The FINANCIAL — FRAZER, Pa., Aug. 22, 2011 — Cephalon, Inc. today provided notice to holders of its 2.50 percent Convertible Senior Subordinated Notes due 2014 and 2.00 percent Convertible Senior Subordinated Notes due 2015 in respect of the Merger of the Company with a wholly-owned subsidiary of Teva Pharmaceutical Industries Ltd., an Israeli corporation, the consummation of which will constitute a Fundamental Change under each of the Indenture governing the 2014 Notes and the Indenture governing the 2015 Notes.
The 2014 Notes will be convertible in connection with the Merger at the option of the holders on the effective date of the Merger and will remain convertible until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the Fundamental Change Purchase Date (as defined in the 2014 Indenture) relating to such Fundamental Change. The 2015 Notes will be convertible in connection with the Merger at the option of the holders at any time beginning 40 days before the anticipated effective date of the Merger and will remain convertible until 5:00 p.m., New York City time, on the second trading day immediately preceding the Fundamental Change Purchase Date (as defined in the 2015 Indenture) relating to such Fundamental Change.
If consummated, the Merger will additionally constitute a Make-Whole Adjustment Event under Section 4.02 of the 2014 Indenture, which will entitle holders converting their 2014 Notes during the 2014 Applicable Conversion Period to convert such 2014 Notes at an increased conversion rate based on the table set forth in Section 4.02 of the 2014 Indenture. Assuming the Merger occurs on the anticipated effective date, based on a stock price of $81.50 and a conversion rate immediately prior to the Merger of 14.4928 shares of common stock per $1,000 principal amount of 2014 Notes, the conversion rate would be increased by 0.8959 shares of common stock per $1,000 principal amount of 2014 Notes for holders converting their 2014 Notes during such 2014 Applicable Conversion Period.
Additionally, if consummated, the Merger will entitle holders converting their 2015 Notes during the 2015 Applicable Conversion Period to receive a make whole premium based on the table set forth in Section 4.02 of the 2015 Indenture. Assuming the Merger occurs on the anticipated effective date, based on a stock price of $81.50, the make whole premium would be equal to 2.89% of the principal amount of the 2015 Notes.
On May 1, 2011, the Company entered into an Agreement and Plan of Merger with Parent and Copper Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent, providing for the merger of the Merger Sub with and into the Company, with the Company surviving the Merger as an indirect wholly owned subsidiary of Parent. The Company issued a press release publicly announcing the execution of the Merger Agreement on May 2, 2011, and included a copy of the press release and the Merger Agreement as exhibits to the Company's Current Report on Form 8-K, filed with the SEC on May 2, 2011.
Solely for the purpose of providing notice under each of the 2014 Indenture and the 2015 Indenture, the Company currently anticipates that the Merger will become effective on or about October 14, 2011. While the parties expect that the Merger may become effective on or about October 14, 2011, the Merger is subject to the satisfaction of certain conditions to closing, including the receipt of applicable regulatory approvals, and there can be no assurance that the required conditions will be satisfied by October 14, 2011, or at all, and consequently there can be no assurance that the Merger will be consummated on that date, or at all. At the effective time of the Merger, each share of common stock, par value $0.01 per share, of the Company issued and outstanding immediately prior to the effective time (other than shares of Company Common Stock (i) held by the Parent, the Merger Sub or in the treasury of the Company, (ii) owned by any subsidiary of the Company or the Parent (other than the Merger Sub) or (iii) held by stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be cancelled and converted automatically into the right to receive $81.50 in cash, without interest.
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