Business Context and Reporting Period
This Form 8-K, dated September 2, 2003, reports on the definitive interim results of Zimmer Holdings, Inc.'s (Zimmer) exchange offers for Centerpulse AG ("Centerpulse") and InCentive Capital AG ("InCentive"). The initial offering period expired on August 27, 2003. Zimmer is currently in a subsequent offering period running from September 2, 2003, to September 15, 2003.
Key Financial Metrics and Transaction Details
- Centerpulse Tender Results: 7,489,650 registered shares and 6,712,776 ADSs were tendered, representing approximately 68.0% of outstanding shares. Including shares held by InCentive, this totals approximately 86.7% of issued shares.
- InCentive Tender Results: 2,123,647 bearer shares were tendered, representing approximately 98.9% of outstanding shares.
- Consideration for Centerpulse: 3.68 shares of Zimmer Common Stock plus CHF 120 cash per registered share (or 0.368 shares plus CHF 12 cash per ADS).
- Consideration for InCentive: 3.8349 shares of Zimmer Common Stock plus CHF 178.84 cash per bearer share.
- Escrow Amount: CHF 25,000,000 to be deposited as security for indemnification obligations by InCentive shareholders.
- Expected Settlement Date: October 2, 2003, subject to Swiss regulatory approval.
Material Changes and Competitive Context
On August 28, 2003, competitor Smith & Nephew plc announced its competing exchange offers for Centerpulse and InCentive failed due to insufficient valid tenders. Consequently, Smith & Nephew declared its offers failed and agreed to release tendered shares. Zimmer has accepted all shares tendered during the initial period and entered into an agreement with major InCentive shareholders (holding ~77% of InCentive) to declare the InCentive Offer unconditional following the additional acceptance period.
Outlook, Risks, and Contingencies
- Regulatory Approval: Settlement is contingent upon approval by competent Swiss authorities.
- Shareholder Restrictions: Major InCentive shareholders have agreed not to acquire or dispose of Centerpulse or InCentive shares for six months following the end of the additional acceptance period.
- Indemnification: Shareholders have agreed to indemnify Zimmer for losses resulting from breaches of representations or actions that force an increase in the offer price under Swiss law.
- Liability Representations: Shareholders warrant that InCentive has no undisclosed liabilities arising from transactions prior to the settlement date.
Investor Verification Checklist
- Verify the final tender percentages after the subsequent offering period ends on September 15, 2003.
- Confirm receipt of approval from Swiss authorities for the October 2, 2003 settlement date.
- Review the full text of the Agreement (Exhibit 99.1) regarding the CHF 25,000,000 escrow terms and indemnification scope.
- Monitor for any potential increase in the offer price required by Swiss law if shareholder actions trigger such obligations.