RNS Number:1326D
Gyrus Group PLC
4 May 2001
4 May 2001
GYRUS GROUP PLC
Proposed $93m Acquisition of the ENT Business of Smith & Nephew, Inc.
Proposed $55.7m Acquisition of Somnus Medical Technologies, Inc.
&
Firm Placing and Placing & Open Offer to Raise #100 million
(S) On 27 April 2001, Gyrus Group PLC ("Gyrus" or "the Company")
announced that it was in advanced negotiations to make two acquisitions, at
which point dealings in the existing ordinary shares of the Company were
suspended from listing on the Official List and from trading on the London
Stock Exchange.
(S) The Directors of Gyrus announced today that the Company has made a
major step in its strategy of developing a specialist head and neck surgery
business by agreeing to acquire the Ear, Nose & Throat division of Smith &
Nephew, Inc. (the "ENT Business") for $93 million, of which $75 million will
be payable on closing, with the balance payable by 1 January 2003. It has
also agreed to acquire Somnus Medical Technologies, Inc. ("Somnus") (together
"the Acquisitions") in a transaction that values Somnus (on a fully diluted
basis) at approximately $55.7 million or $3.11 per share of Somnus ("the
Acquisitions"). The Acquisitions are subject, inter alia, to the approval of
Gyrus shareholders.
(S) To fund the cost of the Acquisitions, the associated expenses and
to raise working capital for Gyrus and its subsidiary undertakings following
completion of the Acquisitions ("Enlarged Group"), Gyrus intends to raise
approximately #100 million by way of a Firm Placing and Placing and Open Offer
of new Gyrus ordinary shares, both of which have been underwritten by the
Company's broker, WestLB Panmure Limited, and arranged by WestLB Panmure
Limited and Nomura International. The Company has also raised #7.5 million
under a standby underwriting facility from West Equity Bridge Finance Limited.
(S) The ENT Business is one of the leading participants in the global
market for ENT surgical devices with a 66 year operating history. Through its
US sales force of 86 commissioned sales representatives, the ENT Business
offers a wide portfolio of products, many marketed under the well-known "
Richards" brand. The sales force calls on over 6,000 hospitals and clinics in
the US, representing over 90% of practising ENT specialists in the US. Its
products are sold in over 60 countries outside the US. The ENT Business had a
turnover of $42 million in 2000.
(S) Somnus, a NASDAQ listed company, designs, develops, manufactures
and markets medical devices that utilise its proprietary Somnoplasty system
(temperature controlled radio frequency technology) that enables the minimally
invasive surgical treatment of upper airway disorders by ENT surgeons. Somnus
reported product revenues of $12.1 million in 2000.
(S) Gyrus is focused on the management of tissue using less traumatic
techniques. The Board believes that the Acquisitions will provide Gyrus with
a platform to expand its business in this area and establish a leading
position in the field of head and neck surgery, with the following key
benefits:
- The ENT Business has an established sales and marketing
infrastructure which can be leveraged to sell the Enlarged Group's products
and technologies
- The Enlarged Group will have a leading position in the supply of
surgical devices to the head and neck surgery market. This will provide a
channel through which to enter the high growth cosmetic surgery market and
distribute Gyrus' cosmetic surgery system, PlasmaKinetic II, which is expected
to be launched in 2002
- Access to the world-wide head and neck surgery market which the
Directors believe is worth $900 million at present and could potentially grow
to $2 billion by 2003
- The ENT Business has a strong record of revenue and cash generation
- Somnus provides access to the innovative Somnoplasty system
- There are a number of cross-selling and cost saving opportunities
- The Acquisitions are expected to be earnings enhancing before
certain non-recurring costs and goodwill amortisation in the first 12 months
following completion of the Acquisitions, and significantly enhancing (before
amortisation of goodwill) in the next following 12 months
Commenting on today's announcement, Mark Goble, Group Managing Director of
Gyrus, said:
"These two strategic acquisitions will provide Gyrus with the technologies,
customer-base and distribution capabilities in the US and Europe required to
accelerate our entry into the market for head and neck surgery.
"The ENT Business will provide us with an established direct sales and
marketing operation and the acquisition of Somnus brings an innovative
surgical system for the treatment of upper airways disorders. In combination
with Gyrus' own technology for both open and endoscopic surgical procedures,
these acquisitions can be leveraged to establish the Enlarged Group as one of
the leaders in the global market for head and neck surgical devices."
Gyrus was advised by Bear, Stearns International Limited in relation to the
acquisition of the ENT Business, by Nomura International in relation to the
acquisition of Somnus and West LB Panmure Limited in relation to the Firm
Placing and the Placing and Open Offer.
Enquiries:
Gyrus Group PLC Tel: 07974 985333
Dr Mark Goble, Group Managing Director
Tom Murphy, Finance Director
West LB Panmure Limited Tel: 020 7638 4010
Chris Collins/Juliet Thompson/Dominic Morley
Bear, Stearns International Limited Tel: 020 7516 6937
Richard Strang
Nomura International plc Tel: 020 7521 2000
Charles Spicer/Steve Adkin
Financial Dynamics Tel: 020 7831 3113
Edward Bridges/Alistair Hetherington
A presentation for analysts will be held today, 4 May 2001, at 10am at the
offices of Financial Dynamics, Holborn Gate, Southampton Buildings, London,
WC2A 1PB. Please call Jenny Alves on 020 7831 3113 for further details.
The contents of this announcement have been approved solely for the purposes
of Section 57 of the Financial Services Act 1986 by WestLB Panmure Limited
which is regulated in the United Kingdom by the Securities and Futures
Authority Limited. WestLB Panmure Limited is not acting for and will not be
responsible to, any person other than Gyrus Group PLC for providing the
protections afforded to customers of WestLB Panmure Limited or for advising
any other person on the contents of this document or any transaction or
arrangement referred to herein.
GYRUS GROUP PLC
Proposed $93m Acquisition of the ENT Business of Smith & Nephew, Inc.
Proposed $55.7m Acquisition of Somnus Medical Technologies, Inc.
&
Firm Placing and Placing & Open Offer to Raise #100 million
Introduction
On 27 April 2001, Gyrus Group PLC ("Gyrus" or "the Company") announced that it
was in advanced negotiations to make two acquisitions, at which point dealings
in the existing ordinary shares were suspended from listing on the Official
List and from trading on the London Stock Exchange. The Directors of Gyrus
announced today that the Company has made a major step in its strategy of
developing a specialist head and neck surgery business by agreeing to acquire
the ENT division of Smith & Nephew, Inc. (the "ENT Business"), and Somnus
Medical Technologies, Inc. ("Somnus") (together "the Acquisitions") . The ENT
Business designs, develops, manufactures and markets a comprehensive range of
ENT products. Somnus designs, develops, manufactures and markets innovative
medical devices for the treatment of upper airway disorders.
The Directors believe that the Acquisitions will provide Gyrus with the
technologies, customer base and distribution capabilities in the US and Europe
required to accelerate Gyrus' entry into the market for head and neck surgery.
The acquisition of the ENT Business (the "ENT Acquisition") will provide
Gyrus with an established direct sales and marketing operation that can be
leveraged to establish Gyrus and its subsidiary undertakings following
completion of the Acquisitions (the "Enlarged Group") as one of the leading
participants in the global market for head and neck surgical devices. The
acquisition of Somnus (the "Somnus Acquisition") will provide the Enlarged
Group with an innovative surgical system in this sector.
Gyrus has agreed to acquire the ENT Business for a cash consideration of $93
million (#64.9 million), of which $75 million will be payable on closing with
the balance payable by 1 January 2003. The Somnus Acquisition is to be
accomplished by a cash tender offer valuing Somnus at $55.7 million (#38.9
million). The Company has also raised #7.5 million under a standby
underwriting facility from West Equity Bridge Finance Limited.
The Directors believe there are a number of benefits in making the
Acquisitions. The key benefits are:
- The ENT Business has an established sales and marketing
infrastructure which can be leveraged to sell the Enlarged Group's products
and technologies
- The Enlarged Group will have a leading position in the supply of
surgical devices to the head and neck surgery market. This provides a channel
through which to enter the high growth cosmetic surgery market and distribute
Gyrus' cosmetic surgery system, PK II, which is expected to be launched in
2002
- Access to the world-wide head and neck surgery market which the
Directors believe is worth $900 million at present and could potentially grow
to $2 billion by 2003
- The ENT Business has a strong record of revenue and cash generation
- Somnus provides access to the innovative Somnoplasty system
- There are a number of cross-selling and cost saving opportunities.
The Directors of Gyrus also announced today the terms of a Firm Placing and a
Placing and Open Offer, which are being made at 260 pence per Ordinary Share.
Under the Firm Placing and the Placing and Open Offer, up to 11,728,900 new
Gyrus ordinary shares have been placed firm with institutional investors and
up to 26,732,712 new Gyrus ordinary shares have been placed with institutional
investors subject to recall by qualifying shareholders under the Open Offer.
The Firm Placing and the Placing and Open Offer have been fully underwritten
by WestLB Panmure Limited on the terms and conditions set out in the Placing
and Open Offer Agreement. The proceeds of the Firm Placing and the Placing
and Open Offer and the equity bridge facility will be utilised to satisfy the
consideration due at completion of the Acquisitions to meet the costs and
expenses of the Acquisitions and to provide working capital to the Enlarged
Group.
Whilst the Directors believe that both the ENT Acquisition and the Somnus
Acquisition will be completed, this may not turn out to be the case. If the
ENT Acquisition does not become unconditional, the ENT Acquisition, the Somnus
Acquisition, the Firm Placing and the Placing and Open Offer will not proceed.
If the Somnus Acquisition does not become unconditional but the ENT
Acquisition does, the ENT Acquisition and the Firm Placing and the Placing and
Open Offer will (subject to satisfaction of the other conditions of the
Placing and Open Offer Agreement) proceed, but in this event the number of new
ordinary shares placed or available for recall by qualifying shareholders
under the Firm Placing and the Placing and Open Offer will be reduced by 38
per cent. (rounded down to the nearest whole number) to reflect the Group's
funding requirements solely for the ENT Acquisition and the expenses incurred
in connection with the Somnus Acquisition. If the Somnus tender offer is
extended, and in certain other circumstances, the ENT Acquisition may become
unconditional before the Somnus Acquisition. In this event, 62 per cent. of
the monies received under the Firm Placing and the Placing and Open Offer
would be used to satisfy the consideration under the ENT Acquisition and the
balance would be held pending resolution of the position on the Somnus
Acquisition.
Given the size of the ENT Business and Somnus relative to that of Gyrus, the
ENT Acquisition is classified as a reverse takeover and each of the
Acquisitions is subject to the approval of Gyrus' shareholders in general
meeting. In addition, Gyrus must reapply for listing as a new applicant under
the Listing Rules of the UK Listing Authority.
Market Overview
Strategically the Group views the head and neck surgery market as encompassing
procedures performed from the neck upwards but excluding procedures performed
on the brain (neurosurgery) and eyes (ophthalmic surgery). As such, the
market includes Otorhinolaryngology ("ENT") which is segmented into three
areas: (i) Otology (ear); (ii) Sinus and Rhinology (sinuses and nasal
passages); and (iii) other surgical procedures commonly performed by ENT,
plastic, cosmetic and maxillofacial surgeons on the face, neck, throat and
mouth. The market for ENT surgical devices was estimated to be worth over
$360 million in 1999, based on world-wide reported revenues. The Directors
believe that the head and neck surgery market is worth $900 million at present
and could potentially grow to $2 billion by 2003 with the move to less
invasive surgical treatments, increasing use of disposables and a broadening
of the market to include cosmetic procedures. There are an estimated 9,000
ENT specialists in the US and approximately 25,000 ENT specialists world-wide.
The Directors believe that approximately one third of ENT specialists in the
US practise facial, plastic and reconstructive surgery and that one third of
all cosmetic surgical procedures are performed by head and neck surgeons.
This includes skin rejuvenation procedures, arguably the fastest growing
segment of the aesthetic treatment market, as an alternative to conventional
surgical face lifts. Skin rejuvenation procedures world-wide are forecast to
increase from 1 million this year to 3.8 million in 2003 reaching a market
size of $760 million. Head and neck specialists also tend to be involved in
treating tumour related diseases of the head and neck. Diseases and
conditions addressed by ENT specialists affect sizeable patient populations
and are some of the most commonly treated conditions among children. The
head and neck surgery market is transitioning from traditional surgical
methods to less invasive approaches involving the use of advanced surgical
tools. This is being driven by both economic pressures and patient demand as
well as the proximity of the areas addressed by head and neck surgery to
sensitive tissues and structures.
Information on the ENT Business and Somnus
The ENT Business currently operates as the ENT division of Smith & Nephew,
Inc., a world-wide supplier of medical technology products. The ENT Business
is one of the leading participants in the global market for ENT surgical
devices, with a 66 year operating history. The ENT Business offers a wide
portfolio of products covering the major sub-specialities of the head and neck
sector, through its experienced US sales force of 86 commissioned sales
representatives. The Directors estimate that the ENT Business' sales force
calls on over 6,000 hospitals and clinics in the US, which represent over 90%
of practising ENT specialists in the US, and sells products in over 60
countries outside the US. The ENT Business has a strong record of revenue,
profit and cashflow generation over the last three years and had net assets of
$20.4 million as at 31 December 2000.
Somnus designs, develops, manufactures and markets innovative medical devices
that utilise its proprietary temperature controlled radio frequency technology
for the treatment of upper airway disorders by ENT surgeons. Somnus has
developed its Somnoplasty system that enables minimally invasive surgical
treatments and is designed to reduce the time, expense and trauma associated
with conventional surgical procedures. Somnus currently has four single-use,
disposable handpieces cleared by the FDA and CE Marked for treating certain
upper airway disorders, including enlarged tonsils in adults. The Directors
also expect FDA clearance in the second half of 2001 for the Somnoplasty
system for use in the shrinkage of enlarged tonsils in children. Somnus
reported revenues of $12.1 million in 2000 and more than 14,500 disposable
handpieces were sold in the fourth quarter of 2000, representing an increase
of more than 40 per cent. over disposable handpiece sales in the corresponding
period in 1999. Somnus had net assets of $6.6 million as at 31 December 2000.
Background to and reasons for the Acquisitions
The Company is focused on the management of tissue using less traumatic
techniques. The Directors of Gyrus believe that the Acquisitions will provide
Gyrus with a platform to expand its business in this area and establish a
leading position in the field of head and neck surgery.
Key competitive advantages of the Enlarged Group
The Directors believe that the Enlarged Group's product offering will have a
number key competitive advantages which should significantly enhance the
position of the Enlarged Group in the head and neck arena:
Building direct sales to address broader markets through complementary
technologies
The Enlarged Group will have a larger and broader portfolio of both marketed
and development stage products and technologies. The Enlarged Group will have
a position as one of the leaders in the supply of surgical devices to the
broader speciality market of head and neck surgery. The additional access of
the Enlarged Group to surgeons in this speciality segment will also provide a
channel through which to distribute its cosmetic surgery system. When
combined with the Enlarged Group's established direct sales operations in the
lower abdominal sector of the market, there will be future opportunities for
cross-fertilisation of technologies and products between the two markets.
Additionally, products utilised in sinus surgery were derived from
arthroscopic devices which is a sector where the Enlarged Group continues to
build expertise and know-how through its relationship with Johnson & Johnson.
The Directors believe that this expertise can be applied to the development of
an integrated technological solution for head and neck surgery. The combined
market opportunity for the Enlarged Group's direct sales activities is
estimated by the Directors to be in excess of $2.5 billion.
The ENT Acquisition also brings with it know-how in the development and
manufacturing of biomaterial implants. The integration of biomaterial
technology with the less traumatic tissue management positioning of the
Enlarged Group's energy based systems is one of the Directors' strategic
goals. The Directors believe that this combination should result in improved
patient outcomes in certain procedures and that this competency will bring
added value to the Enlarged Group.
Provide an integrated tissue management solution for head and neck surgeons
The technologies used by surgeons often affect tissues in different ways.
Surgical procedures may therefore require the use of differing techniques and
the switching of instruments during procedures, thereby increasing training
and other costs. Gyrus intends to address this issue by providing surgeons
with an integrated suite of complementary devices, producing predictable and
repeatable tissue effects, designed to minimise trauma, improve healing,
reduce discomfort and produce better outcomes.
An integrated management team
The management teams within the ENT Business and Somnus have extensive
experience with a number of the leading companies in the medical device sector
including Smith & Nephew, Inc., Genzyme Corporation, Medtronic, Inc. and
Boston Scientific Corporation. Somnus' sales team will be integrated with
that of the ENT Business providing a considerable expansion in the field
management of the US sales force. Management from the ENT Business and Somnus
will support and strengthen the Company's existing management team in the
United States.
Expected benefits of the ENT Acquisition
Established distribution channels
The ENT Business has an experienced US sales force of 86 commissioned sales
representatives, who the Directors estimate call on over 90 per cent. of
practising ENT specialists within the US. In addition, the ENT Business'
products are sold in over 60 countries outside the US.
The Directors believe that the Enlarged Group will be able to leverage this
established sales and marketing infrastructure to sell the branded products
and technologies of the Enlarged Group. Outside the US, the International
Division will seek to accelerate the growth of non-US sales as a proportion of
total sales.
Robust revenue stream and cash generation and a well-established brand name
The ENT Business has a strong record of revenue and cash generation, which
provides a solid platform for the Enlarged Group. Additionally, through the
grant of a 10 year licence, the Enlarged Group will continue to use, and build
upon, the well-established "Richards" brand under which the ENT Business has
historically marketed many of its products.
Entry into the high growth cosmetic surgery market
With approximately one third of head and neck specialists performing cosmetic
procedures, the Enlarged Group should be well positioned to gain entry into
the higher growth market for cosmetic surgery products by using the ENT
Business' contacts. The Directors expect that Gyrus will commence first human
trials using its PlasmaKinetic II system in cosmetic surgery during the summer
of 2001, with an anticipated launch in 2002.
Expected benefits of the Somnus Acquisition
Access to rapidly growing Somnoplasty system
Following the introduction of the first Somnoplasty systems in 1997, more than
1,000 systems have been installed world-wide. Handpiece unit sales in the
fourth quarter of 2000 were more than 40 per cent. higher than in the
corresponding period in 1999. The Directors believe that this growth has been
constrained in the past by the limited resources available to Somnus and that
distribution through the ENT Business' existing sales infrastructure will help
to drive both the number of installed systems and handpiece sales in the
future.
Reduced time to market
The acquisition of Somnus will accelerate the Company's entry into the head
and neck market. The Directors believe that Somnus' Somnoplasty technology is
highly regarded by a number of ENT surgeons who perform surgical procedures on
soft tissue within the head and neck market. Somnus' existing products have
been cleared by the FDA and CE Marked for marketing in Europe for use in the
treatment of a range of disorders, including tonsillar hypertrophy, chronic
nasal obstruction and habitual snoring.
Manufacturing synergies
Gyrus and Somnus employ similar manufacturing strategies for component
assembly, using broadly the same processes and materials. Following
completion of the Somnus Acquisition, the Directors intend to relocate the
manufacture of Somnus' disposable handpieces to the Gyrus facility in
Minneapolis where Gyrus' disposable instruments are currently produced and
where manufacturing capacity is available. The Directors believe that this
relocation will provide opportunities to significantly reduce the cost of
manufacture of Somnus' handpieces.
Somnus' control units are currently assembled by a third party manufacturer.
In the medium-term, the Directors intend to transfer the assembly of these
control units to Gyrus' facility in Cardiff, which already assembles similar
control units for the existing Gyrus business. The Directors believe that
this transfer should reduce the cost to the Enlarged Group of the production
of Somnus' control units.
Leveraging previous investment in product promotion and clinical trials
Somnus has made significant investments in clinical trials of its Somnoplasty
technology in a number of key teaching/university hospitals. Somnus has also
invested heavily in promotion of the Somnoplasty system through literature and
trade shows, which has produced a high level of awareness about the system
amongst leading surgeons in the ENT area. The Directors believe that the
Somnoplasty technique now has a strong clinical foundation and can be
exploited by the Enlarged Group through the promotion of the Somnoplasty
system by the ENT Business' existing sales and distribution network.
Reduction in operating overheads
The Directors believe there is an opportunity for significant cost savings
following the integration of Somnus' operations into the Enlarged Group as a
result of the sharing of corporate and infrastructure overheads.
Strategy of the Enlarged Group
The Directors' strategy for the Enlarged Group will be to provide integrated
technology systems focused on the management of tissue using less traumatic
techniques during both open and endoscopic surgical procedures. The Directors
intend to build upon the Group's position in providing differentiated, cost
effective solutions to surgical needs and quickly to establish the Enlarged
Group as a leader in the market serving the head and neck surgery market.
Following completion of the Acquisitions it is intended that the Enlarged
Group will be restructured into three operational divisions and three sales
and marketing divisions under the corporate group responsible for strategy,
finance, regulatory compliance and intellectual property management of the
Enlarged Group.
It is intended that the three operational divisions will be structured as
follows:
- Gyrus Medical, Inc. ("Lower Abdominal Surgery Division")
Radio frequency instrument design, development and manufacturing
- ENT ("Head and Neck and Cosmetic Surgery Division")
Bio implant design, development and manufacturing
- Gyrus Medical Limited
Platform technology design, development and manufacturing
The Lower Abdominal Surgery Division focuses on the gynaecology, urology and
colorectal sectors of the market whilst Gyrus International Limited, the
Group's sales and marketing division, manages all direct sales outside the
NAFTA market. The day-to-day management of these divisions will be controlled
locally and both Gyrus Medical Limited and Gyrus Medical, Inc. will continue
to service the existing corporate relationships with Johnson & Johnson,
Guidant Inc. and C.R. Bard, Inc.
Prospects for the Enlarged Group
The Enlarged Group will seek to build upon the ENT Business' sales and
marketing capabilities and to grow the revenue from sales of the Enlarged
Group's current and future own brand products. Additionally, by using
existing production and assembly capacity at Gyrus' facilities, the Enlarged
Group will seek to reduce the cost of manufacturing goods sold by Somnus. The
Directors expect these cost reductions to result in a significant increase in
gross margin on the sales of Somnus' products.
There will be significant non-recurring costs associated with the Acquisitions
and the integration of the businesses. The Directors believe that the
Acquisitions will be earnings enhancing before these non-recurring costs and
goodwill amortisation in the first 12 months following completion of the
Acquisitions, and significantly earnings enhancing before goodwill
amortisation in the next following 12 months.
The sales forces of the ENT Business and Somnus will be a specialist sales
force in the ENT sector in the US, which will sell the combined product ranges
of the ENT Business and Somnus. In the event that the Somnus Acquisition does
not become unconditional, Gyrus intends to accelerate its R&D programme.
In the medium-term, the Directors will seek to use the ENT Business' marketing
and distribution platform in order to access the higher growth market for
cosmetic surgery products such as Gyrus' PlasmaKinetic II products. In
addition, Gyrus will invest in cross-fertilising technologies and products
between the head and neck and lower abdominal sectors of the market.
Principal terms of the Acquisitions
Pursuant to the agreement for the acquisition of the ENT Business (the "ENT
Acquisition Agreement"), Smith & Nephew, Inc. has agreed to sell to Gyrus all
of its interests in ENT Business for a consideration of $93 million (#64.9
million), of which $75 million will be payable on closing with the balance
payable on 1 January 2003. The ENT Acquisition Agreement is subject to a
number of conditions including the approval of the shareholders of Gyrus,
Admission to listing of the new Gyrus ordinary shares to be issued in
connection with the ENT Acquisition ("ENT Admission") and regulatory approval
under the US Hart-Scott-Rodino Anti-Trust Improvements Act (the "HSR Act") .
Subject to the approval of at least a majority of the outstanding shares of
common stock of Somnus, the Somnus Acquisition will be completed under the
laws of the US and the State of Delaware in the US on the terms and subject to
the conditions set out in the agreement governing the acquisition of Somnus
(the "Somnus Merger Agreement"). Under the Somnus Merger Agreement, the
Somnus Acquisition is to be implemented by means of a cash tender offer (the "
Somnus Tender Offer"). The total purchase price to be paid by Gyrus to
complete the Somnus Acquisition is $55.7 million (#38.9 million). The Somnus
Tender Offer is subject to a number of conditions including the approval of
shareholders of Gyrus, admission to listing on the Official List of the UK
Listing Authority and to trading on the London Stock Exchange's market for
listed securities of the new Gyrus ordinary shares to be issued in connection
with the Somnus Acquisition ("Somnus Admission"), ENT Admission, and
regulatory approval under the HSR Act.
Principal terms of the Firm Placing
The Firm Placing will raise up to approximately #30.5 million before expenses.
Under the Firm Placing, 11,728,900 new Gyrus ordinary shares have been
placed with institutional investors at 260 pence per ordinary share.
The Firm Placing is subject to a number of conditions including (i) the
passing of the resolutions to be proposed at the EGM, (ii) the ENT Acquisition
Agreement becoming unconditional in all respects (save as to ENT Admission),
(iii) the Somnus Tender Offer becoming unconditional in all respects (except
for the condition relating to Somnus Admission), (iv) ENT Admission, and (v)
Somnus Admission.
In the event that the Somnus Tender Offer does not become unconditional in all
respects (except for the condition relating to Somnus Admission) or if Somnus
Admission does not take place, the Firm Placing will (subject to satisfaction
of the other conditions to the Placing and Open Offer Agreement) nevertheless
proceed but, in this event, the number of firm placed shares will be reduced
by 38 per cent. (with an equivalent reduction in the Placing and Open Offer)
to reflect the Group's funding requirements for the ENT Acquisition and the
expenses incurred in connection with the Somnus Acquisition.
Principal terms of the Placing and Open Offer
The Placing and Open Offer will raise up to #69.5 million before expenses. In
order to give shareholders the opportunity to participate in the issue of the
new Gyrus ordinary shares, Gyrus has arranged for WestLB Panmure Limited as
its agent to invite applications from qualifying shareholders to acquire such
shares at the Placing Price under the Open Offer. Qualifying shareholders may
apply for new ordinary shares on the basis of:
7 new ordinary shares for every 10 ordinary shares
held by them at the close of business on 27 April 2001 and so in proportion
for any other number of ordinary shares then held. The new Gyrus ordinary
shares will, when issued and fully paid, rank pari passu in all respects with
the existing issued ordinary shares of the Company.
Mark Goble and Colin Goble have undertaken not to take up their entitlements
under the Open Offer. These entitlements, amounting to an aggregate 4,357,500
new ordinary shares, have therefore been placed firm with institutional
investors pursuant to the Firm Placing described above.
The Placing and Open Offer will proceed in full subject to a number of
conditions including (i) the passing of the resolutions to be proposed at the
EGM, (ii) the ENT Acquisition Agreement becoming unconditional in all respects
(except for the condition relating to ENT Admission), (iii) the Somnus Tender
Offer becoming unconditional in all respects (except for the condition
relating to Somnus Admission), (iv) ENT Admission, and (v) Somnus Admission.
In the event that the Somnus Tender Offer does not become unconditional in all
respects (except for the condition relating to Somnus Admission) and/or Somnus
Admission does not take place, the Placing and Open Offer will (subject to
satisfaction of the other conditions of the Placing and Open Offer Agreement)
nevertheless proceed, but in this event, the number of new ordinary shares
applied for (or deemed to have been applied for) by each qualifying
shareholder under the Open Offer will be reduced by 38 per cent., rounded down
to the nearest whole number (with an equivalent reduction in the number of
Firm Placed Shares) to reflect the Group's funding requirements solely for the
ENT Acquisition and the expenses incurred in connection with the Somnus
Acquisition. Fractional entitlements arising will not be allocated.
Extraordinary General Meeting
Because of their size in relation to Gyrus, both the ENT Acquisition and the
Somnus Acquisition are subject to the approval of Gyrus' shareholders in
general meeting. In addition, approval will be sought to increase the
authorised and unissued share capital of the Company in order to implement the
Firm Placing and the Placing and Open Offer. An extraordinary general meeting
of the Company will be held at 10.00 a.m. on 30 May 2001 at Gouldens, 10 Old
Bailey, London EC4M 7NG.
Enquiries:
Gyrus Group PLC Tel: 07974 985333
Dr Mark Goble, Group Managing Director
Tom Murphy, Finance Director
West LB Panmure Limited Tel: 020 7638 4010
Chris Collins/Juliet Thompson/Dominic Morley
Bear, Stearns International Limited Tel: 020 7516 6937
Richard Strang
Nomura International plc Tel: 020 7521 2000
Charles Spicer/Steve Adkin
Financial Dynamics Tel: 020 7831 3113
Edward Bridges/Alistair Hetherington
Expected Timetable of Principal Events
2001
Record date for the Open Offer Close of business
on 27 April
Latest time and date for receipt of proxy cards 10am on 28 May
Latest time and date for splitting of application forms 3pm on 29 May
(only to satisfy bona fide market claims)
Extraordinary General Meeting 10am on 30 May
Latest time and date for receipt of application forms and 3pm on 31 May
payment in full and closing of the Open Offer
Result of the Somnus Tender Offer known 5 June
Dealings in new Gyrus ordinary shares commence 6 June
Credit CREST accounts 6 June
Definitive share certificates for new Gyrus ordinary shares By 13 June
despatched
Whilst the expected dates for the Extraordinary General Meeting and the
closing of the Open Offer are unlikely to change, the remaining dates are
subject to change depending on factors including the applicable waiting period
under the HSR Act and the result of the Somnus Tender Offer.
Notes to Editors
Background Information on Gyrus
Gyrus is a medical technology company which designs, develops, manufactures
and markets advanced electrosurgical systems based on its PlasmaKineticTM
technology for both open and endoscopic surgical procedures. The Company
focuses on tissue management using less traumatic surgical techniques to
improve clinical outcomes and reduce costs. Its systems promote the
transition towards minimal access and outpatient surgery, both of which
provide for more cost-effective management of healthcare resources.
The Group has positioned its technology in growth segments of the surgical
device market initially through alliances with corporate marketing partners
but now has a growing emphasis on direct sales built through strategic
acquisitions. In the last twelve months the contribution from direct sales
has risen from 2 per cent. to 41 per cent. of revenues.
In April 2000, Gyrus completed the acquisition of Everest Medical Corporation,
which also designs, develops, manufactures and markets electrosurgical
instrumentation in complementary markets. Everest has now been incorporated
within the Gyrus Group and operates as Gyrus Medical, Inc. The acquisition of
Everest provided Gyrus with a route to market in the US through an independent
group of 120 commissioned sales representatives and an opportunity to
accelerate growth, enhance margins and provide the critical mass to enable it
to become an international player in the minimal access surgery market.
In October 2000, Gyrus acquired SkyMed, which specialises in the distribution
of medical instruments for use in minimal access surgery within the UK. The
ranges handled include Everest, Pilling Weck and Microline via a specialist
nine strong sales team. The SkyMed business was amalgamated with Gyrus's
smaller European sales operation to form Gyrus International Limited with
responsibility for all direct sales outside the NAFTA market which, other than
the UK, are made through a network of independent distributors.
The Group now comprises a small corporate management group and three
operational units: Gyrus Medical, Inc. responsible for instrument design and
development and all direct sales in the NAFTA territory; Gyrus Medical Limited
responsible for development of the PlasmaKineticTM technology platform; and
Gyrus International responsible for direct sales outside NAFTA. Gyrus Medical
Limited and Gyrus Medical, Inc. also manage the Group's corporate
relationships with Johnson & Johnson, Guidant and C.R. Bard Inc.
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