The Work

July 13, 2011 5:12 PM

Five Firms Advise on $6.3 Billion Apax-Led KCI Buy

Posted by Tom Huddleston Jr.

UPDATED: 7/14/11, 12:10 a.m., Additional lawyers from Weil Gotshal, Torys, and Cox Smith Matthews have been added to this story.

A group of investment funds led by Apax Partners is set to pay $6.3 billion for medical device manufacturer Kinetic Concepts, Inc.

Apax, joined by the Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, will pay Kinetic Concepts, Inc. (KCI) shareholders $68.50 per share, according to terms of the deal announced Wednesday by KCI.

(Apax is a part owner of ALM Media, LLC, parent company and publisher of The Am Law Daily.)

The sales price represents a 21 percent premium on KCI's average share price during the 30-day period that ended July 5--the day before speculation about a possible deal first surfaced, according to the KCI press release--and a 6.2 percent premium on the stock's Tuesday closing price of $64.49.

San Antonio, Tx.–based KCI makes such health care–related therapies and products as hospital beds and wound-treatment systems. Those buying the company, which employs more than 7,000 people, likely see it as an undervalued asset with stable cash flow and strong prospects for growth, according to a Reuters report.

Simpson, Thacher & Bartlett is acting as lead counsel to the Apax-led investment consortium. The firm has a long history with Apax and has already advised the fund on a number of deals this year, including the $763 million purchase of Trader Corporation from Yellow Media Inc. in March. In 2007 Simpson Thacher led the way on the $7.75 billion acquisition of Thomson Learning by a group led by Apax and OMERS Capital Partners.

Simpson Thacher's team on the KCI deal is being led by M&A partners Robert Spatt and Ryerson Symons. Other attorneys from the team working on the deal include tax partner Gary Mandel, benefits partner Brian Robbins, intellectual property partner Lori Lesser, derivatives partner Joyce Xu, and capital markets partner John Lobrano.

Kirkland & Ellis partners Jay Ptashek and Josh Korff are advising the group on the deal's financing. Kirkland has its own history with Apax. The Am Law Daily reported in April that the firm advised the fund on its $2 billion acquisitions of a pair of software companies.

Epstein Becker & Green is serving as health care regulatory counsel for the buyers. Mark Lutes, a member in Epstein Becker's health care and life sciences practice among the firm lawyers who are working on the transaction.

Weil, Gotshal & Manges is counsel to PSP Investment Board as part of the consortium. Corporate partner Douglas Warner is working on the matter for that firm, along with tax partner Kimberly Blanchard. CPIBB also engaged separate counsel, as Torys corporate partners Darren Baccus and Stefan Stauder, as well as tax partner Peter Keenan, advised the fund on the matter.

KCI hired Skadden, Arps, Slate, Meagher & Flom to advise on the acquisition, as well as San Antonio–based Cox Smith Matthews. William McDonough, Jr., led the Cox Smith team.

Skadden partners working on the deal include Chicago-based M&A partners Charles Mulaney and Shilpi Gupta, banking partner Seth Jacobson, and benefits partner Joseph Yaffe. In 2008 Skadden advised KCI on its $1.7 billion acquisition of biotechnology company LifeCell Corporation.

The deal is subject to regulatory and shareholder approval and includes a 40-day "go-shop" period, during which KCI will seek out alternative offers for the company. A group of shareholders that includes KCI founder James Leininger, which holds an 11 percent stake in the company, has pledged to vote its shares in support of the deal, according to KCI.

Assuming it clears those hurdles, the transaction is expected to close in the second half of 2011.

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