CHICAGO–(BUSINESS WIRE)– Merge Healthcare Incorporated (NASDAQ:MRGE) (“Merge”) announced today that it commenced a consent solicitation (the “Solicitation”) with respect to proposed amendments to the indenture (the “Indenture”) governing the company’s outstanding $200 million in aggregate principal amount of 11.75% Senior Notes Due 2015 (CUSIP Numbers 589499AB8 and 589499AA0 and ISIN Number USU58948AA53). The proposed amendments would enable Merge to undertake an offering of an additional amount of notes under the Indenture in an aggregate principal amount not to exceed $52.0 million (the “Additional Note Offering”).
The proceeds of the Additional Note Offering will be used solely to repurchase all of Merge’s outstanding Series A Preferred Stock (current accrued liquidation preference of approximately $49 million) and to pay consent fees, legal, printing and accounting costs and other expenses related to these proposed transactions. The holders of the Preferred Stock have agreed to certain amendments to the terms of the Series A Preferred Stock that will permit this redemption without the payment of otherwise-required redemption premiums of approximately $6 million. The Company believes that it is in the best interests of the Company and its stockholders to redeem the Series A Preferred Stock at this time, given the accruing 15% coupon on the Series A Preferred Stock (as compared to the 11.75% coupon on the Senior Notes) and the uncertainty as to whether market conditions would permit a similar additional note offering and preferred stock redemption in the future. While the Company will incur additional cash expense in 2011 and 2012 as a result of these transactions, the Company believes that a less complicated capital structure will facilitate better investor awareness of its operations and financial status.
None of the Company’s proceeds from the Additional Note Offering will be used to finance the Company’s recently announced proposed acquisition of Ophthalmic Imaging Systems, Inc. (“OIS”). In that transaction, the Company will exchange its common stock for all of the outstanding common stock of OIS. The Company’s out-of-pocket expenses related to the OIS transaction will be paid from the Company’s available cash. Because the OIS acquisition is unrelated, the closings of the Solicitation, the Additional Note Offering and the Series A Preferred Stock redemption (which are expected to occur in mid-June) will be independent from, and not contingent upon, the OIS closing (which is not expected to occur before July). Likewise, the OIS closing is not contingent on the closing of these financing transactions.
The record date to determine holders of the notes entitled to consent is June 3, 2011. The Solicitation will expire at 5:00 p.m., New York City time, on June 14, 2011, unless extended (the “Expiration Date”). As part of the Solicitation, Merge will make a cash payment (the “Consent Payment”) of $10.00 per $1,000 in principal amount of notes to each holder who has validly delivered a duly executed consent (the “Consent”) on or prior to the Expiration Date in accordance with the procedures described in the Consent Solicitation Statement (the “Solicitation Statement”). There are no revocation rights applicable to the Consent and, once delivered, Consents may not be revoked. Merge’s obligation to make the Consent Payment is contingent, among other things, upon the conditions described in the Solicitation Statement, including receipt of the Requisite Consents (as defined in the Solicitation Statement) on or prior to the Expiration Date and the consummation of the Additional Note Offering. The Consent Payment will be paid promptly following the satisfaction of the conditions outlined in the Solicitation Statement, including the consummation of the Additional Note Offering.
Morgan Stanley & Co. LLC is the solicitation agent for the consent solicitation. Questions regarding the consent solicitation may be directed to the solicitation agent at (800) 624-1808 or (212) 761-1057.
Merge Healthcare Incorporated is a leading provider of enterprise imaging and interoperability solutions. Merge Healthcare solutions facilitate the sharing of images to create a more effective and efficient electronic healthcare experience for patients and physicians. Merge Healthcare provides enterprise imaging solutions for radiology, cardiology and orthopaedics; a suite of products for clinical trials; software for financial and pre-surgical management, and applications that fuel the largest modality vendors in the world. Merge Healthcare’s products have been used by healthcare providers, vendors and researchers worldwide to improve patient care for more than 20 years. Additional information can be found at www.merge.com.