Introduction
This Amendment No. 2 (this “
Amendment
”) amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 (as amended or supplemented from time to
time, the “
Schedule 14D-9
”) originally filed with the U.S. Securities and Exchange
Commission (the “
SEC
”) by Eurand N.V., a Netherlands company (“
Eurand
” or the
“
Company
”) on December 22, 2010. The Schedule 14D-9 relates to the offer by Axcan Pharma
Holding B.V., a private limited liability company organized under the laws of the Netherlands
(“
Buyer
”) and a wholly owned subsidiary of Axcan Holdings Inc., a Delaware corporation
(“
Parent
”), to acquire all outstanding ordinary shares, par value €0.01 per share, of
Eurand (the “
Shares
”) at a purchase price of $12.00 per Share (such amount, the “
Offer
Price
”), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated
December 21, 2010, and in the related Letter of Transmittal
(as each may be amended or supplemented from time to time),
copies of which are attached to the
Tender Offer Statement on Schedule TO,
originally
filed by Buyer with the SEC on December 21, 2010.
Except as otherwise set forth below, the information set forth in the Schedule 14D-9 remains
unchanged and is incorporated herein by reference as relevant to the items in this Amendment.
Capitalized terms used but not defined herein shall have the respective meanings ascribed to them
in the Schedule 14D-9. All page references contained in this Amendment are to the pages of the
original Schedule 14D-9, as filed with the SEC on December 22, 2010, unless otherwise specified.
Item 3. Past Contracts, Transactions, Negotiations and Agreements.
Item 3, “
Past Contracts, Transactions, Negotiations and Agreements
,” is hereby amended and
supplemented by replacing in its entirety the subsection titled “Appointment of Directors and
Officers, Proposed Compensation Arrangements” on pages 3 through 5 of Amendment No. 1 to the
Schedule 14D-9, as filed with the SEC on January 13, 2011 (“
Amendment No. 1
”) with the
following:
“
Appointment of Directors and Officers, Proposed Compensation Arrangements
The Board, at the recommendation of the Nominating and Corporate Governance Committee,
proposed that John J. Fraher be appointed to the Board to serve as a director for (i) a term
which will end immediately after completion of the Asset Sale or, (ii) if the Closing does not
occur, an initial term of four years, beginning on January 19, 2011 and ending on the date of
the Annual General Meeting of Shareholders to be held in 2015. Mr. Fraher’s appointment to the
Board was approved by the shareholders of the Company at the Extraordinary General Meeting of
Shareholders (“
EGM
”) of the Company which was held on Wednesday, January 19, 2011.
Upon his appointment to the Board Mr. Fraher became an executive director and the Chief
Executive Officer of the Company, and shall receive the compensation amounts set forth below,
which amounts were approved at the EGM, for his role as Chief Executive Officer of the
Company.
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For the 2011 fiscal year, Mr. Fraher’s gross annual base salary shall be $500,000
(“
2011 CEO Base Salary
”).
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For the 2011 fiscal year, Mr. Fraher shall be eligible to earn a target annual
bonus equal to 50% of his Base Salary (“
2011 CEO Annual Bonus
”).
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Upon Closing Mr. Fraher will receive an additional one-time bonus equal to $125,000
(the “
Additional Bonus
”). The Additional Bonus will be paid in lieu of any awards that
might otherwise be made under the Company’s long term incentive program.
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Mr. Fraher shall be eligible to receive all outstanding amounts to be paid under
his Retention Agreement and his CIC Agreement, subject to and in accordance with the terms of the
applicable agreement, but with the maximum possible amount he may be paid under the Retention
Agreement and his CIC Agreement being the amount that would be calculated based on the 2011 CEO
Base Salary and 2011 CEO Annual Bonus.* In other respects, the terms and conditions of Mr. Fraher’s
CIC Agreement shall remain substantially the same as those that were in effect for Mr. Fraher’s
former position of Chief Commercial Officer of the Company.*
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*
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The actual amounts which may be paid to Mr. Fraher under the
applicable agreement shall be determined by the Company’s
Compensation Committee.
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Subject to Compensation Committee approval of the specific terms, Mr. Fraher may be entitled
to have the payout entitlements under his Retention Agreement and CIC Agreement be based upon
his 2011 Base Salary and 2011 CEO Annual Bonus, and he shall be eligible to receive the
Additional Bonus. In the event of Compensation Committee approval, the information provided
for Mr. Fraher under the table provided on page 7 of the original Schedule 14D-9 in the
subsection titled “Change in Control and Retention Arrangements Concerning Executive Officers
and Continuing Employees” shall be replaced as follows:
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Executive Officer
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CIC Agreements
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Retention Agreements
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Additional Bonus
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John Fraher
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$
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1,018,415.00
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$
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1,050,000.00
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125,000.00
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The Board, at the recommendation of the Nominating and Corporate Governance Committee,
proposed that Ms. Cecilia Gonzalo be appointed to the Board to serve as a director for (i) a
term which will end immediately after completion of the Asset Sale or, (ii) if the Closing
does not occur, an initial term of four years, beginning on January 19, 2011 and ending on the
date of the Annual General Meeting of Shareholders to
be held in 2015. Ms. Gonzalo’s
appointment to the Board was approved by the shareholders of the Company at the EGM. Upon her
appointment to the Board Ms. Gonzalo became a non-executive director and shall receive
compensation that is consistent with current compensation practices for non-employee
directors, including a gross annual fee of €30,000, pro-rated for 2011, plus €1,000 for each
meeting of the Board or a Board committee that she attends. If Closing does not occur,
Ms. Gonzalo will be granted options to purchase 10,000 shares of Company stock under the
Eurand N.V. Equity Compensation Plan with terms and conditions of grant consistent with
current practices for non-employee directors.
Angelo C. Malahias has served as the Chairman of the Board since January 1, 2011, and shall be
paid for his role as Chairman of the Board, in addition to the cash compensation for
non-employee directors described in the preceding paragraph, (i) a gross annual fee of
€20,000, pro-rated for 2011, (ii) an additional retainer fee of €60,000 which will be paid in
two installments: €30,000 to be paid as of January 1, 2011 and €30,000 to be paid on the
Closing, and (iii) €3,000 for each day of services he performs for the Company during the
period beginning January 1, 2011 and ending on the Closing.
Extraordinary General Meeting of Shareholders
On Wednesday, January 19, 2011 at 10:00 AM (CET), the EGM was held at Eurand’s offices in
Amsterdam, The Netherlands. The shareholders of the Company approved all resolutions before
them at the EGM, including resolutions to approve the Asset Sale and Subsequent Offering
Period.”
Item 8. Additional Information.
Item 8, “
Additional Information
,” is hereby amended and supplemented by replacing the fourth
through tenth sentences in the second paragraph in the subsection titled “United States Antitrust
Approvals” under the heading “Regulatory Approvals” on page 37 of the Schedule 14D-9 with the
following:
“Eurand and Parent filed Notification and Report Forms with the FTC and Antitrust
Division on January 3, 2011. At 11:59 p.m., New York City time, on January 18, 2011, the
waiting period applicable to the Offer under the HSR Act expired. Accordingly, the condition
to the Offer relating to the expiration or termination of the applicable waiting period under
the HSR Act has been satisfied.”
Item 8, “
Additional Information
,” is hereby further amended and supplemented by replacing the
last sentence in the first paragraph in the subsection titled “Foreign Antitrust Compliance” under
the heading “Regulatory Approvals” on page 38 of the Schedule 14D-9 with the following:
“The Parties’ notification was submitted to the FCO on December 17, 2010, and Phase I was
terminated by the FCO on January 10, 2011.”
Item 8, “
Additional Information
,” is hereby further amended and supplemented by restating in
its entirety the subsection titled “Projected Financial Information” on pages 38-40 of the Schedule
14D-9 as follows:
Projected Financial Information.
The Company does not, as a matter of course, make public any specific forecasts or projections
as to its future financial performance. However, in connection with Parent’s due diligence, the
Company provided certain projected and budgeted financial information concerning the Company to
Parent. In addition, the Company provided the same information to its own financial advisors. The
Company’s internal financial forecasts (upon which the projections provided to Parent were based in
part) are, in general, prepared solely for internal use and capital budgeting and other management
decisions and are subjective in many respects, and thus, susceptible to multiple interpretations
and periodic revisions based on actual experience and business developments.
The projections reflect numerous variables and assumptions that are inherently uncertain
and may be beyond the control of the Company, including but not limited to the development of new
products, the receipt and continued effectiveness of regulatory approvals, meeting certain sales
performance criteria and implementing certain cost saving initiatives. In that connection,
the projections reflect management’s estimate that ZENPEP
®
market share will be
between 19.0% and 20.2% for the period from 2011 through 2014. The Company management prepared the
projections to reflect its best currently available estimates and judgments as to the
Company’s future financial performance. Important factors that may affect actual results and result
in projected results not being achieved include, but are not limited to, fluctuations in demand for
the Company’s products; development of new products; failure of the Company to retain, recruit and
hire key management, sales and technical personnel; inability to achieve cost saving initiatives;
the receipt and continued effectiveness of regulatory approvals; the failure to adequately enable
the sales force to achieve certain sales performance objectives; adverse reactions to the Offer by
customers, suppliers and strategic partners and other risks described in the Company’s report on
Form 20-F filed with the SEC for the fiscal year ended December 31, 2009. The projections also may
be affected by the Company’s ability to achieve strategic goals, objectives and targets over the
applicable period. The assumptions upon which the projections were based necessarily involve
judgments with respect to, among other things, future economic and competitive conditions which are
difficult to predict and many of which are beyond the Company’s control. Moreover, the assumptions
are based on certain business decisions that are subject to change. Therefore, there can be no
assurance that the projections will be realized, and actual results may be materially greater or
less than those contained in the projections.
The inclusion of the projections in this Schedule 14D-9 should not be regarded as an
indication that any of the Company or its affiliates, advisors or representatives considered or
consider the projections to be necessarily predictive of actual future events (or in the case of
projected financials for 2010, the actual results of that fiscal year), and the projections should
not be relied upon as such. Neither the Company nor its affiliates, advisors, officers, directors
or representatives can give any assurance that actual results will not differ from the projections,
and none of them undertakes any obligation to update or otherwise revise or reconcile the
projections to reflect circumstances existing after the date such projections were generated or to
reflect the occurrence of future events even in the event that any or all of the assumptions
underlying the projections are shown to be in error. The Company does not intend to make publicly
available any update or other revisions to the projections, except as required by law. None of the
Company or its affiliates, advisors, officers, directors or representatives has made or makes any
representation to any shareholder or other person regarding the ultimate performance of the Company
compared to the information contained in the projections or that forecasted results will be
achieved. The Company has made no representation to Parent, in the Purchase Agreement or otherwise,
concerning the projections. The projections are not being included in this Schedule 14D-9 to
influence a shareholder’s decision whether to tender his or her Shares in the Offer, but because
the projections were made available by the Company to Parent and its financial advisors.
The Company’s shareholders are cautioned not to place undue reliance on the projected
information provided in this Schedule.
PROJECTED FINANCIAL INFORMATION
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2010
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2011
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2012
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2013
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2014
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($ in millions other than per share amounts)
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Total Revenue
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189.5
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225.0
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243.8
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270.0
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294.4
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Net Income
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4.3
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22.2
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31.9
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39.9
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47.7
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EBITDA(1)
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18.2
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46.7
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58.7
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70.6
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82.4
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EPS(2)
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0.12
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0.44
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0.63
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0.77
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0.90
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(1)
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EBITDA means earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because management believes
that it is a widely accepted and useful financial indicator of
the Company’s performance. Management believes EBITDA assists in
analyzing and benchmarking the performance and value of our
business. Although our management uses EBITDA as a financial
measure to assess the performance of our business compared to
that of others in our industry, the use of EBITDA is limited
because it does not include certain costs that are material in
amount, such as interest, taxes, depreciation and amortization,
which are necessary to operate our business. EBITDA is not a
recognized term under generally accepted accounting principles
and, when analyzing our operating performance, investors should
use EBITDA in addition to, not as an alternative for, operating
income, net income and cash flows from operating activities.
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(2)
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EPS means earnings per share.
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Revenue growth assumptions were made on a product-by-product basis, and ranged from 2% to 8%
per annum. The projections also assumed that expenses would grow at roughly 3% per annum.
Additionally, certain assumptions were made with respect to new product launches and acquisitions.
These projections should be read together with the Company’s financial statements that can be
obtained from the SEC. You may read and copy any such reports, statements or other information at
SEC Headquarters at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information. The Company’s SEC filings are also available to the public from
commercial document retrieval services and at the SEC web site at
www.sec.gov.
These projections
should also be read together with discussion under “Risk Factors” and the other cautionary
statements contained in Eurand’s 2009 Annual Report on Form 20-F.
The projections were not prepared with a view to public disclosure or compliance with
published guidelines of the SEC or the guidelines established by the American Institute of
Certified Public Accountants regarding projections or forecasts. The projections do not purport to
present operations in accordance with U.S. generally accepted accounting principles
(“
GAAP
”), and the Company’s independent auditors have not examined, compiled or performed
any procedures with respect to the projections presented in this Schedule 14D-9, nor have they
expressed any opinion or any other form of assurance of such information or the likelihood that the
Company may achieve the results contained in the projections, and accordingly assume no
responsibility for them.
Reconciliation between Net Income and EBITDA
EBITDA should not be considered as a substitute for net income, operating income or any
performance measures derived in accordance with GAAP. Because EBITDA excludes some, but not all,
items that affect net income and may vary among companies, EBITDA presented by the Company may not
be comparable to similarly titled measures of other companies. A reconciliation of the differences
between the Company’s projections of EBITDA and projections of net income, a financial measurement
prepared in accordance with GAAP, is set forth below.
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2010
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2011
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2012
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2013
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2014
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($ in millions other than per share amounts)
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Net Income
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4.3
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22.2
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31.9
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39.9
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47.7
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Taxes
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4.0
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14.8
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17.2
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21.5
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25.8
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Interest Income
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(0.7
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(0.8
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(0.9
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(1.3
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(1.6
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Depreciation
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9.0
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9.0
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9.0
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9.0
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9.0
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Amortization
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1.6
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1.5
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1.5
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1.5
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1.5
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EBITDA
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18.2
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46.7
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58.7
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70.6
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82.4
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Item 9. Exhibits.
Item 9, “Exhibits,” is hereby amended and supplemented by adding the following exhibit
thereto:
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Exhibit No.
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Description
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(a)(5)(D)
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Joint Press Release issued by the Company, Axcan Pharma
Holding B.V. and Axcan Holdings Inc. dated January 19,
2011.
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