria |
31,964 | $2,429,264 | 3,053 | $232,028 | ||||||||||||||||
Ora H. Pescovitz, M.D. |
- | - | - | - | ||||||||||||||||
Per A. Peterson, Ph.D. |
28,238 | $2,146,088 | 3,053 | $232,028 | ||||||||||||||||
David C. UPrichard, Ph.D. |
23,024 | $1,749,824 | 3,053 | $232,028 |
(1) | Depending on when the effective time of the merger occurs, certain unvested RSUs may become vested in accordance with their terms without regard to the merger. The table above does not include any grants of RSUs which may be awarded following the date of this proxy statement. |
Cash-Based Performance Units
In addition to the equity awards described above, the Companys executive officers hold long-term incentive compensation awards in the form of cash-based performance units. Each cash-based performance unit has an initial notional value of $100 and a final value ranging from $0 to $200, based on the Companys performance relative to pre-established financial objectives over a three-year period. In connection with the consummation of the merger, each cash-based performance unit will vest and become payable at the greater of the target level and the level achieved based on the Companys performance as of the end of the completed fiscal year or years in the applicable performance period, except that cash-based performance units granted in the fiscal year in which the merger is consummated will vest and become payable at the target level, in each case, in accordance with the applicable award agreement. Amounts payable in respect of cash-based performance units as a result of the merger are expected to be paid to holders within five business days following the effective time of the merger. Compensation payable in respect of outstanding cash-based performance units held by the
58
Companys executive officers is quantified in the tables contained in the section below entitled Quantification of Payments and Benefits beginning on page 64. As of the date of this proxy statement, the Companys directors do not hold any cash-based performance units.
Deferred Compensation Plan
Pursuant to the Companys non-qualified Deferred Compensation Plan, participants (including the Companys directors and executive officers) may defer up to 75% of base salary (100% of cash retainer with respect to directors) and/or up to 100% of the executive officers annual bonus. Contributions may be directed into a selection of underlying investment funds, including in the form of Share Equivalent Units in the Life Technologies Stock Fund, which invests solely in Company common stock. The Company also offers executive officers a 25% match on deferrals of annual bonus awards to the Life Technologies Stock Fund in the form of Share Equivalent Units, up to an annual maximum of 100% of the participants target annual bonus amount. Matching contributions are credited in the form of Share Equivalent Units to the Life Technologies Stock Fund on the date bonus awards are paid, and they fully vest on the third anniversary of the time the match is made. Pursuant to the terms of the Companys Deferred Compensation Plan and the merger agreement, (i) each Share Equivalent Unit will vest (to the extent unvested) and be converted into the right to receive an amount in cash equal to the merger consideration and (ii) all amounts deferred by participants will be distributed in a lump-sum cash payment within 60 days of the consummation of the merger. The table below, entitled Payments to Directors and Executive Officers in Respect of Vested Deferred Compensation Account Balances and Vested Share Equivalent Units, along with its footnotes, shows the vested deferred compensation account balances of the Companys directors and executive officers as of July 18, 2013, that are invested in investment alternatives other than Share Equivalent Units, the number of vested Share Equivalent Units held by the Companys directors and executive officers as of July 18, 2013, and the payments each of them can expect to receive with respect thereto (taking into account any Share Equivalent Units that are expected to vest in accordance with their terms without regard to the merger between such date and January 13, 2014). Compensation payable in respect of outstanding unvested Share Equivalent Units held by the Companys executive officers is quantified in the tables contained in the section below entitled Quantification of Payments and Benefits beginning on page 64. As of the date of this proxy statement, the Companys directors do not hold any unvested Share Equivalent Units and only Ora H. Pescovitz, M.D., holds vested Share Equivalent Units.
59
Payments to Directors and Executive Officers in Respect of Vested Deferred
Compensation Account Balances and Vested Share Equivalent Units
Name | Value from Vested Deferred Compensation Account Balance (1) (2) |
Number of Vested Share Equivalent Units (2) |
Value from Vested Share Equivalent Units (2) | ||||||||||||
Directors |
|||||||||||||||
George F. Adam, Jr. |
- | - | - | ||||||||||||
Raymond V. Dittamore |
- | - | - | ||||||||||||
Donald W. Grimm |
- | - | - | ||||||||||||
Balakrishnan S. Iyer |
- | - | - | ||||||||||||
Arnold J. Levine, Ph.D. |
$45,262 | - | - | ||||||||||||
William H. Longfield |
- | - | - | ||||||||||||
Bradley G. Lorimier |
- | - | - | ||||||||||||
Ronald A. Matricaria |
- | - | - | ||||||||||||
Craig J. Mundie |
- | - | - | ||||||||||||
Ora H. Pescovitz, M.D. |
- | 4,701 | $357,276 | ||||||||||||
Per A. Peterson, Ph.D. |
- | - | - | ||||||||||||
David C. UPrichard, Ph.D. |
- | - | - | ||||||||||||
Executive Officers |
|||||||||||||||
Gregory T. Lucier |
$5,103 | 30,948.21 | $2,352,064 | ||||||||||||
Mark P. Stevenson |
$13,311 | 28,004.42 | $2,128,336 | ||||||||||||
Ronald A. Andrews |
- | - | - | ||||||||||||
David F. Hoffmeister |
$4,204 | 15,443.15 | $1,173,680 | ||||||||||||
Peter M. Leddy, Ph.D. |
$100,923 | 8,879.52 | $674,844 | ||||||||||||
John A. Cottingham |
$4,204 | 2,275.82 | $172,962 | ||||||||||||
Kelli A. Richard |
$4,204 | - | - |
(1) | The amounts shown in this column reflect the value of the vested deferred compensation account balances as of the close of business on July 18, 2013, and do not reflect increases or decreases in value between such date and the date of this proxy statement. |
(2) | Depending on when consummation of the merger occurs, the Companys directors and executive officers may defer additional amounts under the Companys Deferred Compensation Plan and may or may not elect to invest such amounts in Company common stock. The table above does not include any such deferrals which may occur following the date of this proxy statement. |
Change-in-Control Agreements
The Company is a party to change-in-control agreements with each of its executive officers, which provide for certain payments and benefits in the event that an executive officers employment is terminated by the Company without cause (as defined in the change-in-control agreement) or by the executive officer for good reason (as defined in the change-in-control agreement and described below) in anticipation of or within the two-year period following a change-in-control of the Company (as defined in the change-in-control agreement and which would include, among other things, the adoption of the merger agreement by the Companys stockholders) (such termination, a Qualifying Termination).
After giving effect to the amendments described in the section below entitled New Management Agreements, in the event of a Qualifying Termination, the executive officer is entitled to:
| accrued obligations, which include, among other things, a lump-sum payment in an amount equal to a prorated portion of the annual bonus and any long-term incentive bonus paid, guaranteed to be paid or payable to the executive officer but for any deferral for the then-most-recently-completed fiscal year during the executives employment with the Company, based on the relative portion of the then-current year during which the executive officer was employed by the Company and its subsidiaries; |
60
| a lump-sum payment in an amount equal to two times (1.33 times in the case of Ms. Richard) the sum of (i) the executive officers then-current annual base salary, plus (ii) the greater of (x) the average of the annualized bonuses paid or payable to the executive officer, but for any deferral, in respect of the previous three years (or lesser number of years during which the executive officer was employed by the Company and its subsidiaries) and (y) the executive officers then-current annual bonus target; |
| any guaranteed or targeted awards under the Companys long-term incentive plans that would have been payable within two years of the executive officers termination; |
| an amount equal to any unvested portion of any contribution previously made by the Company to the executive officers 401(k) or other similar savings or individual account plan, plus a gross-up payment to make the executive officer whole for any income taxes imposed on such payment; |
| up to $25,000 for executive outplacement services; |
| a cash payment (grossed up for taxes) equal to the cost of providing continued welfare benefits coverage for the executive officer and, where applicable, the executive officers family for up to two years; |
| accelerated vesting of outstanding equity-based awards; and |
| reimbursement of certain relocation expenses if the executive officer relocated at the request of the Company in the then-current or immediately preceding calendar year. |
The lump-sum payments described above will be made within 30 days following the date of termination, or to the extent necessary to comply with Section 409A, the earlier of six months and one day following termination of employment and the executive officers death. For purposes of the Companys change-in-control agreements, good reason is generally defined to mean any of the following: (i) a substantial diminution of the executive officers position, authority, duties or responsibilities (or, for certain executive officers, a substantial diminution of the executive officers authority, duties or responsibilities, measured in the aggregate, when compared to the position the executive officer held immediately prior to the change-in-control, provided that changes only to the executive officers reporting relationships, level of reporting relationships, and/or title will not alone establish good reason) as contemplated under the change-in-control agreement, excluding non-substantial changes in title or office, and excluding any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of written notice thereof; (ii) any failure by the Company to comply with the provisions of the change-in-control agreement governing the compensation and benefits to be provided to the executive officer following the change-in-control, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof; (iii) the Company requiring the executive officer to be based at any office or location other than the location where the executive officer was employed immediately prior to the change-in-control or any office or location less than 50 miles from such location, or requiring the executive officer to travel away from his or her office in the course of discharging responsibilities or duties which is significantly more frequent (in terms of either consecutive days or aggregate days in any calendar year) than was required prior to the change-in-control; (iv) any purported termination by the Company of the executive officers employment otherwise than as expressly permitted by the change-in-control agreement; or (v) any failure by any successor to the Company to expressly assume and agree to perform under the change-in-control agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. With respect to certain executive officers, a good faith determination by the executive officer that any of the foregoing events has occurred will be conclusive.
For purposes of the Companys change-in-control agreements, cause is generally defined to mean any of the following events: (i) repeated violations by the executive officer of the executive officers material responsibilities and material duties under the change-in-control agreement which are demonstrably willful and deliberate on the executive officers part and which are not remedied in a reasonable period of time after receipt
61
of written notice from the Company; (ii) commission of an intentional act of fraud, embezzlement or theft by the executive officer in connection with the executive officers duties or in the course of the executive officers employment with the Company or its affiliated companies; (iii) violation of any law, regulation, or rule applicable to the Companys business or reputation, including, without limitation, securities laws; (iv) causing intentional wrongful damage to property of the Company or its affiliated companies; (v) intentionally and wrongfully disclosing secret processes or confidential information of the Company or its affiliated companies; (vi) conviction of, or plea of nolo contendere to, a felony, which conviction or plea materially harms the business or reputation of the Company; or (vii) participating, without the Companys express written consent, in the management of any business enterprise which engages in substantial and direct competition with the Company or its affiliated companies, provided that in the case of clauses (i) through (vi), any such act or omission will have been materially harmful to the Company or its affiliated entities.
Additional Payment
Pursuant to their respective change-in-control agreements, each of Messrs. Lucier, Stevenson, Hoffmeister and Cottingham and Dr. Leddy is entitled to receive an additional payment in respect of any golden parachute excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, in order to adjust, on an after-tax basis, for the amount of any such tax. Based on the Companys analysis as of the date of this proxy statement, in the event that the merger is consummated on January 13, 2014, and, as of such date, the executive officer experiences a Qualifying Termination under his or her change-in-control agreement, it is anticipated that Mr. Stevenson is the only executive officer for whom such payment may be required.
Retention Bonus Program
Pursuant to the merger agreement, the Company may, between the date of the merger agreement and the effective time of the merger, establish a retention bonus program with an aggregate maximum award pool of up to $30,000,000 for the benefit of the employees of the Company and its subsidiaries, excluding the Companys executive officers (other than Ms. Richard). The Company entered into a transaction bonus agreement with Ms. Richard in the amount of $258,750 that is payable upon the consummation of the merger, subject to Ms. Richards continued employment with the Company and its subsidiaries through the consummation of the merger under the retention program. In the event Ms. Richard is terminated by the Company without cause, as defined in her RSU equity award agreements, prior to the date her transaction bonus award vests and becomes payable in full in accordance with its terms, Ms. Richards transaction bonus award will be paid to her within 30 days following the date of such termination.
2013 Annual Bonuses
Pursuant to the merger agreement, the Company may, between the date of the merger agreement and the effective time of the merger, provide that, with respect to the Life Technologies 2010 Incentive Compensation Plan (2010 ICP), (a) in the event that the effective time of the merger does not occur on or prior to the normal determination of performance by the C&OD Committee in respect of the 2013 performance period, annual bonuses in respect of the 2013 performance period under the 2010 ICP will be paid to all participants in the 2010 ICP who are employed by the Company and its subsidiaries as of December 31, 2013, in accordance with the terms of the 2010 ICP in the ordinary course of business and consistent with past practice, and (b) in the event the effective time of the merger occurs prior to the normal determination of performance by the C&OD Committee in respect of the 2013 performance period, annual bonuses in respect of the 2013 performance period under the 2010 ICP will be deemed to have been earned at the greater of target or actual Company performance under the 2010 ICP for the 2013 performance period relative to the performance goals approved by the C&OD Committee in February 2013, determined in the ordinary course of business and consistent with past practice, for each participant who is employed by the Company and its subsidiaries as of December 31, 2013. Messrs. Luciers, Stevensons, Andrews, Hoffmeisters, and Cottinghams, Dr. Leddys and Ms. Richards target bonuses under the 2010 ICP in respect of the 2013 performance period are $1,950,000, $775,000, $560,000, $470,250, $394,500, $390,000 and $172,500, respectively.
62
New Management Arrangements
As of the date of this proxy statement, neither the Company nor Thermo Fisher has entered into any new employment agreements with the Companys executive officers in connection with the merger. The Company has, however, amended its change-in-control agreements to (i) clarify that the lump-sum pro-rata bonus payable pursuant to the change-in-control agreements will be calculated with reference to the most-recently-completed fiscal year during the executives employment with the Company, (ii) provide for a cash payout (grossed up for taxes) in lieu of up to two years of continuation of medical and dental benefits and (iii) clarify that RSUs held by certain employees will vest upon a Qualifying Termination. In addition, the Company has amended its change-in-control agreement with Ms. Richard to increase the severance multiple thereunder from one to 1.33.
Post-Closing Arrangements with Thermo Fisher
The merger agreement states that Thermo Fisher intends to nominate at least one member of the Board, selected by Thermo Fisher, for appointment to Thermo Fishers board of directors at the effective time of the merger. As of the date of this proxy statement, Thermo Fisher has not taken any action to nominate a member of the Board for appointment to Thermo Fishers board of directors. It is expected that Mr. Stevenson will have a significant leadership role at Thermo Fisher following the closing of the merger. Thermo Fisher anticipates entering into an employment arrangement with Mr. Stevenson relating to his post-closing employment with Thermo Fisher; however, the terms of such arrangement have not been determined as of the date of this proxy statement.
Director and Officer Indemnification and Insurance
Under the Companys Bylaws, the Company is required to indemnify its current and former directors, officers, employees and agents, in each case to the fullest extent authorized by the DGCL, against all expenses, liability and losses reasonably incurred or suffered in connection with such persons being made a party to or otherwise involved in any action or proceeding by reason of their status or service at the Company. The Bylaws also provide that, subject to certain exceptions, the Company will advance expenses incurred by these indemnified persons in advance of the final disposition of any action or proceeding upon delivery to the Company of an undertaking, by or on behalf of such indemnified person, to repay all amounts so advanced if it should be determined ultimately that such indemnified person is not entitled to be indemnified under the Bylaws. In addition, the Company has entered into indemnification agreements with each of its directors and executive officers containing provisions that may require the Company, among other things, to indemnify those officers and directors against liabilities that may arise by reason of their status or service as officers or directors and to advance to the officers and directors expenses that they expect to incur as a result of any proceeding against them as to which they could be indemnified.
The Company also carries insurance policies insuring its directors and officers against certain liabilities that they may incur in their capacity as directors and officers.
Under the merger agreement, Thermo Fisher has agreed to assume all obligations of the Company and its subsidiaries to each individual who is or was a director or officer of the Company or any of its subsidiaries in respect of indemnification and exculpation as provided in the Companys organizational documents and indemnification agreements in effect as of the date of the merger agreement, and to indemnify the Companys current and former officers and directors from and after the consummation of the merger in connection with matters arising out of such persons service with the Company or its subsidiaries or acts or omissions (in such persons capacity as an officer or director) occurring prior to the closing, to the fullest extent permitted under applicable Law. In addition, Thermo Fisher has agreed that, for a period of six years following the effective time of the merger, the surviving corporation will maintain in effect the Companys current directors and officers liability insurance and fiduciary liability insurance policies with respect to pre-closing matters or, in the alternative, the Company may (or, if requested by Thermo Fisher, will) purchase a six-year prepaid tail policy with substantially equivalent coverage, subject in each case to limitations on the costs of such policies.
63
For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification and liability insurance, please see the section of this proxy statement entitled The Merger AgreementDirector and Officer Indemnification and Insurance beginning on page 87.
Quantification of Payments and Benefits
The following tables show the amounts of payments and benefits that each executive officer of the Company would receive in connection with the merger, assuming the consummation of the merger occurred on January 13, 2014 and the employment of the executive officer was terminated by the surviving corporation without cause on such date. The amounts shown reflect the terms of the executive officers compensation arrangements with the Company as in effect on the date of this proxy statement, after giving effect to the amendments described above in the section entitled New Management Arrangements.
The first table below, entitled Potential Change-in-Control Payments to Named Executive Officers, along with its footnotes, shows the compensation payable to the Companys chief executive officer, chief financial officer and three other most highly compensated executive officers, as determined for purposes of its most recent annual proxy statement (each, a named executive officer), and is subject to an advisory vote of the Companys stockholders, as described below in the section entitled Non-Binding Compensation Proposal.
The second table below, entitled Potential Change-in-Control Payments to Other Executive Officers, along with its footnotes, shows the compensation payable to the Companys other executive officers and is not subject to an advisory vote.
Potential Change-in-Control Payments to Named Executive Officers
Name |
Cash ($) (1) | Equity ($) (7) |
Pension/ NQDC ($)(8) |
Perquisites/ Benefits ($)(9) |
Tax Reimbursement (10) |
Other ($)(10) |
Total ($) | |||||||||||||||||||
Gregory T. Lucier | $6,569,452 (2) | $26,248,673 | $588,016 | $200,277 | - | $4,500,000 | $38,106,418 | |||||||||||||||||||
Mark P. Stevenson | $3,127,603 (3) | $11,817,550 | $490,310 | $170,567 | $4,397,411 | $2,000,000 | $22,003,441 | |||||||||||||||||||
Ronald A. Andrews | $2,371,066 (4) | $5,440,054 | - | $170,421 | - | $850,000 | $8,831,541 | |||||||||||||||||||
David F. Hoffmeister | $2,211,249 (5) | $6,072,418 | $281,925 | $143,837 | - | $1,000,000 | $9,709,429 | |||||||||||||||||||
Peter M. Leddy, Ph.D. |
$1,855,051 (6) | $4,008,642 | $168,711 | $170,681 | - | $600,000 | $6,803,085 |
(1) | As described above, these payments are equal to (i) a prorated portion of the annual bonus and any long-term incentive bonus paid, guaranteed to be paid or payable to the executive officer but for any deferral for the then-most-recently-completed fiscal year during the executives employment with the Company, based on the relative portion of the then-current year during which the executive officer was employed by the Company and its subsidiaries, and (ii) two times the sum of the named executive officers annual base salary in effect as of the date the merger is consummated and the greater of (A) the average of the annualized bonuses paid or payable to the named executive officer, but for any deferral, in respect of the three years prior to the year in which the merger is consummated (or such lesser number of years during which the named executive officer was employed by the Company and its subsidiaries) and (B) the named executive officers target annual bonus as in effect as of the date of the consummation of the merger. The amount in respect to Mr. Andrews also reflects his unvested 401(k) Company make-up match on an after-tax basis. As of the date of this proxy statement, none of the named executive officers are entitled to be paid any long-term incentive bonus with respect to any past or future fiscal year of the Company. The amounts |
64
shown in this column will be payable within 30 days following the date of termination, or to the extent necessary to comply with Section 409A, the earlier of six months and one day following termination of employment and the named executive officers death. These payments are double-trigger, as they will only be payable in the event of a termination of employment by the Company without cause, or by the named executive officer for good reason, within the two-year period following the adoption of the merger agreement by the Companys stockholders, as described above. |
Pursuant to their respective change-in-control agreements, each of Messrs. Lucier, Stevenson, and Hoffmeister and Dr. Leddy is entitled to receive a payment in respect of any golden parachute excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, in order to adjust, on an after-tax basis, for the amount of any such tax. Based on the Companys analysis as of the date of this proxy statement, in the event that the merger is consummated on January 13, 2014, and, as of such date, the named executive officer experiences a Qualifying Termination under his or her change-in-control agreement, it is anticipated that such payment will only be required for Mr. Stevenson.
(2) | Represents 13/365ths, or approximately 3.6% (the pro-rata fraction), of Mr. Luciers 2013 target annual bonus of $1,950,000, plus two times Mr. Luciers current annual base salary of $1,300,000, plus two times Mr. Luciers 2013 target annual bonus of $1,950,000. |
(3) | Represents the pro-rata fraction of Mr. Stevensons 2013 target annual bonus of $775,000, plus two times Mr. Stevensons current annual base salary of $775,000, plus two times Mr. Stevensons 2013 target annual bonus of $775,000. |
(4) | Represents the pro-rata fraction of Mr. Andrews 2013 target annual bonus of $560,000, plus two times Mr. Andrews current annual base salary of $560,000, plus two times the average of the annualized bonuses paid to Mr. Andrews in respect of the two years prior to the consummation of the merger equal to $602,709. |
(5) | Represents the pro-rata fraction of Mr. Hoffmeisters 2013 target annual bonus of $470,250, plus two times Mr. Hoffmeisters current annual base salary of $627,000, plus two times Mr. Hoffmeisters 2013 target annual bonus of $470,250. |
(6) | Represents the pro-rata fraction of Dr. Leddys 2013 target annual bonus of $394,500, plus two times Dr. Leddys current annual base salary of $526,000, plus two times Dr. Leddys 2013 target annual bonus of $394,500. |
(7) | As described above, the amounts shown in this column represent the accelerated vesting and cash-out of the named executive officers unvested Options, Pre-2015 Vesting RSUs, PRSUs and the NQDC RSUs granted in 2013 to Mr. Hoffmeister, which, in each case, are single-trigger in that such vesting and cash-out will occur upon consummation of the merger, whether or not such named executive officers employment is terminated. The following table shows the amounts in this column attributable to the named executive officers unvested Options, Pre-2015 Vesting RSUs, PRSUs and the NQDC RSUs granted in 2013 to Mr. Hoffmeister (taking into account any such awards that are expected to vest in accordance with their terms between the date of this proxy statement and January 13, 2014): |
Name |
Number of Unvested Options (1) |
Value from Unvested Options ($)(1) |
Number of Pre-2015 Vesting RSUs (1) |
Value from Pre-2015 Vesting RSUs ($)(1) |
Number of PRSUs (1)(2) |
Value from PRSUs ($)(1)(2) |
Number of NQDC RSUs (1)(3) |
Value from NQDC RSUs ($)(1)(3) | ||||||||
Gregory T. Lucier |
180,872 | $4,711,793 | 77,954 | $5,924,504 | 69,626 | $5,291,576 | - | - | ||||||||
Mark P. Stevenson |
75,804 | $1,988,242 | 36,793 | $2,796,268 | 30,170 | $2,292,920 | - | - | ||||||||
Ronald A. Andrews |
49,505 | $1,338,410 | 10,898 | $828,248 | 17,018 | $1,293,368 | - | - | ||||||||
David F. Hoffmeister |
43,573 | $1,128,162 | - | - | 15,472 | $1,175,872 | 15,487 | $1,177,012 | ||||||||
Peter M. Leddy, Ph.D. |
26,143 | $676,878 | 13,423 | $1,020,148 | 9,282 | $705,432 | - | - |
(1) | Depending on when consummation of the merger occurs, certain awards shown as unvested in the table may become vested in accordance with their terms without regard to the merger. The table above does not include any grants of awards which may occur following the date of this proxy statement. |
65
(2) | The number and value of the PRSUs shown in this table assume the PRSUs vest at 200% of the target PRSU award level pursuant to the terms of the applicable equity award agreement, assuming maximum actual performance with respect to 2013. |
(3) | The RSUs granted to the named executive officers in 2013 provide that, in the event the named executive officer is eligible for retirement at the time such awards are granted or will become eligible for retirement at any time during the vesting period for such awards, then any such awards that are unvested on the date of the consummation of the merger will become vested upon the consummation of the merger. Other than Mr. Hoffmeister, none of the named executive officers is or will become eligible for retirement during the vesting period of the RSUs granted in 2013. |
As described above, the amounts shown in this column also represent the accelerated vesting of the named executive officers Post-2014 Vesting RSUs and the NQDC RSUs granted prior to 2013 to Mr. Hoffmeister. These payments are double-trigger as they will be payable in the event of either (a) continued employment with the surviving corporation through the date specified in the applicable equity award agreement, (b) a termination of the named executive officers employment by the surviving corporation without cause or by the named executive officer for good reason following the consummation of the merger or (c) with respect to the NQDC RSUs granted prior to 2013 to Mr. Hoffmeister, a termination of Mr. Hoffmeisters employment as a result of retirement following the consummation of the merger. All payments in respect of the named executive officers Post-2014 Vesting RSUs and the NQDC RSUs granted prior to 2013 to Mr. Hoffmeister will be made in accordance with the terms of the applicable equity award agreement, unless earlier accelerated pursuant to certain qualifying terminations of employment. The following table shows the amounts in this column attributable to such RSUs:
Name |
Number of Post- 2014 Vesting RSUs (1) |
Value from Post- 2014 Vesting RSUs ($) (1) |
Number of NQDC RSUs (1)(2) |
Value from NQDC RSUs ($)(1)(2) | ||||
Gregory T. Lucier |
135,800 | $10,320,800 | - | - | ||||
Mark P. Stevenson |
62,370 | $4,740,120 | - | - | ||||
Ronald A. Andrews |
26,053 | $1,980,028 | - | - | ||||
David F. Hoffmeister |
- | - | 34,097 | $2,591,372 | ||||
Peter M. Leddy, Ph.D. |
21,134 | $1,606,184 | - | - |
(1) | Depending on when consummation of the merger occurs, certain Post-2014 Vesting RSUs shown as unvested in the table above may become vested in accordance with their terms without regard to the merger. The table above does not include any grants of RSUs which may occur following the date of this proxy statement. |
(2) | The RSUs granted to the named executive officers prior to 2013 provide for accelerated vesting in the event of a termination of the named executive officers employment as a result of retirement following the consummation of the merger. Other than Mr. Hoffmeister, none of the named executive officers is or will become eligible for retirement during the vesting period of the RSUs granted prior to 2013. |
(8) | As described above, the amounts shown in this column represent the accelerated vesting and cash-out of the named executive officers unvested Share Equivalent Units under the terms of the merger agreement and the Companys Deferred Compensation Plan, which are single-trigger in that such vesting and cash-out will occur upon consummation of the merger, whether or not such named executive officers employment is terminated. |
(9) | The amounts shown in this column represent $25,000 of executive outplacement services, the cost of two years of executive financial planning services consistent with past practice plus a cash payment (grossed up for taxes) equal to the cost of providing continued welfare benefits coverage for the named executive officer and, where applicable, the named executive officers family for two years, as provided under the named executive officers change-in-control agreements, after giving effect to the amendments described above in the section entitled New Management Arrangements. These benefits are double-trigger, as they will only be provided in the event of a termination of employment by the Company without cause, or by the named executive officer for good reason within the two-year period following the adoption of the merger agreement by the Companys stockholders, as described above. The amounts shown in this column are based in part on the welfare benefit levels in effect on July 18, 2013 and estimated benefit levels and |
66
associated costs of providing continued coverage during the two year period following consummation of the merger; therefore, if welfare benefit levels are increased after such date, the value of the benefits provided to the named executive officers may be greater than those shown in the table above. |
(10) | As described above, the amounts shown in this column represent the accelerated vesting and payments of the named executive officers outstanding cash-based performance units at the target award level, which are single-trigger in that such vesting and payment will occur upon consummation of the merger, whether or not such named executive officers employment is terminated. If the Companys performance exceeds certain levels during 2013, actual payments to the named executive officers may be greater than those shown in the table above. |
Potential Change-in-Control Payments to Other Executive Officers
Name |
Cash ($) (1) | Equity ($) (4) | Pension/ NQDC ($)(5) |
Perquisites/ Benefits($) (6) |
Other (7) | Total ($) | ||||||||||||||||
John A. Cottingham |
$1,833,890 (2) | $3,521,606 | $43,240 | $135,398 | $600,000 | $6,134,134 | ||||||||||||||||
Kelli A. Richard |
$695,547 (3) | $1,821,491 | - | $122,203 | $558,750 | $3,197,991 |
(1) | As described above, these payments are equal to (i) a prorated portion of the annual bonus and any long-term incentive bonus paid, guaranteed to be paid or payable to the executive officer but for any deferral for the then-most-recently-completed fiscal year during the executives employment with the Company, based on the relative portion of the then-current year during which the executive officer was employed by the Company and its subsidiaries, and (ii) two times (in the case of Mr. Cottingham) or 1.33 times (in the case of Ms. Richard) the sum of the executive officers annual base salary in effect as of the date the merger is consummated and the greater of (A) the average of the annualized bonuses paid or payable to the executive officer, but for any deferral, in respect of the three years prior to the year in which the merger is consummated (or such lesser number of years during which the executive officer was employed by the Company and its subsidiaries) and (B) the executive officers target annual bonus as in effect as of the date of the consummation of the merger. As of the date of this proxy statement, none of the executive officers is entitled to be paid any long-term incentive bonus with respect to any past or future fiscal year of the Company. The amounts shown in this column will be payable within 30 days following the date of termination, or to the extent necessary to comply with Section 409A, the earlier of six months and one day following termination of employment and the executive officers death. These payments are double-trigger, as they will only be payable in the event of a termination of employment by the Company without cause, or by the executive officer for good reason within the two-year period following the adoption of the merger agreement by the Companys stockholders, as described above. Pursuant to his change-in-control agreement, Mr. Cottingham is entitled to receive a payment in respect of any golden parachute excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, in order to adjust, on an after-tax basis, for the amount of any such tax. Based on the Companys analysis as of the date of this proxy statement, in the event that the merger is consummated on January 13, 2014, and, as of such date, Mr. Cottingham experiences a Qualifying Termination under his change-in-control agreement, it is anticipated that no such payment will be required. |
(2) | Represents the pro-rata fraction of Mr. Cottinghams 2013 target annual bonus of $390,000, plus two times Mr. Cottinghams current annual base salary of $520,000, plus two times Mr. Cottinghams 2013 target annual bonus of $390,000. |
(3) | Represents the pro-rata fraction of Ms. Richards 2013 target annual bonus of $172,500, plus 1.33 times Ms. Richards current annual base salary of $345,000, plus 1.33 times the average of the annualized |
67
bonuses paid to Ms. Richard in respect of the three years prior to the consummation of the merger equal to $173,349. |
(4) | As described above, the amounts shown in this column represent the accelerated vesting and cash-out of the executive officers unvested Options, Pre-2015 Vesting RSUs, PRSUs and the NQDC RSUs granted in 2013 to Mr. Cottingham, which, in each case, are single-trigger in that such vesting and cash-out will occur upon consummation of the merger, whether or not such executive officers employment is terminated. The following table, including its footnotes, shows the amounts in this column attributable to unvested Options, Pre-2015 Vesting RSUs, PRSUs and the NQDC RSUs granted in 2013 to Mr. Cottingham (taking into account any such awards that are expected to vest in accordance with their terms between the date of this proxy statement and January 13, 2014): |
Name |
Number of Unvested Options (1) |
Value from Unvested Options ($)(1) |
Number of Pre-2015 Vesting RSUs (1) |
Value from Pre-2015 Vesting RSUs ($) (1) |
Number of PRSUs (1)(2) |
Value from PRSUs ($)(1)(2) |
Number of NQDC RSUs (1)(3) |
Value from NQDC RSUs ($)(1)(3) | ||||||||
John A. Cottingham |
21,072 | $555,174 | - | - | 9,282 | $705,432 | 9,292 | $706,192 | ||||||||
Kelli A. Richard |
13,071 | $338,427 | 5,510 | $418,760 | 4,640 | $352,640 | - | - |
(1) | Depending on when consummation of the merger occurs, certain awards shown as unvested in the table may become vested in accordance with their terms without regard to the merger. The table above does not include any grants of awards which may occur following the date of this proxy statement. |
(2) | The number and value of the PRSUs shown in this table assume the PRSUs vest at 200% of the target PRSU award level pursuant to the terms of the applicable equity award agreement, assuming maximum actual performance with respect to 2013. |
(3) | The RSUs granted to the executive officers in 2013 provide that, in the event the executive officer is eligible for retirement at the time such awards are granted or will become eligible for retirement at any time during the vesting period for such awards, then any such awards that are unvested on the date of the consummation of the merger will become vested upon the consummation of the merger. Mr. Cottingham will become eligible for retirement during the vesting period of the RSUs granted in 2013, and Ms. Richard is not and will not become eligible for retirement during the vesting period of the RSUs granted in 2013. |
As described above, the amounts shown in this column also represent the accelerated vesting of the executive officers Post-2014 Vesting RSUs and the NQDC RSUs granted prior to 2013 to Mr. Cottingham. These payments are double-trigger as they will be payable in the event of either (a) continued employment with the surviving corporation through the date specified in the applicable equity award agreement, (b) a termination of the executive officers employment by the surviving corporation without cause or by the executive officer for good reason following the consummation of the merger or (c) with respect to the NQDC RSUs granted prior to 2013 to Mr. Cottingham, a termination of Mr. Cottinghams employment as a result of retirement following the consummation of the merger. All payments in respect of the executive officers Post-2014 Vesting RSUs and the NQDC RSUs granted prior to 2013 to Mr. Cottingham will be made in accordance with the terms of the applicable equity award agreement, unless earlier accelerated pursuant to certain qualifying terminations of employment. The following table shows the amounts in this column attributable to such RSUs:
Name |
Number of Post- 2014 Vesting RSUs (1) |
Value from Post- 2014 Vesting RSUs ($) (1) |
Number of Certain NQDC RSUs (1)(2) |
Value from Certain NQDC RSUs ($)(1)(2) | ||||
John A. Cottingham |
- | - | 20,458 | $1,554,808 | ||||
Kelli A. Richard |
9,364 | $711,664 | - | - |
(1) | Depending on when consummation of the merger occurs, certain Post-2014 Vesting RSUs shown as unvested in the table above may become vested in accordance with their terms without regard to the merger. The table above does not include any grants of RSUs which may occur following the date of this proxy statement. |
(2) | The RSUs granted to the executive officers prior to 2013 provide for accelerated vesting in the event of a termination of the executive officers employment as a result of retirement following the consummation of the merger. Mr. Cottingham will become |
68
eligible for retirement during the vesting period of the RSUs granted prior to 2013, and Ms. Richard is not and will not become eligible for retirement during the vesting period of the RSUs granted prior to 2013. |
(5) | As described above, the amounts shown in this column represent the accelerated vesting and cash-out of the executive officers unvested Share Equivalent Units, which are single-trigger in that such vesting and cash-out will occur upon consummation of the merger, whether or not such executive officers employment is terminated. |
(6) | The amounts shown in this column represent $25,000 of executive outplacement services, the cost of two years of executive financial planning services consistent with past practice plus a cash payment (grossed up for taxes) equal to the cost of providing continued welfare benefits coverage for the executive officer and, where applicable, the executive officers family for two years, as provided under the executive officers change-in-control agreements, after giving effect to the amendments described above in the section entitled New Management Arrangements. These benefits are double-trigger, as they will only be provided in the event of a termination of employment by the Company without cause, or by the executive officer for good reason within the two-year period following the adoption of the merger agreement by the Companys stockholders, as described above. The amounts shown in this column are based in part on the welfare benefit levels in effect on July 18, 2013 and estimated benefit levels and associated costs of providing continued coverage during the two year period following consummation of the merger; therefore, if welfare benefit levels are increased after such date, the value of the benefits provided to the executive officers may be greater than those shown in the table above. |
(7) | As described above, the amounts shown in this column represent the accelerated vesting and payments of the executive officers outstanding cash-based performance units at the target award level, which are single-trigger in that such vesting and payment will occur upon consummation of the merger, whether or not such executive officers employment is terminated. If the Companys performance exceeds certain levels during 2013, actual payments to the executive officers may be greater than those shown in the table above. |
As described above, the amounts shown in this column also represent a $258,750 transaction bonus payment to Ms. Richard pursuant to a retention bonus program established by the Company. Ms. Richards transaction bonus is single-trigger, as it will vest and be payable in cash upon the consummation of the merger, or earlier in the event Ms. Richards employment is terminated by the Company without cause.
Non-Binding Compensation Proposal
In accordance with Section 14A of the Exchange Act, the Company is providing its stockholders with the opportunity to cast an advisory vote on the compensation that may be payable to its named executive officers in connection with the merger. As required by those rules, the Company is asking its stockholders to vote on the adoption of the following resolution:
RESOLVED, that the compensation that may be paid or become payable to the Companys named executive officers in connection with the merger, as disclosed in the table entitled Potential Change-in-Control Payments to Named Executive Officers, including the associated narrative discussion, and the agreements or understandings pursuant to which such compensation may be paid or become payable, are hereby APPROVED.
The Board unanimously recommends a vote FOR the approval of the non-binding compensation proposal.
The vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, you may vote to approve the merger and vote not to approve the executive compensation and vice versa. Because the vote is advisory in nature only, it will not be binding on the Company or the Board. Accordingly, because the Company is contractually obligated to pay the compensation, such compensation will be paid or become payable, subject only to the conditions applicable thereto, if the merger is consummated and regardless of the outcome of the advisory vote.
69
The approval of the non-binding compensation proposal requires the approval by a majority of the votes cast affirmatively or negatively on that proposal at the special meeting. Assuming a quorum is present at the special meeting, abstentions, failures to vote and broker non-votes will have no effect on the outcome of the non-binding compensation proposal.
Material U.S. Federal Income Tax Consequences of the Merger
The following discussion summarizes the material U.S. federal income tax consequences of the merger to holders of Company common stock. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the U.S. Treasury Regulations promulgated thereunder and judicial and administrative rulings, all as in effect as of the date of this proxy statement and all of which are subject to change or varying interpretation, possibly with retroactive effect. Any such changes could affect the accuracy of the statements and conclusions set forth herein.
This discussion assumes that holders of Company common stock hold their shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a holder of Company common stock in light of such holders particular circumstances, nor does it discuss the special considerations applicable to holders of Company common stock subject to special treatment under the U.S. federal income tax laws, such as, for example, financial institutions or broker-dealers, mutual funds, partnerships or other pass-through entities and their partners or members, tax-exempt organizations, insurance companies, dealers in securities or foreign currencies, traders in securities who elect mark-to-market method of accounting, controlled foreign corporations, passive foreign investment companies, U.S. expatriates, holders who acquired their Company common stock through the exercise of options or otherwise as compensation, holders who hold their Company common stock as part of a hedge, straddle, constructive sale or conversion transaction, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, holders who exercise appraisal rights, and holders who own or have owned (directly, indirectly or constructively) five percent or more of the Companys stock (by vote or value). This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any aspect of foreign, state, local, alternative minimum, estate, gift or other tax law that may be applicable to a holder.
We intend this discussion to provide only a general summary of the material U.S. federal income tax consequences of the merger to holders of Company common stock. We do not intend it to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The U.S. federal income tax laws are complex and subject to varying interpretation. Accordingly, the Internal Revenue Service may not agree with the tax consequences described in this proxy statement.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Company common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and activities of the partnership. If you are a partner of a partnership holding Company common stock, you should consult your own tax advisor.
All holders should consult their own tax advisor to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the receipt of cash in exchange for shares of Company common stock pursuant to the merger.
For purposes of this discussion, the term U.S. holder means a beneficial owner of Company common stock that is, for U.S. federal income tax purposes:
| an individual citizen or resident of the United States; |
| a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
70
| a trust if (1) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or |
| an estate the income of which is subject to U.S. federal income tax regardless of its source. |
A non-U.S. holder is a beneficial owner (other than a partnership) of Company common stock that is not a U.S. holder.
U.S. Holders
The conversion of shares of Company common stock into cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received pursuant to the merger and such U.S. holders adjusted tax basis in the shares converted into cash pursuant to the merger. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the holders holding period for such shares exceeds one year as of the date of the merger. Long-term capital gains for certain non-corporate U.S. holders, including individuals, are generally eligible for a reduced rate of federal income taxation. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of Company common stock at different times or at different prices, such U.S. holder must determine its tax basis, holding period, and gain or loss separately with respect to each block of Company common stock.
A U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding (at a rate of 28%) with respect to the cash received pursuant to the merger, unless such holder properly establishes an exemption or provides its correct tax identification number and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules can be refunded or credited against a payees U.S. federal income tax liability, if any, provided that such U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.
Non-U.S. Holders
Any gain recognized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:
| the gain is effectively connected with a U.S. trade or business of such non-U.S. holder (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment or, in the case of an individual, a fixed base in the United States maintained by such non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign corporation, such corporation may be subject to branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty); or |
| the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax on the non-U.S. holders net gain realized in the merger, which may be offset by U.S. source capital losses of the non-U.S. holder, if any. |
A non-U.S. holder will be subject to information reporting and, in certain circumstances, backup withholding will apply with respect to the cash received by such holder pursuant to the merger, unless such non-U.S. holder certifies under penalties of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the holder is a United States person as defined under the Code) or such holder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax and
71
any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holders U.S. federal income tax liability, if any.
The Company has not paid dividends in the last two years. Under the terms of the merger agreement, the Company is prohibited from establishing a record date for, declaring, setting aside for payment or paying any dividends on, or making any other distribution in respect of, any shares of our capital stock or other equity or voting interests without obtaining Thermo Fishers written consent (which may not be unreasonably withheld, delayed or conditioned). Accordingly, we do not expect to declare or pay any dividends prior to the consummation of the merger.
Regulatory Approvals Required for the Merger
Under the HSR Act, and the related rules and regulations issued by the Federal Trade Commission (the FTC), certain transactions, including the merger, may not be consummated until notifications have been given and specified information and documentary material have been furnished to the FTC and the Antitrust Division of the Department of Justice (the DOJ) and the applicable waiting periods have expired or terminated.
The Company and Thermo Fisher are also required to make filings with, and obtain clearance from, certain foreign antitrust authorities in connection with the merger, including antitrust authorities in the European Union and the Peoples Republic of China.
The Company and Thermo Fisher filed their respective notification and report forms under the HSR Act with the DOJ and the FTC in early May 2013, and on June 7, 2013, the Company and Thermo Fisher received a request for additional information and documentary material, often referred to as a second request, from the FTC in connection with the FTCs regulatory review of the merger. The Company and Thermo Fisher have made or are preparing to make the other filings and notifications required under applicable antitrust laws.
At any time before or after the effective time of the merger, the DOJ, the FTC, antitrust authorities in foreign jurisdictions or U.S. state attorneys general could take action under applicable antitrust laws, including seeking to enjoin the consummation of the merger, conditionally approving the merger upon the divestiture of assets of the Company or Thermo Fisher, subjecting the consummation of the merger to regulatory conditions or seeking other remedies. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.
Under the merger agreement, the respective obligations of the Company, Thermo Fisher and Merger Sub to consummate the merger are subject to, among other things, the expiration of the waiting period (and any extension thereof) or the granting of early termination applicable to the consummation of the merger under the HSR Act, and the receipt of antitrust approvals in certain other jurisdictions. In the event that the merger has not closed by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), then the deadline for completing the merger will be automatically extended to July 14, 2014, unless an earlier date is agreed in writing by the Company and Thermo Fisher, and if this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price payable per share in the merger will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date. For a description of Thermo Fishers and the Companys respective obligations under the merger agreement with respect to regulatory approvals, please see the section of this proxy statement entitled The Merger AgreementEfforts to Obtain Regulatory Approvals beginning on page 86.
We currently expect to obtain all antitrust and other regulatory approvals that are required for the consummation of the merger by early in 2014; however, we cannot guarantee when any such approvals will be obtained, or that they will be obtained at all.
72
Delisting and Deregistration of the Companys Common Stock
If the merger is completed, the shares of Company common stock will be delisted from NASDAQ and deregistered under the Exchange Act, and shares of Company common stock will no longer be publicly traded.
Litigation Relating to the Merger
Since the announcement of the merger on April 15, 2013, the Company and certain of its current and former directors have been named as defendants in eight substantively similar putative class action lawsuits brought by and on behalf of stockholders of the Company.
The following four actions brought by and on behalf of stockholders of the Company are pending in the Delaware Court of Chancery:
| David Shaev Profit Sharing Account v. Life Technologies Corporation, et al., C.A. No. 8488-VCL, filed on April 18, 2013; |
| Smilow v. Life Technologies Corporation, et al., Case No. 8504-VCL, filed on April 24, 2013; |
| Cavatore v. Life Technologies Corporation, et al., Case No. 8512-VCL, filed on April 30, 2013; and |
| Gordon v. Life Technologies Corporation, et al., Case No. 8517-VCL, filed on May 1, 2013. |
On May 21, 2013, the Delaware Court of Chancery entered an Order of Consolidation and Appointment of Co-Lead Counsel in respect of the four suits pending in the Delaware Court of Chancery. Pursuant to this order, the four Delaware cases have been consolidated under the caption In re Life Technologies Corporation Stockholders Litigation, Consolidated Case No. 8488-VCL.
On June 12, 2013, the plaintiffs in the consolidated Delaware cases filed a Verified Consolidated Amended Class Action Complaint for Breach of Fiduciary Duty.
On June 26, 2013, the defendants in the consolidated Delaware cases filed motions to dismiss the consolidated amended complaint.
In addition, the following four actions were brought by and on behalf of stockholders of the Company in the Superior Court of the State of California, County of San Diego:
| Choi v. Life Technologies Corporation, et al., Case No. 37-2013-00044671-CU-BT-CTL, filed on April 18, 2013; |
| Rogers Living Trust DTD 1/4/2007 v. Adam, et al., Case No. 37-2013-00044711-CU-SL-NC, filed on April 18, 2013; |
| Louisiana Municipal Police Employees Retirement System v. Adam, et al., Case No. 37-2013-00045787-CU-MC-CTL, filed on April 24, 2013; and |
| Noch v. Life Technologies Corporation, et al., Case No. 37-2013-00046405-CU-BT-CTL, filed on April 29, 2013. |
On June 10, 2013, the defendants in the California cases filed a Motion To Stay or Dismiss those actions, a Motion for Protective Order Staying Discovery and an Application for an Order Shortening Time on Motion To Stay or Dismiss in the California cases.
73
On June 11, 2013, a hearing was held before the Honorable Judith F. Hayes of the Superior Court of the State of California, County of San Diego, on the defendants Motion for Protective Order Staying Discovery and Application for an Order Shortening Time on Motion To Stay or Dismiss. At the conclusion of the hearing, Judge Hayes stayed the California cases and scheduled a hearing on the defendants Motion To Stay or Dismiss for August 2, 2013.
On June 12, 2013, the plaintiffs in Choi, Noch and Rogers Living Trust served Requests for Dismissal of Action Without Prejudice on the defendants in those actions.
On June 13, 2013, the Rogers Living Trust action was dismissed without prejudice.
On June 21, 2013, the plaintiff in Louisiana Municipal Employees Retirement System served a Request for Voluntary Dismissal of Action Without Prejudice Pursuant to Rule 3.770 of California Rules of Court on the defendants in that action.
On July 11, 2013, the Choi, Noch and Louisiana Municipal Employees Retirement System actions were dismissed without prejudice.
Each of the eight actions described above is a putative class action suit filed on behalf of a proposed class of Life Technologies stockholders against the Company and certain of its current and former directors. Thermo Fisher has been named as a defendant in each of the suits other than the Smilow suit, and Merger Sub is named as a defendant in the David Shaev Profit Sharing Account, Cavatore and Gordon suits. The complaints filed in connection with each of these suits allege, among other things, that the Companys directors breached their fiduciary duties to the Companys stockholders in connection with the merger. Each of the actions seeks, among other things, the issuance of an injunction preventing the consummation of the merger.
One of the conditions to the Companys and Thermo Fishers respective obligations to consummate the merger is that no governmental authority of competent authority shall have issued any order, writ, injunction, decree, judgment, award, settlement or stipulation, or enacted any law that prohibits, restrains or makes illegal the consummation of the merger. As such, if the plaintiffs are successful in obtaining an injunction prohibiting the defendants from completing the merger on the agreed-upon terms, then such injunction may prevent the merger from becoming effective, or from becoming effective within the expected timeframe.
The Company and its directors believe that the claims in each of these lawsuits are without merit, and they intend to vigorously defend all pending actions relating to the merger.
74
The following is a summary of the material terms and conditions of the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. The description of the merger agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the Agreement and Plan of Merger, dated as of April 14, 2013, a copy of which is attached to this proxy statement as Annex A and is incorporated by reference into this proxy statement. We encourage you to read the merger agreement carefully and in its entirety because it is the contractual document that governs this merger.
Additional information about the Company and Thermo Fisher may be found elsewhere in this proxy statement and in other public reports and documents filed with the SEC. Please see the section of this proxy statement entitled Where You Can Find Additional Information, beginning on page 104.
Explanatory Note Regarding the Merger Agreement
The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Factual disclosures about the Company contained in this proxy statement or in the Companys public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement and described in this summary. The representations, warranties and covenants made in the merger agreement by the Company, Thermo Fisher and Merger Sub were qualified and subject to important limitations agreed to by the Company, Thermo Fisher and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to close the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by disclosures that were made by each party to the other, which disclosures are not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement.
Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws
The merger agreement provides for the merger of Merger Sub with and into the Company upon the terms, and subject to the conditions, set forth in the merger agreement. As the surviving corporation, the Company will continue to exist following the merger as a wholly owned subsidiary of Thermo Fisher.
The board of directors of the surviving corporation will, from and after the effective time of the merger, consist of the directors of Merger Sub until the earlier of their resignation or removal or until their respective successors have been duly elected and qualified. The officers of the surviving corporation will, from and after the effective time of the merger, consist of the officers of the Company until the earlier of their resignation or removal or until their respective successors have been duly elected and qualified.
At the effective time of the merger, the certificate of incorporation and by-laws of the surviving corporation will be amended and restated to be in the forms agreed upon by the Company and Thermo Fisher until amended in accordance with their terms or by applicable law.
75
Closing and Effective Time of the Merger
The closing of the merger, which we refer to as the closing, will take place on the second business day following the date on which the last of the conditions to closing (described in this section below entitled Conditions to the Merger), other than the conditions that by their terms are to be satisfied at the closing, have been satisfied or (to the extent permitted by applicable law) waived, or such other date as the Company and Thermo Fisher may agree.
The effective time of the merger will occur as soon as practicable on the date of the closing upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, or at such later time as the Company and Thermo Fisher may agree and specify in the certificate of merger.
Merger Consideration and Conversion of Company Common Stock
At the effective time of the merger, each share of Company common stock issued and outstanding immediately prior to the effective time of the merger, other than shares owned by the Company or Thermo Fisher or their respective wholly owned subsidiaries and shares owned by stockholders who have properly exercised and perfected appraisal rights under the DGCL, will be canceled and converted into the right to receive $76.00 in cash, without interest, subject to adjustment as described in the following sentence. If the merger does not close by January 14, 2014, by reason of the failure to obtain certain required antitrust approvals or the issuance or enactment by a governmental authority of an order or law prohibiting or restraining the merger (and such prohibition or restraint is in respect of an antitrust law), and this failure was not caused by the failure of the Company to perform in all material respects its efforts and similar obligations under the merger agreement with respect to seeking antitrust approvals, the cash price per share will increase by $0.0062466 per day during the period commencing on, and including, January 14, 2014, and ending on, and including, the closing date. We refer to this additional amount, if payable, as the additional per share consideration and, together with the $76.00 in cash to be paid in the merger, the merger consideration.
At the effective time of the merger, each share of Company common stock owned by the Company as treasury stock (other than certain shares held by the Company in a rabbi trust on behalf of third parties) or owned by Thermo Fisher immediately prior to the effective time will be canceled without payment of consideration, and each share of Company common stock owned by any wholly owned subsidiary of the Company or of Thermo Fisher immediately prior to the effective time will, at the election of Thermo Fisher, either be converted into common stock of the surviving corporation or be canceled without payment of consideration.
Shares of Company common stock owned by stockholders who have not voted in favor of the merger and who are entitled to demand and have properly demanded their rights to be paid the fair value of such shares in accordance with Section 262 of the DGCL will not be canceled and converted into the merger consideration. Such stockholders will instead be entitled to the appraisal rights granted by Section 262 of the DGCL, as described in the section of this proxy statement entitled Appraisal Rights.
Exchange and Payment Procedures
Prior to the closing, Thermo Fisher will designate a bank or trust company reasonably acceptable to the Company to act as the paying agent for the payment of the merger consideration. At or prior to the effective time of the merger, Thermo Fisher will deposit or cause to be deposited with the paying agent an amount in cash sufficient to pay the aggregate merger consideration payable to holders of Company common stock in the merger. Within three business days after the effective time of the merger, the paying agent will mail to each registered holder of a certificate that represented shares of Company common stock a letter of transmittal describing the procedure for surrendering such certificate in exchange for the merger consideration.
If you hold stock certificates representing shares of Company common stock, you will not be entitled to receive the merger consideration until you surrender your stock certificates along with a duly completed and validly executed letter of transmittal to the paying agent. If ownership of your stock certificate is not registered in
76
the transfer records of the Company, a check for any cash to be delivered will only be issued if the certificate is properly endorsed and the applicable letter of transmittal is accompanied by all documents reasonably required to evidence that any applicable stock transfer taxes have been paid or are not applicable. If you hold shares of Company common stock in uncertificated book-entry form, you will not be required to deliver a stock certificate or an executed letter of transmittal to the paying agent to receive the merger consideration.
You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.
The aggregate merger consideration payable in respect of each stock certificate that, immediately prior to the effective time of the merger, represented shares of Company common stock, or to any holder of shares held in uncertificated book-entry form, will be rounded to the nearest whole cent. Thermo Fisher, the surviving corporation and the paying agent will be entitled to deduct and withhold any applicable taxes from the merger consideration. In the event any amount is withheld from the merger consideration otherwise payable to any person (and is paid over to the taxing authorities), that amount will be treated as having been paid to that person.
After the effective time of the merger, there will be no transfers on the stock transfer books of the surviving corporation of shares of Company common stock. If, after the effective time of the merger, any person presents to the surviving corporation or the paying agent any stock certificates representing shares of Company common stock that were canceled in the merger, such stock certificates will be canceled in exchange for the applicable cash payment.
Any portion of the funds deposited with the paying agent that remains undistributed to holders of stock certificates that formerly represented shares of Company common stock for one year after the effective time of the merger may be delivered to Thermo Fisher. Holders of stock certificates who have not complied with the exchange and payment procedures described above may thereafter look only to Thermo Fisher for payment of the merger consideration. None of Thermo Fisher, Merger Sub, the Company, the surviving corporation or the paying agent will be liable to any person in respect of any cash delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. If any certificate has not been surrendered within five years after the effective time of the merger (or such earlier date on which the merger consideration in respect of such certificate would escheat to a governmental authority), any merger consideration in respect of such certificate will become the property of the surviving corporation (to the extent permitted by law).
If any stock certificate has been lost, stolen or destroyed, then the person claiming the stock certificate to be lost, stolen or destroyed must make an affidavit of that fact in order to be entitled to receive the merger consideration in respect of such stock certificate and, if required by the surviving corporation, such person must post a bond in a reasonable amount (as determined by the surviving corporation) as indemnity against any claim that may be made against it with respect to such certificate. These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its entirety.
At the effective time of the merger:
| each outstanding Option, whether vested or unvested, will be canceled and will entitle the holder thereof to receive an amount in cash equal to the product of (x) the total number of shares of Company common stock subject to such Option times (y) the excess, if any, of the merger consideration over the exercise price per share of Company common stock subject to such Option; |
| each outstanding NQDC RSU will be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger or, with respect to NQDC RSUs granted in 2013, upon consummation of the merger, in each case, in accordance with the terms of the applicable equity award agreement; |
77
| each outstanding Pre-2015 Vesting RSU will vest in full and will be canceled in exchange for the right to receive an amount in cash equal to the merger consideration; |
| each outstanding Post-2014 Vesting RSU will be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger in accordance with the terms of the applicable equity award agreement; |
| each outstanding PRSU will vest in full at the greater of the target RSU award level and the level achieved based on the Companys performance as of the end of the most recently completed fiscal year in the applicable performance period, except that PRSUs granted in the fiscal year in which the merger is consummated will vest at the target RSU award level, in each case, in accordance with the terms of the applicable equity award agreement, and will be canceled in exchange for the right to receive an amount in cash equal to the merger consideration; and |
| each stock unit credited to a participants account under the Companys Deferred Compensation Plan, which we refer to as a Share Equivalent Unit, will vest (to the extent unvested) and be converted into the right to receive an amount in cash equal to the merger consideration, and will be paid in accordance with the terms of the Companys Deferred Compensation Plan. |
Amounts in respect of Options will be paid to holders no later than five business days after the effective time of the merger and amounts in respect of RSUs will be paid to holders in accordance with the terms of the applicable equity plan and equity award agreement governing such RSUs and amounts in respect of Share Equivalent Units will be paid to holders in accordance with the terms of the Companys Deferred Compensation Plan.
In addition, under the merger agreement, the Company has reserved the right to grant RSUs that vest based solely on the continued service of the holder of such RSUs (or cash equivalent awards) to newly hired employees and employees promoted based on job performance in the ordinary course of business consistent with past practice, which RSUs will, upon the effective time of the merger, be assumed by Thermo Fisher and converted into the right to receive an amount in cash equal to the merger consideration, and will vest and become payable following the merger in accordance with the terms of the applicable award agreement.
Representations and Warranties
The merger agreement contains representations and warranties made by the Company, Thermo Fisher and Merger Sub to each other. The statements embodied in those representations and warranties were made for purposes of the merger agreement and are subject to qualifications and limitations agreed by the parties in connection with negotiating the terms of the merger agreement (including the disclosure letter delivered by the Company in connection therewith). In addition, some of those representations and warranties were made as of a specific date, may be subject to a contractual standard of materiality different from that generally applicable to stockholders or may have been used for the purpose of allocating risk between the parties to the merger agreement rather than establishing matters as facts.
The representations and warranties made by the Company (including, in certain cases, with respect to its subsidiaries) to Thermo Fisher and Merger Sub relate to, among other things, the following:
| due organization, valid existence, good standing and corporate authority to conduct business; |
| ownership of subsidiaries; |
| capitalization and the absence of preemptive or other similar rights; |
78
| corporate authority to execute and deliver, to perform the Companys obligations under and to consummate the transactions contemplated by the merger agreement, and the enforceability of the merger agreement against the Company; |
| the declaration of advisability of the merger agreement by the Board, and the approval of the merger agreement and the merger by the Board; |
| the absence of violations of, or conflicts with, organizational documents, applicable law and certain contracts as a result of the Company entering into the merger agreement and consummating the merger and the other transactions contemplated by the merger agreement; |
| governmental consents and approvals; |
| the required vote of the Companys stockholders to adopt the merger agreement and approve the merger and other transactions contemplated by the merger agreement; |
| the Companys SEC filings since January 1, 2011 and the financial statements included therein; |
| the absence of indebtedness and certain undisclosed liabilities; |
| internal controls over financial reporting and disclosure controls and procedures; |
| the conduct of business in all material respects in the ordinary course of business since December 31, 2012, and the absence of a material adverse effect (as defined below) since December 31, 2012; |
| the absence of legal proceedings and governmental orders; |
| compliance with applicable laws, governmental orders and permits; |
| tax matters; |
| employee benefits matters; |
| labor matters; |
| environmental matters; |
| intellectual property; |
| the absence of a rights agreement and the inapplicability of anti-takeover laws to the merger; |
| title to real and personal property; |
| the accuracy of the information provided in this proxy statement; |
| material contracts and the absence of any default under, or termination of, any material contract; |
| the receipt of opinions from Deutsche Bank and Moelis; and |
| the absence of brokers or finders fees. |
Many of the Companys representations and warranties are qualified as to, among other things, materiality or material adverse effect. For purposes of the merger agreement, material adverse effect
79
means any effect, change, event, circumstance or occurrence that, individually or in the aggregate, (i) would prevent or materially delay, interfere with, impair or hinder the consummation by the Company of the merger and the other transactions contemplated by the merger agreement on a timely basis or (ii) has a material adverse effect on the business, results of operations, assets or condition (financial or otherwise) of the Company and its subsidiaries, taken as a whole, provided that with respect to clause (ii) above, none of the following, and no effect, change, event, circumstance or occurrence arising out of, or resulting from, the following, will be taken into account, individually or in the aggregate, in determining whether a material adverse effect has occurred or may occur:
| changes generally affecting the economy, credit or financial or capital markets, in the United States or elsewhere in the world, including changes in interest or exchange rates (in each case, only to the extent it does not have a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other industry participants); |
| changes generally affecting the industries in which the Company and its subsidiaries operate (only to the extent it does not have a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other industry participants); |
| changes or prospective changes in law or U.S. generally accepted accounting principles (GAAP) or in accounting standards, or any changes or prospective changes in the interpretation or enforcement of any of the foregoing, or any changes or prospective changes in general legal, regulatory or political conditions (in each case, only to the extent it does not have a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other industry participants); |
| changes proximately caused by the negotiation, execution, announcement or performance of the merger agreement or the consummation of the transactions contemplated by the merger agreement (other than for purposes of certain specified representations and warranties), including the impact thereof (to the extent proximately caused thereby) on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, employees or governmental authorities, or any litigation arising from allegations of breach of fiduciary duty or violation of law relating to the merger agreement or the transactions contemplated thereby; |
| acts of war (whether or not declared), sabotage or terrorism, or any escalation or worsening of any such acts of war (whether or not declared), sabotage or terrorism (in each case, only to the extent it does not have a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other industry participants); |
| volcanoes, tsunamis, pandemics, earthquakes, floods, storms, hurricanes, tornados or other natural disasters (in each case, only to the extent it does not have a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, as compared to other industry participants); |
| any action taken by the Company or its subsidiaries that is required by the merger agreement or with Thermo Fishers written consent or at Thermo Fishers written request, or the failure to take any action by the Company or its subsidiaries if that action is prohibited by the merger agreement; |
| changes resulting or arising from the identity of, or any facts or circumstances relating to, Thermo Fisher, Merger Sub or any of their respective affiliates; |
| changes or prospective changes in the Companys credit ratings or changes in the price or trading volume of the Company common stock (except that the underlying cause of any such change or prospective change, to the extent not falling within any of the other exceptions described above, may be taken into account); or |
80
| any failure to meet any internal or public projections, forecasts, guidance, estimates, milestones, budgets or internal or published financial or operating predictions of revenue, earnings, cash flow or cash position (except that the underlying cause of any such failure, to the extent not falling within any of the other exceptions described above, may be taken into account). |
The representations and warranties made by Thermo Fisher and Merger Sub to the Company are more limited and relate to, among other things, the following:
| due organization, valid existence, good standing and corporate authority to conduct business; |
| corporate authority to execute and deliver, to perform Thermo Fishers and Merger Subs obligations under and to consummate the transactions contemplated by the merger agreement, and the enforceability of the merger agreement against Thermo Fisher and Merger Sub; |
| the declaration of advisability of the merger agreement by the respective boards of directors of Thermo Fisher and Merger Sub, and the approval of the merger agreement and the merger by the respective boards of Thermo Fisher and Merger Sub; |
| the absence of violations of, or conflicts with, organizational documents, applicable law and certain contracts as a result of Thermo Fisher and Merger Sub entering into the merger agreement and consummating the merger and the other transactions contemplated by the merger agreement; |
| governmental consents and approvals; |
| the absence of legal proceedings and governmental orders; |
| capitalization, ownership and operations of Merger Sub; |
| the accuracy of information provided by or on behalf of Thermo Fisher or Merger Sub for inclusion in this proxy statement; |
| ownership by Thermo Fisher and Merger Sub of Company common stock; |
| availability of cash to make all required payments in connection with the merger; |
| enforceability of the commitment letter Thermo Fisher executed with affiliates of JP Morgan and Barclays; |
| the absence of certain arrangements between Thermo Fisher or Merger Sub, on the one hand, and the Companys management or directors, on the other hand; |
| enforceability and compliance with the confidentiality agreement between Thermo Fisher and the Company; |
| the absence of brokers or finders fees; and |
| the independent investigation conducted by Thermo Fisher and Merger Sub of the Companys business, operations, assets, liabilities, results of operations, condition (financial or otherwise) and prospects. |
Many of the representations and warranties of Thermo Fisher and Merger Sub are qualified as to, among other things materiality or Parent material adverse effect. For purposes of the merger agreement, Parent material adverse effect means any effect, change, event, circumstance or occurrence that would prevent or
81
materially delay, interfere with, impair or hinder (i) the consummation by Thermo Fisher or Merger Sub of the merger and the other transactions contemplated by the merger agreement on a timely basis or (ii) the compliance by Thermo Fisher or Merger Sub with their obligations under the merger agreement.
All representations and warranties contained in the merger agreement will terminate upon the earlier of the consummation of the merger or the termination of the merger agreement pursuant to its terms.
Covenants Relating to the Conduct of Business
The Company has agreed to covenants in the merger agreement that affect the conduct of its business between the date of the merger agreement and the effective time of the merger. Prior to the closing, subject to certain exceptions specified in the merger agreement and the disclosure letter delivered by the Company in connection with the merger agreement, unless Thermo Fisher gives its written consent (which cannot be unreasonably withheld, delayed or conditioned), the Company and its subsidiaries are required to cause their businesses to be conducted in all material respects in the ordinary course of business consistent with past practice and, to the extent consistent therewith, to use commercially reasonable efforts to preserve their business organizations substantially intact and preserve existing relations with key customers, suppliers and other persons with whom they have significant business relationships.
In addition, subject to certain exceptions specified in the merger agreement and the disclosure letter delivered by the Company in connection with the merger agreement, unless Thermo Fisher gives its written consent (which cannot be unreasonably withheld, delayed or conditioned), the Company and its subsidiaries are restricted from, among other things:
| amending the organizational documents of the Company, or amending the organizational documents of any of the Companys subsidiaries in any material respect or in any respect adversely impacting Thermo Fisher or Merger Sub; |
| entering into written agreements with the Companys stockholders in their capacity as such; |
| issuing, selling, encumbering or granting shares of capital stock of, or other equity or voting interests in, the Company or any of its subsidiaries (or certain rights or securities related thereto), subject to certain exceptions; |
| redeeming, purchasing or otherwise acquiring any outstanding shares of capital stock of, or other equity or voting interests in the Company or any of its subsidiaries, or any rights, warrants or options to acquire any such shares or interests, subject to certain exceptions; |
| establishing a record date for, declaring, setting aside for payment or paying any dividend or distribution in respect of any shares of the Companys capital stock or other equity or voting interests; |
| splitting, combining, subdividing or reclassifying any shares of the Companys capital stock or other equity or voting interests; |
| incurring indebtedness under the Companys existing credit facility or existing bank lines of credit such that the amount outstanding is in excess of $450,000,000 or incurring any other indebtedness, subject to certain exceptions; |
| making any loans, capital contributions or advances to any person outside of the ordinary course of business consistent with past practice, other than to the Company or its wholly owned subsidiaries; |
| adopting or implementing any stockholder rights plan or similar arrangement; |
82
| selling, leasing, licensing or otherwise transferring any properties or assets, including any owned or licensed intellectual property, if the value or purchase price, individually or in the aggregate, exceeds $100,000,000, subject to certain exceptions, including an exception for transfers in the ordinary course of business consistent with past practice; |
| making or authorizing capital expenditures in any calendar year that, individually or in the aggregate, exceed the amounts budgeted in the Companys current capital expenditure plan by more than 10%; |
| making any acquisition of or investment in any properties, assets, securities or business if the value or purchase price exceeds $50,000,000 individually or $100,000,000 in the aggregate, except in the ordinary course of business consistent with past practice; |
| subject to certain exceptions, including an exception for actions required by law or under the terms of existing benefit plans or contracts: granting to any director, executive officer, employee or consultant any increase in compensation, or paying or awarding any bonuses or incentive compensation, other than increases and payouts of compensation to employees other than executive officers in the ordinary course of business consistent with past practice; granting to any current or former director, executive officer or employee any increase in severance, retention or termination pay; granting or amending any equity awards; entering into or modifying any employment or consulting agreement with any current or former director, executive officer, employee or consultant pursuant to which the annual base salary under such agreement exceeds $500,000 per annum; hiring or engaging any employee or consultant whose base salary and target bonus opportunity exceeds $500,000 per annum, other than the hiring or engagement of a replacement employee or replacement consultant on terms substantially consistent with those applicable to the predecessor employee or consultant; establishing, adopting, entering into or amending in any material respect any material collective bargaining agreement or material benefit plan or agreement; or taking any action to accelerate any rights or benefits under any benefit plan or agreement; |
| making material changes to financial accounting methods, principles or policies of the Company or its subsidiaries, subject to certain exceptions; |
| adopting a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries, subject to certain exceptions; |
| granting any liens other than certain permitted liens, other than to secure certain permitted indebtedness; |
| entering into any settlement or compromise of litigation that involves injunctive or equitable relief or imposes restrictions on the business of the Company or its subsidiaries, that involves any license, cross license or similar arrangement with respect to intellectual property or that requires payment by the Company or its subsidiaries of amounts that either are not reflected or reserved against in the Companys financial statements or that, individually or in the aggregate, exceed the amounts reflected or reserved against in the Companys financial statements by $100,000,000 or more; |
| making any material change in any method of tax accounting or annual tax accounting period, making, changing or rescinding any material tax election, settling any material tax liability, audit claim or assessment, surrendering any right to claim a material tax refund, filing any amended tax return with respect to any material tax, entering into any closing agreement with respect to any material tax or waiving or extending the statute of limitations with respect to any tax return reporting a tax liability in excess of $5,000,000, subject to certain exceptions; |
| entering into, renewing, extending, materially amending or terminating certain material contracts; and |
| agreeing, authorizing or committing to do any of the foregoing. |
83
In addition, each of the Company, Thermo Fisher and Merger Sub has agreed not to knowingly take or permit its affiliates to take any action that could reasonably be expected to prevent, impede, interfere with or hinder, or delay in any material respect, the consummation of the merger and the other transactions contemplated by the merger agreement, subject in the Companys case to the provisions of the merger agreement described below in the sections entitled No Solicitation by the Company and Changes in the Boards Recommendation.
No Solicitation by the Company
The Company has agreed under the merger agreement, subject to certain exceptions described below, that the Company will cease all then-existing discussions or negotiations with respect to a takeover proposal (as defined below) and will not, and will cause its subsidiaries and its and their respective officers, directors, employees, consultants, agents, financial advisors, investment bankers, attorneys, accountants, affiliates and other representatives not to, directly or indirectly:
| initiate, solicit or knowingly facilitate or encourage any inquiry or the making of any takeover proposal; or |
| engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any non-public information in connection with, any takeover proposal. |
Under the merger agreement, a takeover proposal means any inquiry, proposal or offer from any person or group of persons (other than Thermo Fisher and its subsidiaries) relating to:
| any direct or indirect acquisition, in a single transaction or a series of related transactions, of 20% or more of the consolidated assets of the Company and its subsidiaries (based on the fair market value of such assets, as determined in good faith by the Board), including by way of merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving subsidiaries of the Company whose assets, individually or in the aggregate, constitute 20% or more of the consolidated assets of the Company and its subsidiaries; |
| any direct or indirect acquisition, in a single transaction or series of related transactions, of 20% or more of the outstanding shares of common stock or voting power of the Company; |
| any tender offer or exchange offer that if consummated would result in any person or group of persons beneficially owning 20% or more of the outstanding shares of common stock or voting power of the Company; or |
| any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company, pursuant to which such person or group of persons (or the stockholders of any person) would acquire, directly or indirectly, 20% or more of the aggregate voting power of the Company or of the surviving entity in a merger involving the Company or the resulting direct or indirect parent of the Company or such surviving entity. |
In the event any of the Company or its subsidiaries or its or their representatives receives a takeover proposal, the Company must notify Thermo Fisher within 24 hours of receipt and provide to Thermo Fisher the identity of the person or group of persons making such takeover proposal and a copy of such takeover proposal. Upon the request of Thermo Fisher, the Company must keep Thermo Fisher reasonably informed of any developments with respect to any such takeover proposal.
Notwithstanding the general restrictions described above, if at any time prior to the adoption of the merger agreement by the Companys stockholders, the Company receives an unsolicited written takeover proposal, the Company and its representatives may:
| contact the person or group of persons making the takeover proposal to clarify the terms and conditions of such proposal; and |
84
| if the Board or any committee thereof determines in good faith, after consultation with its financial advisor and outside legal counsel, that such takeover proposal either constitutes or would reasonably be expected to lead to a superior proposal (as defined below) and the failure to take the following actions would reasonably be expected to be inconsistent with the directors fiduciary duties under applicable law, (i) enter into a confidentiality agreement (generally containing confidentiality provisions no less favorable in the aggregate to the Company than those contained in the confidentiality agreement between the Company and Thermo Fisher) with the person or group of persons making the takeover proposal and furnish information, including non-public information, to such person or group of persons (provided that if any material non-public information has not previously been made available to Thermo Fisher, the Company must furnish such information to Thermo Fisher within 24 hours) and (ii) engage or participate in discussions or negotiations with the person or group of persons making the takeover proposal. |
Under the merger agreement, a superior proposal means a bona fide written takeover proposal to acquire more than 50% of the consolidated assets of the Company and its subsidiaries or more than 50% of the outstanding shares of common stock or voting power of the Company, that the Board has determined in its good faith judgment, after consultation with its financial advisors and outside legal counsel, (i) is reasonably capable of being consummated on the terms proposed, taking into account all material financial, legal, regulatory and other aspects of such proposal, including all material conditions contained therein, and (ii) to be more favorable from a financial point of view to the Companys stockholders than the transactions contemplated by the merger agreement, after taking into account any changes to the merger agreement proposed by Thermo Fisher in response to such proposal.
Changes in the Boards Recommendation
The Company has agreed under the merger agreement, subject to certain exceptions described below, that neither the Board nor any committee thereof will (i) withhold or withdraw (or modify in a manner adverse to Thermo Fisher), or publicly propose to withhold or withdraw (or modify in a manner adverse to Thermo Fisher), the Boards recommendation of the merger to the Companys stockholders, (ii) make any public statement that is inconsistent with the Boards recommendation (including by failing to recommend against any takeover proposal structured as a tender offer or exchange offer within 10 business days after its commencement), (iii) approve or adopt, or recommend the approval or adoption of, or publicly propose to recommend, approve or adopt, any takeover proposal (any of the foregoing, an adverse recommendation change).
The Company has also agreed under the merger agreement, subject to certain exceptions described below, that neither the Board nor any committee thereof will authorize, cause or permit the Company or any of its subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement related to any takeover proposal (other than a confidentiality agreement that complies with the terms of the merger agreement).
Notwithstanding the general restrictions described above, at any time prior to the adoption of the merger agreement by the Companys stockholders, the Board and any committee thereof may, subject to compliance with the following paragraph:
| make an adverse recommendation change if the Board has determined in good faith, after consultation with its financial advisors and outside legal counsel, that failure to do so would reasonably be expected to be inconsistent with the directors fiduciary duties under applicable law; or |
| cause the Company to enter into an agreement with respect to an unsolicited takeover proposal and terminate the merger agreement if the Board has determined in good faith, after consultation with its financial advisors and outside legal counsel, that such takeover proposal constitutes a superior proposal. |
Prior to taking any action described in the immediately preceding paragraph, the Board or a committee thereof, as applicable, must provide at least five days prior written notice to Thermo Fisher of its intention to
85
take such action, which notice must specify the reasons for such proposed action and, if relating to a takeover proposal, include unredacted copies of the superior proposal and related transaction agreements and specify the identity of the person or group of persons making such superior proposal. During the five-day notice period, the Company is obligated to negotiate in good faith with Thermo Fisher, to the extent Thermo Fisher wishes to negotiate, to enable Thermo Fisher to propose in writing an improved, binding offer, and following the end of the five-day notice period, the Board must consider such improved, binding offer from Thermo Fisher in good faith.
The merger agreement does not prohibit the Company or the Board from taking and disclosing to the Companys stockholders a position contemplated by Rule 14e-2(a) or Rule 14d-9 under the Exchange Act or Item 1012(a) of Regulation M-A under the Exchange Act, or making any disclosure to the Companys stockholders required by applicable law (but any such action will have the effects otherwise set forth in the merger agreement).
The Company has agreed under the merger agreement that, unless the merger agreement is terminated, it will take all necessary actions in accordance with applicable law, the Companys organizational documents and the rules of NASDAQ to duly call, give notice of, convene and hold a meeting of its stockholders as soon as reasonably practicable after the SEC confirms that it has no further comments on this proxy statement, for the purpose of obtaining the stockholder approval required by the merger agreement, notwithstanding any adverse recommendation change. The Company may, in its sole discretion, adjourn, recess or postpone the stockholders meeting (i) after consultation with Thermo Fisher, to the extent necessary to ensure that any required supplement or amendment to this proxy statement is provided to the Companys stockholders within a reasonable amount of time in advance of the stockholders meeting or (ii) if as of the time for which the stockholders meeting is originally scheduled there are insufficient shares of Company common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the stockholders meeting. Subject to the provisions of the merger agreement described above in the sections entitled No Solicitation by the Company and Changes in the Boards Recommendation, the Board will use its reasonable best efforts to obtain the stockholder approval required by the merger agreement.
Thermo Fisher has agreed under the merger agreement that it will vote any shares of Company common stock owned by it or any of its subsidiaries, or with respect to which Thermo Fisher or any of its Subsidiaries have the power to cause to be voted, in favor of the adoption of the merger agreement.
Efforts to Obtain Regulatory Approvals
The Company, Thermo Fisher and Merger Sub have each agreed, subject to the exceptions described in the following paragraph, to:
| make an appropriate filing of a Notification and Report Form pursuant to the HSR Act and any other applicable antitrust law with respect to the transactions contemplated by the merger agreement as promptly as reasonably practicable after execution of the merger agreement; |
| supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act or any other applicable antitrust law; |
| take or cause to be taken all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act and other applicable antitrust laws and to obtain all consents under any antitrust laws that may be required by any governmental authority so as to enable the parties to consummate the merger and the other transactions contemplated by the merger agreement; and |
| use best efforts to cooperate with the other parties in connection with filings or submissions with governmental authorities, and keep the other parties informed in all material respects of communications received from governmental authorities regarding the transactions contemplated by the merger agreement. |
86
In connection with the agreements described in the immediately preceding paragraph, the Company, Thermo Fisher and Merger Sub have each agreed to take or cause to be taken all actions necessary to resolve objections that may be asserted under any antitrust law with respect to the transactions contemplated by the merger agreement, including defending any lawsuits challenging the merger agreement or the consummation of the merger, executing settlements, undertakings, stipulations or other agreements with governmental authorities or other persons, selling, divesting, conveying, holding separate particular products, assets or businesses of the parties and effectuating any other change or restructuring of the Company or Thermo Fisher or their respective subsidiaries to the extent necessary to obtain all consents under the HSR Act or other applicable antitrust laws or to resolve any objections asserted by any governmental authority with competent jurisdiction. The foregoing obligations are subject to certain exceptions, including that (i) Thermo Fisher is not required to, and the Company is not permitted to, take any action or agree or commit to take any action, or agree to any condition or restriction, that would reasonably be expected to, individually or in the aggregate, result in a material adverse effect on Thermo Fisher or on the Company and its subsidiaries (including, after the closing, the surviving corporation and its subsidiaries), in each case measured on a scale relative to Thermo Fisher and its subsidiaries, taken as a whole, and (ii) the Company is not obligated to take any action with respect to its business or operations unless the effectiveness of such agreement or action is conditioned upon the closing. Without limiting Thermo Fishers obligations described above, if any products, businesses or assets of the Company or Thermo Fisher or their respective subsidiaries are to be sold, divested or disposed of, Thermo Fisher may select the products, businesses or assets to be sold, divested or disposed of.
The Company, Thermo Fisher and Merger Sub have each agreed to cooperate with the other parties and use reasonable best efforts to promptly take all actions and assist and cooperate with the other parties in doing all things necessary, proper or advisable to cause the conditions to closing to be satisfied as promptly as reasonably practicable, and to obtain all approvals, consents, registrations, waivers, permits, authorizations, orders and other confirmations necessary, proper or advisable to be obtained from any third party or any governmental entity in order to consummate the transactions contemplated by the merger agreement, in each case other than actions relating to antitrust laws, with respect to which the parties obligations are described above in the section entitled Efforts to Obtain Regulatory Approvals.
Access to Information; Cooperation with Financing
The Company has agreed under the merger agreement, subject to certain limited exceptions, that it will afford to Thermo Fisher and its officers, directors, employees, consultants, agents, financial advisors, investment bankers, attorneys, accountants, affiliates and other representatives, reasonable access during normal business hours during the period prior to the closing to the Companys officers, employees, agents, properties, books, contracts and records, and furnish to Thermo Fisher and Thermo Fishers representatives information concerning the Companys business, personnel, assets, liabilities and properties as Thermo Fisher may reasonably request.
In addition, the Company has agreed under the merger agreement, subject to certain exceptions, that the Company and its subsidiaries will provide all cooperation, and use reasonable best efforts to cause the Companys officers, directors, employees, consultants, agents, financial advisors, investment bankers, attorneys, accountants, affiliates and other representatives to provide all cooperation, that is necessary, customary or advisable and reasonably requested by Thermo Fisher to assist Thermo Fisher in the arrangement of any third party debt or equity financing for the purpose of financing all required payments in connection with the merger.
Director and Officer Indemnification and Insurance
Thermo Fisher has agreed under the merger agreement that, from and after the effective time of the merger, each of Thermo Fisher and the surviving corporation will (i) indemnify and hold harmless (and will advance expenses to) each individual who is or was a director or officer of the Company or any of its subsidiaries with respect to all claims, liabilities, losses, damages, judgments, fines, penalties, costs and expenses (including fees
87
and expenses of legal counsel) in connection with any claim, suit, action, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of the fact that such person was a director or officer of the Company or one of its subsidiaries or acts or omissions (in such persons capacity as an officer or director) occurring at or prior to the effective time, in each case to the fullest extent permitted under applicable Law, and (ii) assume all obligations of the Company and its subsidiaries to each individual who is or was a director or officer of the Company or any of its subsidiaries in respect of indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the effective time as provided in the Companys organizational documents or any indemnification agreement in effect as of the date of the merger agreement. The certificate of incorporation and bylaws of the surviving corporation will contain provisions no less favorable to such persons with respect to the limitation of liabilities of directors and officers and indemnification than are set forth in the Companys organizational documents in effect on April 14, 2013.
In addition, Thermo Fisher has agreed that, for a period of six years following the effective time of the merger, the surviving corporation will maintain in effect the Companys current directors and officers liability insurance and fiduciary liability insurance policies with respect to matters arising on or prior to the effective time of the merger, provided that if the aggregate annual cost of such policies exceeds 300% of the aggregate annual premium under the Companys current policies, Thermo Fisher will provide a policy with the best coverage available up to such amount. In the alternative, prior to the effective time of the merger, the Company may (or, if requested by Thermo Fisher, will), in consultation with Thermo Fisher, purchase a six-year prepaid tail policy with substantially equivalent coverage, provided that the aggregate cost does not exceed 600% of the aggregate annual premium under the Companys current policies.
Under the merger agreement, Thermo Fisher and the surviving corporation are not permitted to settle, compromise or consent to the entry of any judgment in any threatened or actual action relating to any acts or omissions covered by the provisions described above for which indemnification has been sought unless such settlement, compromise or consent includes an unconditional release of the indemnified party from all liability (or the indemnified party otherwise consents).
The current and former directors and officers of the Company are third-party beneficiaries of the provisions described above, and such persons will have the right to enforce these provisions of the merger agreement.
Thermo Fisher has agreed under the merger agreement that it will, and will cause the surviving corporation after the closing, to:
| from the effective time of the merger until December 31, 2014, provide each of the Companys employees and the employees of its subsidiaries employed immediately prior to the effective time of the merger with target total compensation (including equity-based incentive compensation) and benefits, in each case, that are no less favorable in the aggregate than the target total compensation and benefits provided to such employees immediately prior to the effective time of the merger (provided that base salaries will remain no less favorable than immediately prior to the effective time of the merger until December 31 of the calendar year following the calendar year in which the effective time of the merger occurs); |
| assume and honor in accordance with their terms all of the Company Plans (as defined below) (including any change-in-control severance agreement or other arrangement that is a Company Plan), in each case, as in effect at the effective time of the merger, including with respect to any payments, benefits or rights arising as a result of the transactions contemplated by the merger agreement (either alone or in combination with any other event), which will not limit Thermo Fishers right to amend any Company Plans in accordance with their terms; |
| cause any benefit plan in which the Companys employees or the employees of its subsidiaries are eligible to participate in following the effective time to credit all years of service by such employees for |
88
all purposes, including determining eligibility to participate, level of benefits, vesting, benefit accruals and early retirement subsidies to the extent such years of service were credited under one of the Companys comparable employee benefit plan, subject to certain exceptions; |
| waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any welfare benefit plan maintained by the surviving corporation or any of its subsidiaries in which the Companys employees or the employees of its subsidiaries are eligible to participate in following the effective time, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Company Plan immediately prior to the effective time of the merger; and |
| use commercially reasonable efforts to comply fully with all notice, consultation, effects bargaining or other bargaining obligations to any labor union, labor organization, works council or group of employees of the Company and its subsidiaries in connection with the transactions contemplated by the merger agreement (with respect to employees based outside of the United States, such obligations to be modified to the extent necessary to comply with applicable laws of the foreign countries). |
Under the merger agreement, Company Plan means each plan, program, policy, agreement or other arrangement covering current or former directors, employees or consultants, that is (i) an employee welfare plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), whether or not subject to ERISA, (ii) an employee pension benefit plan within the meaning of Section 3(2) of ERISA, whether or not subject to ERISA, (iii) a stock option, stock purchase, or other equity or equity-based agreement, program or plan, (iv) an individual employment, consulting, change-in-control, severance, retention or other similar agreement or (v) a bonus, incentive, deferred compensation, profit-sharing, retirement, post-retirement, vacation, severance or termination pay, benefit or fringe-benefit plan, program, policy, agreement or other arrangement, in each case, that is sponsored, maintained or contributed to by the Company or any of its subsidiaries or to which the Company or any of its subsidiaries contributes or is obligated to contribute to or has or may have any liability, each as may be amended from time to time.
The merger agreement states that Thermo Fisher intends to maintain the Life Technologies name as a brand of the combined company following the closing of the merger, and to nominate at least one member of the Board, selected by Thermo Fisher, for appointment to Thermo Fishers board of directors effective at the effective time of the merger.
Other Covenants and Agreements
The merger agreement contains additional agreements between the Company and Thermo Fisher relating to, among other things, the following:
| preparation of this proxy statement; |
| using reasonable best efforts to ensure that no state takeover statute or similar law becomes applicable to the merger or the other transactions contemplated by the merger agreement; |
| consulting with the other party regarding public announcements with respect to the transactions contemplated by the merger agreement; |
| ensuring exemptions of certain transactions in connection with the merger under Rule 16b-3 under the Exchange Act; |
| notifying the other party of any litigation that relates to the merger agreement or the transactions contemplated thereby; and |
89
| delivering a tax certificate. |
The respective obligations of the Company, Thermo Fisher and Merger Sub to consummate the merger are subject to the satisfaction or (to the extent permitted by applicable law) waiver on or prior to the date of closing of the following conditions:
| the adoption of the merger agreement by the holders of a majority of the outstanding shares of Company common stock; |
| the expiration of the waiting period (and any extension thereof) or the granting of early termination applicable to the consummation of the merger under the HSR Act, and the receipt of antitrust approvals in certain other jurisdictions; and |
| the absence of any order issued by any governmental authority of competent authority or any law that is in effect and prohibits, restrains or makes illegal the consummation of the merger. |
The obligations of Thermo Fisher and Merger Sub to consummate the merger are further subject to the satisfaction or (to the extent permitted under applicable law) waiver by Thermo Fisher on or prior to the date of the closing of the following additional conditions:
| the representations and warranties of the Company set forth in the merger agreement regarding (i) the Companys capitalization must be true and correct, except for de minimis inaccuracies, as of the closing date with the same effect as though made as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), (ii) the corporate power and authority of the Company to execute the merger agreement and consummate the merger, the approval of the merger agreement and the merger by the Board, the execution and enforceability of the merger agreement, the absence of violations of, or conflicts with, the Companys organizational documents, the absence of a rights agreement and the inapplicability of anti-takeover laws to the merger and the absence of brokers or finders fees, must be true and correct in all material respects as of the closing date with the same effect as though made as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date) and (iii) all other matters must be true and correct, disregarding all qualifications or limitations as to materiality or material adverse effect or words of similar import set forth therein, as of the closing date with the same effect as though made as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of clause (iii), where the failure to be true and correct would not, individually or in the aggregate, reasonably be expected to have a material adverse effect, and the receipt by Thermo Fisher of a certificate signed on behalf of the Company by an officer of the Company to such effect; |
| the Companys performance of or compliance in all material respects with its obligations under the merger agreement on or prior to the closing date, and the receipt by Thermo Fisher of a certificate signed on behalf of the Company by an officer of the Company to such effect; and |
| the absence of any effect, change, event, circumstance or occurrence since the date of the merger agreement that has had or would reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole. |
The Companys obligation to consummate the merger is further subject to the satisfaction or (to the extent permitted under applicable law) waiver by the Company on or prior to the date of the closing of the following additional conditions:
| the representations and warranties of Thermo Fisher and Merger Sub set forth in the merger agreement must be true and correct, disregarding all qualifications or limitations as to materiality or Parent |
90
material adverse effect or words of similar import set forth therein, as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such earlier date), except where the failure to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Parent material adverse effect, and the receipt by the Company of a certificate signed on behalf of Thermo Fisher and Merger Sub by an officer of Thermo Fisher to such effect; and |
| Thermo Fishers and Merger Subs performance of or compliance in all material respects with their respective obligations under the merger agreement on or prior to the closing date, and the receipt by the Company of a certificate signed on behalf of Thermo Fisher and Merger Sub by an officer of Thermo Fisher to such effect. |
The receipt or availability of funds or financing is not a condition to the consummation of the merger.
Before the closing, the Company and Thermo Fisher may each waive any of their respective conditions to closing and consummate the merger even though one or more of the conditions described above has not been met, except where waiver is not permitted by applicable law.
Neither Thermo Fisher and Merger Sub nor the Company may rely on the failure of any closing condition to be satisfied if such failure was caused by such partys failure to perform in all material respects its obligations under the merger agreement, to act in good faith or to use its reasonable best efforts to consummate the merger and the other transactions contemplated by the merger agreement.
Termination of the Merger Agreement
The Company and Thermo Fisher may, by mutual written consent duly authorized by each of their respective boards of directors, terminate the merger agreement and abandon the merger at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by the Companys stockholders.
The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger in the following circumstances:
| by either Thermo Fisher or the Company, if: |
¡ | the merger is not consummated on or before January 14, 2014, except that if, on January 14, 2014, certain required antitrust approvals have not been obtained or a governmental authority of competent authority has issued an order or enacted a law is in effect and prohibits, restrains or makes illegal the consummation of the merger (and such prohibition or restraint is in respect of an antitrust law), but all other closing conditions have been satisfied (other than those conditions that by their terms are to be satisfied at the closing), then the deadline will be automatically extended to July 14, 2014, or such earlier date as may be agreed in writing by the Company and Thermo Fisher, provided that neither Thermo Fisher nor the Company may rely on this provision to terminate the merger agreement if such partys failure to fulfill any obligation under the merger agreement materially contributed to the failure of the merger to be consummated before the deadline; |
¡ | any governmental authority of competent authority issues a final nonappealable order or enacts a law that prohibits, restrains or makes illegal the consummation of the merger; or |
¡ | at a duly convened meeting of the Companys stockholders, or any adjournment or postponement thereof, the Companys stockholders fail to adopt the merger agreement; |
| by Thermo Fisher, if: |
¡ | the Company breaches any of its representations and warranties or fails to perform any of its covenants or agreements set forth in the merger agreement, which breach or failure to perform |
91
(i) would give rise to the failure of a condition to Thermo Fishers and Merger Subs obligation to effect the merger relating to the accuracy of the Companys representations and warranties or compliance by the Company with its obligations under the merger agreement and (ii) is incapable of being cured prior to January 14, 2014 (or July 14, 2014, as applicable), provided that Thermo Fisher may not rely on this provision to terminate the merger agreement if either Thermo Fisher or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements under the merger agreement; or |
¡ | prior to the adoption of the merger agreement by the Companys stockholders, the Board effects an adverse recommendation change; |
| by the Company: |
¡ | if either Thermo Fisher or Merger Sub breaches any of its representations or warranties or fails to perform any of its covenants or agreements set forth in the merger agreement, which breach or failure to perform (i) would give rise to the failure of a condition to the Companys obligation to effect the merger relating to the accuracy of Thermo Fishers and Merger Subs representations and warranties or compliance by Thermo Fisher and Merger Sub with their obligations under the merger agreement and (ii) is incapable of being cured prior to January 14, 2014 (or July 14, 2014, as applicable), provided that the Company may not rely on this provision to terminate the merger agreement if the Company is then in material breach of any of its representations, warranties, covenants or agreements under the merger agreement; or |
¡ | prior to the adoption of the merger agreement by the Companys stockholders, in connection with entering into an agreement with respect to an unsolicited superior proposal (subject to the payment of a termination fee). |
The Company is required to pay Thermo Fisher a termination fee of $485,000,000 in cash if the merger agreement is terminated under the following circumstances:
| the Company terminates the merger agreement in connection with entering into an agreement with respect to a superior proposal, in which case the termination fee must be paid simultaneously with such termination; |
| Thermo Fisher terminates the merger agreement because the Board has effected an adverse recommendation change, in which case the termination fee must be paid within two business days after such termination; or |
| (i) a bona fide takeover proposal has been publicly made, proposed or communicated (and not withdrawn), after the date of the merger agreement and prior to the completion of the Companys stockholders meeting to approve the adoption of the merger agreement (including any adjournment or postponement thereof) or prior to the termination of the merger agreement if earlier than completion of such stockholders meeting, (ii) following the making, proposal or communication of such bona fide takeover proposal, either the Company or Thermo Fisher terminates the merger agreement because the merger has not been consummated by January 14, 2014 (or July 14, 2014, as applicable) or because the Companys stockholders failed to adopt the merger agreement at a duly convened meeting, or Thermo Fisher terminates the merger agreement because the Company has breached its representations, warranties, covenants or agreements, which breach has given rise to the failure of a closing condition relating to the accuracy of the Companys representations and warranties or compliance by the Company with its obligations under the merger agreement and is incapable of being cured prior to January 14, 2014 (or July 14, 2014, as applicable) and (iii) within twelve months of the date the merger |
92
agreement is terminated, the Company enters into a definitive agreement with respect to, or consummates, any takeover proposal involving more than 50% of the consolidated assets of the Company and its subsidiaries or more than 50% of the outstanding shares of common stock or voting power of the Company, whether or not such takeover proposal was the same takeover proposal referred to in clause (i), in which case the termination fee must be paid within two business days of the earlier of entering into such definitive agreement and the consummation of such takeover proposal. |
Remedies; Specific Enforcement
The parties to the merger agreement have agreed that irreparable damage would occur in the event that any provision of the merger agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, the parties have agreed that they are entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions thereof, without proof of damages, in addition to any other remedy to which the parties are entitled under the merger agreement. If, prior to January 14, 2014 (or July 14, 2014, as applicable), any party brings any action for specific enforcement of the merger agreement against any other party, such deadline will be automatically extended for the period during which such action is pending plus 10 business days, or by such other time period established by the court presiding over such action, as the case may be.
In the event that Thermo Fisher receives full payment of the termination fee (described above in the section entitled Termination Fee), the receipt of such termination fee will be the sole and exclusive monetary remedy for any and all losses or damages suffered or incurred by Thermo Fisher, Merger Sub, any of their respective affiliates or any other person in connection with the merger agreement, the merger and the other transactions contemplated by the merger agreement (and the abandonment thereof) or any matter forming the basis for such termination.
Amendment or Supplement of the Merger Agreement
At any time prior to the effective time of the merger, the merger agreement may be amended or supplemented in any and all respects, by action taken by the respective boards of directors of each of the parties to the merger agreement. However, following adoption of the merger agreement by the Companys stockholders, there will be no amendments to the merger agreement that would by law require further approval of the Companys stockholders without obtaining such approval.
Any amendment or supplement to the merger agreement will be valid only if set forth in a writing signed on behalf of each party.
The merger agreement is governed by the law of the State of Delaware, and provides that any litigation arising out of or relating to the merger agreement or the transactions contemplated thereby will be heard and determined in the Court of Chancery of the State of Delaware.
93
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of July 18, 2013 regarding the beneficial ownership of Company common stock by (i) each person known by the Company to own beneficially more than five percent (>5%) of the outstanding Company common stock, (ii) each director, (iii) each executive officer and (iv) all directors and executive officers as a group. Except as otherwise specified, the named beneficial owner has sole voting and investment power over the shares listed. Except as otherwise indicated, the address for each beneficial owner is c/o Life Technologies Corporation, 5791 Van Allen Way, Carlsbad, California 92008.
Stock Ownership Table
Name and Address of Beneficial Owner |
Amount and
Nature of Beneficial Ownership of Common Stock (1) |
Percentage of Common Stock |
||||||
Paulson & Co., Inc.(2) |
14,773,700 | 8.6 | % | |||||
PRIMECAP Management Company(3) |
14,657,427 | 8.5 | % | |||||
Glenview Capital Management LLC(4) |
14,539,992 | 8.4 | % | |||||
BlackRock, Inc.(5) |
10,978,751 | 6.4 | % | |||||
The Vanguard Group, Inc.(6) |
10,685,089 | 6.2 | % | |||||
Gregory T. Lucier(7) |
1,767,099 | 1.0 | % | |||||
David F. Hoffmeister(8) |
686,765 | * | ||||||
Peter M. Leddy, Ph.D.(9) |
541,927 | * | ||||||
Mark P. Stevenson(10) |
438,404 | * | ||||||
John A. Cottingham(11) |
195,062 | * | ||||||
Kelli A. Richard(12) |
63,984 | * | ||||||
Ronald A. Andrews(13) |
23,860 | * | ||||||
George F. Adam, Jr.(14) |
25,214 | * | ||||||
Raymond V. Dittamore(15) |
105,176 | * | ||||||
Donald W. Grimm(16) |
75,912 | * | ||||||
Balakrishnan S. Iyer(17) |
83,964 | * | ||||||
Ronald A. Matricaria(18) |
149,964 | * | ||||||
Craig J. Mundie(19) |
0 | * | ||||||
Ora H. Pescovitz, M.D.(20) |
5,451 | * | ||||||
Per A. Peterson, Ph.D.(21) |
30,156 | * | ||||||
David C. UPrichard, Ph.D.(22) |
28,954 | * | ||||||
All Directors and Section 16 Executive Officers as group (16 individuals) Total |
4,221,892 | 2.4 | % |
* | Less than 1%. |
(1) | We determined the number of shares of Company common stock beneficially owned by each person under rules promulgated by the SEC, based on information obtained from questionnaires, company records and filings with the SEC. In cases of holders who are not directors, director nominees and/or executive officers, public filings (and, consequently, ownership reflected here) often reflect holdings as of a date prior to July 18, 2013 (i.e., March 31, 2013, or December 31, 2012). In the case of holders who are not directors, director nominees and/or executive officers, the information presented here is based on Schedule 13G filings made by such holders with the SEC and, where believed by us to improve the accuracy of such information, upon subsequent Schedule 13F filings made by such holders with the SEC. Percentage of beneficial ownership is, in all cases, based on the number of shares of Company common stock outstanding as of July 18, 2013. The information is not necessarily indicative of beneficial ownership for any other purpose. Beneficial ownership is determined in accordance with the rules of the SEC, based on factors including voting and investment power with respect to shares. Shares of Company common stock issuable upon conversion of convertible notes, or the exercise of options or |
94
warrants currently exercisable, or exercisable within 60 days after July 18, 2013, are deemed outstanding for the purpose of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other persons. |
(2) | Based on information obtained from a Schedule 13F filed with the SEC on May 15, 2013, by Paulson & Co. Inc. (Paulson), Paulson reported sole voting and dispositive power as to 14,773,700 shares. In a Schedule 13G filed with the SEC on February 14, 2013, Paulson stated that all shares reported in such Schedule 13G were owned by Paulsons advisory clients, none of which to Paulsons knowledge owned more than 5% of the class. Paulson itself disclaimed beneficial ownership of all such shares. The address for Paulson is 1251 Avenue of the Americas, New York, New York 10020. The number of shares held by Paulson and its related entities may have changed since the filing of the Schedule 13F. |
(3) | Based on information obtained from a Schedule 13F filed with the SEC on May 14, 2013, by PRIMECAP Management Company (PRIMECAP), PRIMECAP reported sole voting power as to 4,165,551 shares and sole dispositive power as to 14,657,427 shares. The address for PRIMECAP is 225 South Lake Avenue, Suite 400, Pasadena, California 91101. The number of shares held by PRIMECAP and its related entities may have changed since the filing of the Schedule 13F. |
(4) | Based on information obtained from a Schedule 13F filed with the SEC on May 15, 2013, by Glenview Capital Management, LLC (Glenview Capital), Glenview Capital reported sole voting and dispositive power as to 14,539,992 shares. In a Schedule 13G filed with the SEC on February 14, 2013, Glenview Capital reported that it held the shares reported in such Schedule 13G for the accounts of Glenview Capital Partners, L.P., Glenview Capital Master Fund, Ltd., Glenview Institutional Partners, L.P., Glenview Offshore Opportunity Master Fund, Ltd., Glenview Capital Opportunity Fund, L.P.; and GCM Opportunity Fund, L.P. Effective January 1, 2013, GCM Opportunity Fund, L.P. merged with and into Glenview Capital Opportunity Fund, L.P., and as a result the shares previously held for the account of GCM Opportunity Fund, L.P. are held for the account of Glenview Capital Opportunity Fund, L.P. The address for Glenview Capital is 767 Fifth Avenue, 44th Floor, New York, New York 10153. The number of shares held by Glenview Capital and its related entities may have changed since the filing of the Schedule 13F. |
(5) | Based on information obtained from a Schedule 13G filed with the SEC on February 5, 2013, by BlackRock, Inc. (BlackRock), on behalf of itself and its wholly owned subsidiaries BlackRock Advisors, LLC, BlackRock Capital Management, Inc., BlackRock Financial Management, Inc., BlackRock Investment Management, LLC, BlackRock Investment Management (Australia) Limited, BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Fund Managers Limited, BlackRock Life Limited, BlackRock Asset Management Australia Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Deutschland AG, BlackRock Asset Management Ireland Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock International Limited, BlackRock Institutional Trust Company, N.A., BlackRock Japan Co. Ltd., and BlackRock Investment Management (UK) Limited, BlackRock reported sole voting and dispositive power as to 10,978,751 shares. Such shares were beneficially owned by BlackRock and its wholly owned subsidiaries identified above. The address for BlackRock is 40 East 52nd Street, New York, New York 10022. The number of shares held by BlackRock and its related entities may have changed since the filing of the Schedule 13G. |
(6) | Based on information obtained from a Schedule 13F filed with the SEC on April 15, 2013 by The Vanguard Group, Inc. (Vanguard), Vanguard reported sole dispositive power as to 10,393,859 shares and shared dispositive power as to 291,230 shares. Vanguard reported sole voting power as to 300,684 shares. In a Schedule 13G filed with the SEC on February 12, 2013, Vanguard reported that certain shares reported in such Schedule 13G were beneficially owned by Vanguards wholly-owned subsidiaries Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. |
95
The address for Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The number of shares held by Vanguard and its related entities may have changed since the filing of the Schedule 13F. |
(7) | Includes 484,991 shares owned directly by Mr. Lucier, 30,948.21 shares under the Companys deferred compensation plan, and 1,251,160 shares issuable upon exercise of options exercisable within 60 days. |
(8) | Includes 84,804 shares owned directly by Mr. Hoffmeister, 15,443.15 shares under the Companys deferred compensation plan, and 586,518 shares issuable upon exercise of options exercisable within 60 days. |
(9) | Includes 40,326 shares owned directly by Dr. Leddy, 8879.52 shares under the Companys deferred compensation plan, and 492,721 shares issuable upon exercise of options exercisable within 60 days. |
(10) | Includes 97,260 shares owned directly Mr. Stevenson, 28,004.42 shares under the Companys deferred compensation plan, and 313,140 shares issuable upon exercise of options exercisable within 60 days. |
(11) | Includes 20,248 shares owned by a family trust in which Mr. Cottingham has a beneficial interest, 8,231 shares owned directly by Mr. Cottingham, 2,275.82 shares under the Companys deferred compensation plan, and 164,307 shares issuable upon exercise of options exercisable within 60 days. |
(12) | Includes 11,754 shares owned directly by Ms. Richard and 52,230 shares issuable upon exercise of options exercisable within 60 days. |
(13) | Includes 7,357 shares owned directly by Mr. Andrews and 16,503 shares issuable upon exercise of options exercisable within 60 days. |
(14) | Includes 2,747 shares owned directly by Mr. Adam and 22,467 fully vested restricted stock units issuable upon termination. |
(15) | Includes 28,073 shares owned directly, 4,000 shares owned by a family trust in which Mr. Dittamore has a beneficial interest, 25,103 fully vested restricted stock units issuable upon termination, and 48,000 shares issuable upon exercise of options exercisable within 60 days. |
(16) | Includes 27,912 fully vested restricted stock units issuable upon termination to Mr. Grimm and 48,000 shares issuable upon exercise of options exercisable within 60 days. |
(17) | Includes 8,888 shares owned directly by Mr. Iyer, 27,076 fully vested restricted stock units issuable upon termination, and 48,000 shares issuable upon exercise of options exercisable within 60 days. |
(18) | Includes 70,000 shares owned directly by Mr. Matricaria, 31,964 fully vested restricted stock units issuable upon termination, and 48,000 shares issuable upon exercise of options exercisable within 60 days. |
(19) | Elected as a director on April 24, 2013. |
(20) | Includes 750 shares owned directly by Dr. Pescovitz and 4,701 shares under the Companys deferred compensation plan. |
(21) | Includes 28,238 fully vested restricted stock units issuable upon termination to Dr. Peterson and 1,918 shares issuable upon exercise of options exercisable within 60 days. |
(22) | Includes 2,930 shares owned directly by Dr. UPrichard, 23,024 fully vested restricted stock units issuable upon termination, and 3,000 shares issuable upon exercise of options exercisable within 60 days. |
96
If you do not vote for the adoption of the merger agreement at the special meeting of stockholders, and you make a written demand for appraisal prior to the taking of the vote on the adoption of the merger agreement and otherwise comply with the applicable statutory procedures of Section 262 of the DGCL, summarized herein, you may be entitled to appraisal rights under Section 262 of the DGCL. In order to exercise and perfect appraisal rights, a record holder of shares of Company common stock must follow the steps summarized below properly and in a timely manner.
Section 262 of the DGCL is reprinted in its entirety as Annex D to this proxy statement. Set forth below is a summary description of Section 262 of the DGCL. The following summary describes the material aspects of Section 262 of the DGCL and the law relating to appraisal rights, and is qualified in its entirety by reference to Annex D. All references in Section 262 of the DGCL and this summary to stockholder are to the record holder of shares of Company common stock. Failure to comply strictly with the procedures set forth in Section 262 of the DGCL will result in the loss of appraisal rights.
Under the DGCL, holders of shares of Company common stock who follow the procedures set forth in Section 262 of the DGCL will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the fair value of those shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid on the amount determined to be the fair value.
Under Section 262 of the DGCL, when a merger agreement relating to a proposed merger is to be submitted for adoption at a meeting of stockholders, as in the case of the special meeting, the corporation, not less than 20 days prior to such meeting, must notify each of its stockholders who was a stockholder on the record date for notice of such meeting with respect to such shares for which appraisal rights are available that appraisal rights are so available, and must include in each such notice a copy of Section 262 of the DGCL. This proxy statement constitutes such notice to the holders of Company common stock and Section 262 of the DGCL is attached to this proxy statement as Annex D and incorporated herein by reference. Any stockholder who wishes to exercise such appraisal rights or who wishes to preserve his or her right to do so should review the following discussion and Annex D carefully, because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under the DGCL.
If you wish to exercise appraisal rights in accordance with Section 262 of the DGCL, you must not vote for the adoption of the merger agreement and you must deliver to the Company, before the vote on the proposal to adopt the merger agreement, a written demand for appraisal of your shares of Company common stock. If you sign and return a proxy card or vote by submitting a proxy via the internet or by telephone, without abstaining or expressly directing that your shares of Company common stock be voted against the adoption of the merger agreement, you will effectively waive your appraisal rights with respect to shares represented by the proxy because such shares will be voted for the adoption of the merger agreement. Accordingly, if you desire to exercise and perfect appraisal rights with respect to any of your shares of Company common stock, you must either refrain from executing and returning the enclosed proxy card and from voting in person, or submitting a proxy via the internet or by telephone, in favor of the proposal to adopt the merger agreement or check either the against or the abstain box next to the proposal on such card or vote in person or by submitting a proxy via the internet or by telephone against the proposal or register in person an abstention with respect thereto. A vote or proxy against the adoption of the merger agreement will not, in and of itself, constitute a demand for appraisal.
A demand for appraisal will be sufficient if it reasonably informs the Company of the identity of the stockholder and that such stockholder intends thereby to demand appraisal of such stockholders shares of Company common stock. This written demand for appraisal must be separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. If you wish to exercise your appraisal rights you must be the record holder of such shares of Company common stock on the date the written demand for appraisal is made and you must continue to hold such shares through the effective time of the merger. Accordingly,
97
a stockholder who is the record holder of shares of Company common stock on the date the written demand for appraisal is made, but who thereafter transfers such shares prior to the effective time of the merger, will lose any right to appraisal in respect of such shares.
Only a stockholder of record is entitled to assert appraisal rights for the shares of Company common stock registered in that stockholders name. A demand for appraisal must be executed by or on behalf of the stockholder of record, fully and correctly, as the holders name appears on the stock certificates, or in the case of uncertificated shares, as the holders name appears on the stockholder register, and must state that such person intends thereby to demand appraisal of his, her or its shares. If the shares are owned of record in a fiduciary capacity, such as by a broker, bank, trust or other nominee, execution of the demand for appraisal should be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including one for two or more joint owners, may execute the demand for appraisal on behalf of a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for such owner or owners.
A record holder such as a broker, bank, trust or other nominee who holds shares as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of Company common stock held for one or more beneficial owners while not exercising such rights with respect to the shares held for other beneficial owners; in such case, the written demand should set forth the number of shares as to which appraisal is sought. If the number of shares of Company common stock is not expressly stated, the demand will be presumed to cover all shares held in the name of the record owner. If you hold your shares in an account with a broker, bank, trust or other nominee and wish to exercise your appraisal rights, you are urged to consult with your broker, bank, trust or other nominee to determine the appropriate procedures for the making of a demand for appraisal.
All written demands for appraisal of shares of Company common stock must be mailed or delivered to the Companys Corporate Secretary at our principal executive offices at 5791 Van Allen Way, Carlsbad, California 92008, Attention: Corporate Secretary, prior to the vote on the adoption of the merger agreement.
Within 10 days after the effective time of the merger, Life Technologies, as the surviving corporation in the merger, will notify each stockholder who has properly asserted appraisal rights under Section 262 of the DGCL and has not voted for the adoption of the merger agreement of the effective date of the merger. Within 120 days after the effective time of the merger, but not thereafter, Life Technologies, as the surviving corporation in the merger, or any stockholder who has complied with the statutory requirements summarized above may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of Company common stock held by all such stockholders. If no such petition is filed, appraisal rights will be lost for all stockholders who had previously demanded appraisal of their shares. We are not under any obligation, and we have no present intention, to file a petition with respect to appraisal of the value of the shares. Accordingly, if you wish to exercise your appraisal rights, you should regard it as your obligation to take all steps necessary to perfect your appraisal rights in the manner prescribed in Section 262 of the DGCL.
Within 120 days after the effective date of the merger, any stockholder who has complied with the provisions of Section 262 of the DGCL will be entitled, upon written request, to receive from Life Technologies, as the surviving corporation in the merger, a statement setting forth the aggregate number of shares of Company common stock not voted in favor of the adoption of the merger agreement and with respect to which demands for appraisal were received, and the aggregate number of holders of such shares. Such statement will be mailed within 10 days after the written request therefor has been received by Life Technologies, as the surviving corporation in the merger, or within 10 days after expiration of the period for delivery of appraisal demands, whichever is later. A person who is the beneficial owner of Company common stock held either in a voting trust or by a broker, bank, trust or other nominee on behalf of such person may, in such persons own name, file an appraisal petition or request from Life Technologies, as the surviving corporation, the statement described in this paragraph.
98
If a petition for an appraisal is timely filed and a copy thereof served upon Life Technologies, then as the surviving corporation in the merger we will be obligated, within 20 days, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Delaware Court of Chancery, the Court of Chancery is empowered to conduct a hearing on such petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded appraisal rights and who hold stock certificates representing shares of Company common stock to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with such direction, the Court of Chancery may dismiss the proceeding as to such stockholder.
After the Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court of Chancery will determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. If you are considering seeking appraisal, you should be aware that the fair value of your shares as determined under Section 262 of the DGCL could be more than, the same as or less than the merger consideration you are entitled to receive pursuant to the merger agreement if you did not seek appraisal of your shares, and that investment banking opinions as to the fairness from a financial point of view of the merger consideration to be paid in the merger are not necessarily opinions as to fair value under Section 262 of the DGCL. In determining fair value of shares, the Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court has stated that such factors include market value, asset value, dividends, earning prospects, the nature of the enterprise and any other facts which were known or which could be ascertained as of the date of the merger and which throw any light on future prospects of the merged corporation. In Weinberger, the Delaware Supreme Court stated, among other things, that proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court should be considered in an appraisal proceeding. Section 262 of the DGCL provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger. In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a narrow exclusion [that] does not encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered. In addition, the Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenters exclusive remedy.
The Court of Chancery will direct the payment of the fair value of the shares of Company common stock for which appraisal rights have been properly exercised and perfected, together with interest, if any, by the surviving corporation to the stockholders entitled thereto. The Court of Chancery will determine the amount of interest, if any, to be paid on the amounts to be received by persons whose shares of Company common stock have been appraised. The costs of the action (which do not include attorneys fees or expert fees or expenses) may be determined by the Court of Chancery and taxed upon the parties as the Court of Chancery deems equitable. The Court of Chancery may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including reasonable attorneys fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all of the shares entitled to appraisal. In the absence of such determination or assessment, each party bears its own expenses.
99
Any stockholder who has duly demanded and perfected an appraisal in compliance with Section 262 of the DGCL will not, after the effective time of the merger, be entitled to vote his or her shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to holders of record of shares of Company common stock as of a date prior to the effective time of the merger.
At any time within 60 days after the effective date of the merger, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to withdraw his or her demand for appraisal and to accept the cash payment for his or her shares offered under the merger agreement. After this period, a stockholder may withdraw his or her demand for appraisal only with the written consent of Life Technologies, as the surviving corporation in the merger. If no petition for appraisal is filed with the Court of Chancery within 120 days after the effective date of the merger, a stockholders right to appraisal will cease and he or she will be entitled to receive the cash payment for his or her shares pursuant to the merger agreement, as if such stockholder had not demanded appraisal of the shares. No appraisal proceeding timely filed in the Court of Chancery demanding appraisal will be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned on such terms as the Court of Chancery deems just; however, this will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party to withdraw his or her demand for appraisal and accept the merger consideration offered under the merger agreement within 60 days after the effective date of the merger, as described in the first sentence of this paragraph.
If you properly demand appraisal of your shares of Company common stock under Section 262 of the DGCL and you fail to perfect, or effectively withdraw or lose, your right to appraisal as provided in the DGCL, your shares of Company common stock will be converted into the right to receive the merger consideration under the merger agreement. You will fail to perfect, or effectively lose or withdraw, your right to appraisal if, among other things, no petition for appraisal is filed within 120 days after the effective date of the merger. In addition, a stockholder may withdraw his or her demand for appraisal in accordance with Section 262 of the DGCL and accept the merger consideration offered under the merger agreement as described above.
If you desire to exercise your appraisal rights in accordance with Section 262 of the DGCL, you must not vote for adoption of the merger agreement and you must strictly comply with the procedures set forth in Section 262 of the DGCL.
In view of the complexity of Section 262 of the DGCL, stockholders who wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.
100
MARKET PRICE AND DIVIDEND INFORMATION
The Company common stock trades on the NASDAQ Global Select Market under the symbol LIFE. The table below provides the high and low closing sales prices of the Company common stock for the periods indicated, as reported by NASDAQ.
High |
Low |
|||||||
Year ended December 31, 2013 |
||||||||
Third quarter (through July 19, 2013) |
$ | 74.65 | $ | 74.06 | ||||
Second quarter |
$ | 74.41 | $ | 64.57 | ||||
First quarter |
$ | 65.27 | $ | 50.76 | ||||
Year ended December 31, 2012 |
||||||||
Fourth quarter |
$ | 51.97 | $ | 45.67 | ||||
Third quarter |
$ | 50.27 | $ | 40.50 | ||||
Second quarter |
$ | 49.07 | $ | 39.73 | ||||
First quarter |
$ | 50.84 | $ | 39.80 | ||||
Year ended December 31, 2011 |
||||||||
Fourth quarter |
$ | 43.31 | $ | 36.07 | ||||
Third quarter |
$ | 52.61 | $ | 35.30 | ||||
Second quarter |
$ | 56.71 | $ | 49.85 | ||||
First quarter |
$ | 57.25 | $ | 49.18 |
The Company has not paid dividends in the last two years. Under the terms of the merger agreement, the Company is prohibited from paying dividends prior to the merger without obtaining Thermo Fishers written consent. Accordingly, we do not expect to declare or pay any dividends prior to consummation of the merger.
On January 17, 2013, the last trading day prior to publication of news reports that the Company had hired Deutsche Bank and Moelis to solicit interest for an acquisition of the Company, the reported closing price for the Company common stock was $54.97 per share. The $76.00 per share to be paid for each share of Company common stock in the merger represents a premium of approximately 38.3% over the closing price on January 17, 2013. On April 12, 2013, the last trading day prior to the Boards approval of the merger agreement, the reported closing price for the Company common stock was $68.00 per share. The $76.00 per share to be paid for each share of Company common stock in the merger represents a premium of approximately 11.8% over the closing price on April 12, 2013. On July 19, 2013, the latest practicable trading date before the filing of this proxy statement, the reported closing price for the Company common stock was $74.50. You are encouraged to obtain current market quotations for shares of Company common stock in connection with voting your shares of Company common stock.
As of the close of business on the record date, there were 172,659,776 shares of Company common stock outstanding and entitled to vote, held by 3,832 stockholders of record. The number of holders is based upon the actual number of holders registered in our records at such date and excludes holders of shares in street name or persons, partnerships, associations, corporations, or other entities identified in security positions listings maintained by depository trust companies.
101
STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
In accordance with notices that we sent to certain stockholders, we are sending only one copy of this proxy statement to stockholders who share the same last name and address, unless they have notified the Company that they want to continue receiving multiple copies. This practice, known as householding, is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.
If you received a householded mailing and you would like to have additional copies of this proxy statement mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to Investor Relations via e-mail at ir@lifetech.com or by mail to Investor Relations, Life Technologies Corporation, 5791 Van Allen Way, Carlsbad, CA 92008, or by phone at (760) 603-7208. We will promptly send additional copies of this proxy statement upon receipt of such request. You may also contact the Company if you received multiple copies of this proxy statement and would prefer to receive a single copy in the future.
Householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse share the same last name and address, and you and your spouse each have two accounts containing Life Technologies stock at two different brokerage firms, your household will receive two copies of the Life Technologies Annual Meeting materialsone from each brokerage firm.
102
If the merger is completed, the Company does not expect to hold an annual meeting of stockholders in 2014. If the merger is not completed, you will continue to be entitled to attend and participate in the Companys annual meetings of stockholders, and we will hold a 2014 annual meeting of stockholders, in which case we will provide notice of or otherwise publicly disclose the date on which the 2014 annual meeting will be held. If the 2014 annual meeting of stockholders is held, stockholder proposals will be eligible for consideration for inclusion in the proxy statement and form of proxy for the Companys 2014 annual meeting of stockholders in accordance with Rule 14a-8 under the Exchange Act and the Companys Bylaws, as described below.
Stockholders interested in submitting a proposal for inclusion in our proxy materials for our 2014 annual meeting of stockholders must do so by sending such proposal to the Companys Corporate Secretary at our principal executive offices at 5791 Van Allen Way, Carlsbad, California 92008, Attention: Corporate Secretary. Under the SECs proxy rules, the deadline for submission of proposals to be included in our proxy materials for the 2014 annual meeting of stockholders is November 15, 2013, unless the date of the annual meeting is changed by more than 30 days from the anniversary of the 2013 meeting, in which case a proposal must be received a reasonable time before we print and mail our proxy materials. Accordingly, in order for a stockholder proposal to be considered for inclusion in our proxy materials for the 2014 annual meeting, any such stockholder proposal must be received by our Corporate Secretary on or before such date, and comply with the procedures and requirements in Rule 14a-8 under the Exchange Act, as well as the applicable requirements of the Companys Bylaws discussed below. Any stockholder proposal received after such date will be considered untimely, and will not be included in our proxy materials. In addition, stockholders interested in submitting a proposal outside of Rule 14a-8 must properly submit such a proposal in accordance with the Companys Bylaws.
The Companys Bylaws require advance notice of business to be brought before a stockholders meeting, including nominations of persons for election as directors. To be timely, notice to the Companys Corporate Secretary must be received at our principal executive offices not less than 120 days or more than 150 days prior to the anniversary date of the mailing of the proxy materials for the preceding years annual meeting and must contain specified information concerning the matters to be brought before such meeting and concerning the stockholder proposing such matters. For the Companys 2014 Annual Meeting of Stockholders, proper notice of business that is intended for inclusion in the Companys proxy statement must be received no earlier than October 16, 2013, nor later than the close of business on November 15, 2013, unless the date of the annual meeting is changed by more than 30 days from the anniversary of the 2013 meeting, in which case the deadline is a reasonable time before we begin to print and mail our proxy materials, and not later than the close of business on the later of (i) the 90th day prior to the scheduled annual meeting and (ii) the 15th day following the day on which public announcement of the date of annual meeting was first made.
103
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange Act. We file reports, proxy statements and other information with the SEC. You may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains our reports, proxy and information statements and other information at www.sec.gov.
The Company will make available a copy of the documents we file with the SEC on the Investor Relations section of our website at www.ir.lifetechnologies.com as soon as reasonably practicable after filing these materials with the SEC. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference. Copies of any of these documents may be obtained free of charge either on our website, by contacting the Companys Investor Relations Department at 5791 Van Allen Way, Carlsbad, California 92008, or by calling (760) 603-7208.
Statements contained in this proxy statement, or in any document incorporated in this proxy statement by reference, regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to incorporate by reference information into this proxy statement. This means that we can disclose important information by referring to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement. This proxy statement and the information that we later file with the SEC may update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the information in this proxy statement. We also incorporate by reference into this proxy statement the following documents filed by us with the SEC under the Exchange Act and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the special meeting (provided that we are not incorporating by reference any information furnished to, but not filed with, the SEC):
| our Annual Report on Form 10-K for the fiscal year ended December 31, 2012; |
| our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013; |
| the portions of our Definitive Proxy Statement on Schedule 14A filed with the SEC on March 15, 2013, that are incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012; and |
| our Current Reports on Form 8-K filed on April 15, 2013, April 16, 2013, April 24, 2013, June 7, 2013, and June 26, 2013. |
The information contained in this proxy statement speaks only as of the date indicated on the cover of this proxy statement unless the information specifically indicates that another date applies.
We have not authorized anyone to give you any information or to make any representation about the proposed merger or the Company that is different from or adds to the information contained in this proxy statement or in the documents we have publicly filed with the SEC. Therefore, if anyone does give you any different or additional information, you should not rely on it.
104
AGREEMENT AND PLAN OF MERGER
By and Among
LIFE TECHNOLOGIES CORPORATION,
THERMO FISHER SCIENTIFIC INC.
and
POLPIS MERGER SUB CO.
Dated as of April 14, 2013
TABLE OF CONTENTS
Page | ||||
ARTICLE I
The Merger |
| |||
SECTION 1.01. The Merger | 1 | |||
SECTION 1.02. Closing | 1 | |||
SECTION 1.03. Effective Time | 1 | |||
SECTION 1.04. Effects of the Merger | 2 | |||
SECTION 1.05. Certificate of Incorporation and By-laws | 2 | |||
SECTION 1.06. Directors of the Surviving Corporation | 2 | |||
SECTION 1.07. Officers of the Surviving Corporation | 2 | |||
ARTICLE II
Effect of the Merger on the Capital Stock; Exchange of Certificates |
| |||
SECTION 2.01. Effect on Capital Stock | 2 | |||
SECTION 2.02. Exchange of Shares | 3 | |||
SECTION 2.03. Company Equity Awards | 5 | |||
SECTION 2.04. Adjustments | 6 | |||
ARTICLE III
Representations and Warranties of the Company |
| |||
SECTION 3.01. Organization and Standing; Subsidiaries | 7 | |||
SECTION 3.02. Capital Stock | 7 | |||
SECTION 3.03. Authority; Noncontravention | 8 | |||
SECTION 3.04. Voting Requirements | 9 | |||
SECTION 3.05. Company SEC Documents; Undisclosed Liabilities | 9 | |||
SECTION 3.06. Absence of Certain Changes | 10 | |||
SECTION 3.07. Litigation | 10 | |||
SECTION 3.08. Compliance with Laws; Permits | 10 | |||
SECTION 3.09. Tax Matters | 11 | |||
SECTION 3.10. Employee Benefits | 11 | |||
SECTION 3.11. Labor Matters | 13 | |||
SECTION 3.12. Environmental Matters | 13 | |||
SECTION 3.13. Intellectual Property | 13 | |||
SECTION 3.14. Rights Agreement; Anti-Takeover Provisions | 14 | |||
SECTION 3.15. Real and Personal Property | 14 | |||
SECTION 3.16. Proxy Statement | 14 | |||
SECTION 3.17. Material Contracts | 15 | |||
SECTION 3.18. Opinions of Financial Advisors | 16 | |||
SECTION 3.19. Brokers and Other Advisors | 16 | |||
ARTICLE IV
Representations and Warranties of Parent and Merger Sub |
| |||
SECTION 4.01. Organization and Standing | 16 | |||
SECTION 4.02. Authority; Noncontravention | 16 | |||
SECTION 4.03. Litigation | 17 | |||
SECTION 4.04. Ownership and Operations of Merger Sub | 17 | |||
SECTION 4.05. Information Supplied | 17 | |||
SECTION 4.06. No Ownership of Company Common Stock | 18 | |||
SECTION 4.07. Financing | 18 | |||
SECTION 4.08. Certain Arrangements | 18 | |||
SECTION 4.09. Confidentiality Agreement | 19 | |||
SECTION 4.10. Brokers and Other Advisors | 19 | |||
SECTION 4.11. Independent Investigation | 19 |
ARTICLE V
Covenants and Agreements |
| |||
SECTION 5.01. Conduct of Business | 19 | |||
SECTION 5.02. No Solicitation; Change in Recommendation | 22 | |||
SECTION 5.03. Preparation of the Proxy Statement; Stockholders Meeting | 24 | |||
SECTION 5.04. Reasonable Best Efforts | 25 | |||
SECTION 5.05. Public Announcements | 28 | |||
SECTION 5.06. Access to Information; Confidentiality | 28 | |||
SECTION 5.07. Indemnification and Insurance | 28 | |||
SECTION 5.08. Rule 16b-3 | 30 | |||
SECTION 5.09. Employee Matters | 30 | |||
SECTION 5.10. Notification of Certain Matters; Stockholder Litigation | 31 | |||
SECTION 5.11. Parent Vote | 32 | |||
SECTION 5.12. Post-Closing Arrangements | 32 | |||
SECTION 5.13. Tax Certificate | 32 | |||
ARTICLE VI
Conditions Precedent |
| |||
SECTION 6.01. Conditions to Each Partys Obligation to Effect the Merger | 32 | |||
SECTION 6.02. Conditions to Obligations of Parent and Merger Sub | 32 | |||
SECTION 6.03. Conditions to Obligations of the Company | 33 | |||
SECTION 6.04. Frustration of Closing Conditions | 33 | |||
ARTICLE VII
Termination |
| |||
SECTION 7.01. Termination | 33 | |||
SECTION 7.02. Effect of Termination | 34 | |||
SECTION 7.03. Termination Fees | 35 | |||
ARTICLE VIII
Miscellaneous |
| |||
SECTION 8.01. No Survival of Representations and Warranties | 35 | |||
SECTION 8.02. Amendment or Supplement | 35 | |||
SECTION 8.03. Extension of Time, Waiver, Etc. | 35 | |||
SECTION 8.04. Assignment | 36 | |||
SECTION 8.05. Counterparts | 36 | |||
SECTION 8.06. Entire Agreement; Third-Party Beneficiaries; No Other Representations or Warranties | 36 | |||
SECTION 8.07. Governing Law; Jurisdiction | 37 | |||
SECTION 8.08. Specific Enforcement | 37 | |||
SECTION 8.09. WAIVER OF JURY TRIAL | 38 | |||
SECTION 8.10. Notices | 38 | |||
SECTION 8.11. Severability | 39 | |||
SECTION 8.12. Fees and Expenses | 39 | |||
SECTION 8.13. Definitions | 39 | |||
SECTION 8.14. Interpretation | 43 | |||
SECTION 8.15. No Recourse to Lenders | 43 |
Exhibit A | Certificate of Incorporation of Surviving Corporation | |||
Exhibit B | By-laws of Surviving Corporation |
A-ii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this Agreement) dated as of April 14, 2013, among Life Technologies Corporation, a Delaware corporation (the Company), Thermo Fisher Scientific Inc., a Delaware corporation (Parent), and Polpis Merger Sub Co., a Delaware corporation and a wholly owned subsidiary of Parent (Merger Sub).
WHEREAS the parties intend that Merger Sub, upon the terms and subject to the conditions set forth in this Agreement, be merged (the Merger) with and into the Company, with the Company surviving the Merger and becoming a wholly owned Subsidiary of Parent as a result of the Merger;
WHEREAS the Board of Directors of the Company has (i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, and (iii) subject to Section 5.02, resolved to recommend adoption of this Agreement by the stockholders of the Company; and
WHEREAS the respective Boards of Directors of Parent and Merger Sub have (i) determined that it is in the best interests of the stockholders of Parent and Merger Sub, respectively, and declared it advisable, to enter into this Agreement and (ii) approved the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the DGCL), at the Effective Time Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation in the Merger (the Surviving Corporation).
SECTION 1.02. Closing. The closing of the Merger (the Closing) shall take place at 10:00 a.m. (New York City time) on the second Business Day after satisfaction or (to the extent permitted by applicable Law) waiver of the conditions set forth in Article VI (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by applicable Law) waiver of those conditions at such time). The Closing shall be held at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019. Notwithstanding the foregoing, the Closing may take place at such other date, time or place as Parent and the Company may agree to in writing. The date on which the Closing occurs is referred to in this Agreement as the Closing Date.
SECTION 1.03. Effective Time. Subject to the provisions of this Agreement, at the Closing, the parties shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger, executed in accordance with, and in such form as is required by, the relevant provisions of the DGCL (the Certificate of Merger). At or prior to the Closing, the parties shall make all other filings or recordings required under the DGCL in connection with the Merger. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as
A-1
Parent and the Company shall agree and shall specify in the Certificate of Merger. The time the Merger becomes effective is referred to in this Agreement as the Effective Time.
SECTION 1.04. Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.05. Certificate of Incorporation and By-laws. At the Effective Time, (a) the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to be in the form attached hereto as Exhibit A until thereafter amended as provided therein or by applicable Law (subject to Section 5.07) and (b) the by-laws of the Surviving Corporation shall be amended and restated in their entirety to be in the form attached hereto as Exhibit B until thereafter amended as provided therein or by applicable Law (subject to Section 5.07).
SECTION 1.06. Directors of the Surviving Corporation. The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.
SECTION 1.07. Officers of the Surviving Corporation. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock;
Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any shares of common stock, par value $0.01, of the Company (the Company Common Stock) or any shares of capital stock of Parent or Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of capital stock of Merger Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01, of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Parent-Owned Stock; Treatment of Stock Owned by Company Subsidiaries. Each share of Company Common Stock that is owned by the Company as treasury stock (other than any share of Company Common Stock that is held on behalf of a third party in the Company Rabbi Trust) or that is owned by Parent immediately prior to the Effective Time shall be canceled and shall cease to exist and no consideration shall be delivered in exchange therefor. Each share of Company Common Stock that is owned by any direct or indirect wholly owned Subsidiary of the Company or of Parent shall not represent the right to receive the Merger Consideration and shall be, at the election of Parent, either (i) converted into shares of common stock of the Surviving Corporation or (ii) canceled.
(c) Conversion of Company Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled or converted into shares of common stock of the Surviving Corporation in accordance with Section 2.01(b) and any Appraisal Shares) shall be converted automatically into and shall thereafter represent the right to receive an amount in cash equal to the
A-2
sum of $76.00, without interest, and the Additional Per Share Consideration, if any (together, the Merger Consideration). As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such shares of Company Common Stock (each, a Certificate) and each holder of shares of Company Common Stock held in uncertificated book-entry form (Book-Entry Shares) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration, without interest, to be paid in consideration therefor upon surrender of such Certificate in accordance with Section 2.02(b), in the case of certificated shares, and automatically in the case of Book-Entry Shares. For purposes of this Agreement, Additional Per Share Consideration means, if the Effective Time occurs after the nine-month anniversary of the date hereof (and the End Date has automatically been extended pursuant to Section 7.01(b)(i)) and the failure of the Effective Time to occur on or prior to such date was not caused by the failure of the Company to perform in all material respects its obligations under Sections 5.04(c) and 5.04(d), an amount in cash equal to $0.0062466 for each day during the period commencing on, and including, January 14, 2014, and ending on, and including, the Closing Date.
(d) Appraisal Rights. Notwithstanding any provision of this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by holders who have not voted in favor of or consented to the Merger and who are entitled to demand and have properly demanded their rights to be paid the fair value of such shares of Company Common Stock in accordance with Section 262 of the DGCL (the Appraisal Shares) shall not be canceled and converted into the right to receive the Merger Consideration as provided in Section 2.01(c), and the holders of Appraisal Shares shall be entitled to only such rights as are granted by Section 262 of the DGCL. The Company shall promptly notify Parent of any written demands received by the Company for appraisal of any shares of Company Common Stock and attempted withdrawals of such demands, and Parent shall have the right to participate in negotiations and proceedings with respect to such demands for appraisal. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent or as otherwise required by an Order, make any payment with respect to, or settle or offer to settle, any such demands.
SECTION 2.02. Exchange of Shares. (a) Paying Agent. Prior to the Closing Date, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as agent (the Paying Agent) for the payment of the Merger Consideration in accordance with this Article II and, in connection therewith, shall prior to the Closing Date enter into an agreement with the Paying Agent in a form reasonably acceptable to the Company. At or prior to the Effective Time, Parent shall deposit or cause to be deposited with the Paying Agent an amount in cash sufficient to pay the aggregate Merger Consideration (such cash being hereinafter referred to as the Exchange Fund). Pending its disbursement to the holders of Company Common Stock, the Exchange Fund shall be invested by the Paying Agent as directed by Parent in (i) short-term direct obligations of the United States of America, (ii) short-term obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, (iii) short-term commercial paper rated the highest quality by each of Moodys Investors Service, Inc. and Standard and Poors Ratings Services or (iv) certificates of deposit, bank repurchase agreements or bankers acceptances of commercial banks with capital exceeding $10 billion. Parent shall promptly replace or cause to be replaced any funds deposited with the Paying Agent lost through any investment made pursuant to this Section 2.02(a). The Paying Agent shall be required to hold the Exchange Fund for the benefit of holders of Company Common Stock, and to promptly make the payments provided for in this Article II. The Exchange Fund shall not be used for any purpose not expressly provided for in this Agreement. Nothing contained in this Section 2.02(a) and no investment losses resulting from investment of the funds deposited with the Paying Agent shall diminish the rights of any holder of Company Common Stock to receive the Merger Consideration as provided herein.
(b) Payment Procedures. As soon as reasonably practicable after the Effective Time (but in no event more than three Business Days thereafter), the Surviving Corporation shall cause the Paying Agent to mail to each registered holder of a Certificate (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of such Certificates to the