SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
INVUITY, INC.
(Name of Subject Company)
INVUITY, INC.
(Name of Person Filing Statement)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
46187J205
(CUSIP Number of Class of Securities)
Scott Flora
Interim President and Chief Executive Officer
Invuity, Inc.
444 De Haro Street
San Francisco, CA 94107
(415) 665-2100
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of the persons filing statement)
With copies to:
Robert T. Ishii Wilson Sonsini Goodrich & Rosati, P.C. One Market Plaza, Spear Tower Suite 3300 San Francisco, California 94105 (415) 947-2000 |
Allison B. Spinner Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 (650) 493-9300 |
☐ | Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
This Amendment No. 3 (this Amendment) amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 of Invuity, Inc., a Delaware corporation (Invuity), originally filed with the Securities and Exchange Commission (the SEC) on September 24, 2018 (together with any subsequent amendments and supplements thereto, the Schedule 14D-9). This Amendment relates to the tender offer by Accipiter Corp., a Delaware corporation (Purchaser) and a wholly owned subsidiary of Stryker Corporation, a Michigan corporation (Stryker), as disclosed in the Tender Offer Statement on Schedule TO, filed by Purchaser and Stryker with the SEC on September 24, 2018, pursuant to which Purchaser has offered to purchase all of the outstanding common stock, $0.001 par value per share, of Invuity (the Shares) for a purchase price of $7.40 per Share, in cash, without interest, subject to any applicable withholding of taxes, upon the terms and subject to the conditions set forth in Purchasers Offer to Purchase, dated September 24, 2018, and in the related Letter of Transmittal. Copies of the Offer to Purchase and Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B) to the Schedule 14D-9, respectively, and are incorporated herein by reference.
Although Invuity believes that no supplemental disclosure is required under applicable laws, Invuity is making available certain additional information (which it considers immaterial) to its stockholders in this Amendment in response to the purported class action lawsuits described in Item 8 of the Schedule 14D-9 under the subsection entitled Stockholder Litigation. Except as otherwise set forth below, the information set forth in the Schedule 14D-9 remains unchanged and is incorporated by reference as relevant to the items in this Amendment. Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the Schedule 14D-9. This Amendment is being filed to reflect the information set forth below.
Item 3. | Past Contacts, Transactions, Negotiations and Agreements. |
The subsection entitled Arrangements with Directors and Executive Officers of InvuityRetention Arrangements with Stryker in Item 4 of the Schedule 14D-9 is hereby amended and supplemented by restating the first and second sentences of the first paragraph with the following:
As of the date hereof, Stryker and Invuity have not entered into any agreement, arrangement or understanding with any members of Invuitys management team regarding employment or consultancy with Stryker or the Surviving Corporation, nor has there been any reference by Stryker to the potential employment of any members of Invuitys management team in any written proposals to acquire Invuity or other writing not referenced in this Schedule 14D-9. On September 18, 2018, Stryker Instruments, a subsidiary of Stryker, offered retention packages to Scott Flora, James Mackaness, Douglas Heigel, Hisham Shiblaq and Steve Annen that include payments totaling approximately $1,555,000 in the aggregate.
Item 4. | The Solicitation or Recommendation. |
The subsection entitled Recommendation of the BoardBackground in Item 4 of the Schedule 14D-9 is hereby amended and supplemented by inserting the following at the end of the tenth paragraph:
Among other factors, Moelis was selected due to its proven track record and the positive experience Mr. Lucier had with Moelis in its representation of Life Technologies Corporation, of which Mr. Lucier was Chairman and Chief Executive Officer, in its sale to Thermo Fisher Scientific in 2013.
The subsection entitled Recommendation of the BoardBackground in Item 4 of the Schedule 14D-9 is hereby amended and supplemented by inserting the following at the end of the fifty-ninth paragraph:
The standstill provisions in the non-disclosure agreement with Party A fell away upon the execution of the Merger Agreement.
The subsection entitled Projected Financial Information in Item 4 of the Schedule 14D-9 is hereby amended and supplemented by restating the last sentence of the first paragraph with the following:
The Projections were provided to the Board and Moelis during the evaluation of the Transactions. The Projections were also provided to Stryker, except with respect to the portions of the Projections solely related to the future utilization of net operating losses (NOLs), for which Stryker received only the current NOL balance and dates of expiry.
The two tables following the eleventh paragraph in the subsection entitled Projected Financial Information in Item 4 of the Schedule 14D-9 are hereby amended in their entirety as follows:
Fiscal Year Ended December 31 | ||||||||||||||||||||||||||||
($ in millions) | 2017A | 2018E | 2019E | 2020E | 2021E | 2022E | 2023E | |||||||||||||||||||||
Total Revenues |
$ | 40 | $ | 46 | $ | 59 | $ | 75 | $ | 92 | $ | 111 | $ | 131 | ||||||||||||||
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Gross Profit |
28 | 30 | 40 | 53 | 66 | 80 | 94 | |||||||||||||||||||||
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Operating Expenses: |
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Selling, General & Admin |
(54 | ) | (48 | ) | (40 | ) | (43 | ) | (50 | ) | (57 | ) | (64 | ) | ||||||||||||||
Research & Development |
(6 | ) | (4 | ) | (3 | ) | (3 | ) | (4 | ) | (5 | ) | (6 | ) | ||||||||||||||
Indirect Overhead |
(3 | ) | (4 | ) | (4 | ) | (4 | ) | (4 | ) | (5 | ) | (5 | ) | ||||||||||||||
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Total Operating Expenses |
(63 | ) | (56 | ) | (47 | ) | (50 | ) | (58 | ) | (68 | ) | (76 | ) | ||||||||||||||
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EBIT(1) |
(35 | ) | (26 | ) | (7 | ) | 3 | 8 | 12 | 18 | ||||||||||||||||||
Depreciation & Amortization |
2 | 2 | 2 | 2 | 2 | 2 | 2 | |||||||||||||||||||||
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EBITDA(2) |
(33 | ) | (24 | ) | (5 | ) | 5 | 10 | 14 | 20 |
(1) | EBIT is defined as earnings attributable to Invuity before interest expense and taxes. |
(2) | EBITDA is defined as earnings attributable to Invuity before interest expense, taxes, depreciation and amortization and does not add back stock-based compensation. |
Fiscal Year Ended December 31 | ||||||||||||||||||||||||
($ in millions) | Q2-Q4 2018E |
2019E | 2020E | 2021E | 2022E | 2023E | ||||||||||||||||||
EBIT |
$ | (7 | ) | $ | (7 | ) | $ | 3 | $ | 8 | $ | 12 | $ | 18 | ||||||||||
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Less: Taxes Paid (21%) |
(0 | ) | (0 | ) | (1 | ) | (2 | ) | (3 | ) | (4 | ) | ||||||||||||
Add: Depreciation & Amortization |
1 | 2 | 2 | 2 | 2 | 2 | ||||||||||||||||||
Less: Capital Expenditures |
(0 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||
Change in Net Working Capital |
(1 | ) | (0 | ) | (1 | ) | (0 | ) | 0 | (2 | ) | |||||||||||||
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Unlevered Free Cash Flow(1) |
(7 | ) | (6 | ) | 4 | 8 | 11 | 13 |
(1) | Unlevered Free Cash Flow is calculated by adding depreciation and amortization and changes in net working capital and subtracting taxes paid and capital expenditures from EBIT. |
Fiscal Year Ended December 31 | ||||||||||||||||||||||||||||||||||||||||||||
($ in millions) | Q2-Q4 2018E |
2019E | 2020E | 2021E | 2022E | 2023E | 2024E | 2025E | 2026E | 2027E | 2028E | |||||||||||||||||||||||||||||||||
Taxable Income / (Loss)(1) |
$ | (7 | ) | $ | (7 | ) | $ | 3 | $ | 8 | $ | 12 | $ | 18 | $ | 24 | $ | 26 | $ | 29 | $ | 31 | $ | 35 | ||||||||||||||||||||
NOLs: |
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Beginning Balance |
171 | 178 | 185 | 182 | 174 | 162 | 144 | 120 | 94 | 66 | 34 | |||||||||||||||||||||||||||||||||
NOLs Added / (Utilized) |
7 | 7 | (3 | ) | (8 | ) | (12 | ) | (18 | ) | (24 | ) | (26 | ) | (29 | ) | (31 | ) | (34 | ) | ||||||||||||||||||||||||
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Ending Balance |
178 | 185 | 182 | 174 | 162 | 144 | 120 | 94 | 66 | 34 | 0 | |||||||||||||||||||||||||||||||||
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NOL Utilization(2) |
0 | 0 | 1 | 2 | 3 | 4 | 5 | 5 | 6 | 7 | 7 |
(1) | Taxable Income for fiscal years 2024 through 2028 were extrapolated based on an assumption of 10% growth per year. |
(2) | Based on a tax rate of 21%. |
The table following the first paragraph in the subsection entitled Opinion of Invuitys Financial AdvisorSummary of Material Financial Analyses of InvuitySelected Publicly Traded Companies Analysis in Item 4 of the Schedule 14D-9 is hereby amended in its entirety as follows:
($ in millions) | TEV | TEV / Revenue 2018E |
TEV / Revenue 2019E |
17A to 20E Revenue CAGR |
18E Gross Margin % |
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K2M Group Holdings, Inc. (1) |
$ | 1,035 | 3.6x | 3.3x | 10.2 | % | 65.6 | % | ||||||||||||
AngioDynamics, Inc. |
915 | 2.7x | 2.6x | 1.0 | % | N/A | ||||||||||||||
Sientra, Inc. |
729 | 10.6x | 7.5x | 52.4 | % | 62.2 | % | |||||||||||||
LeMaitre Vascular, Inc. |
667 | 6.2x | 5.7x | 7.9 | % | 71.3 | % | |||||||||||||
RTI Surgical, Inc. |
387 | 1.4x | 1.3x | 4.2 | % | 50.9 | % | |||||||||||||
Endologix, Inc. |
381 | 2.5x | 2.7x | (5.3 | %) | 65.2 | % | |||||||||||||
SeaSpine Holdings Corporation |
233 | 1.7x | 1.6x | 5.1 | % | 61.8 | % | |||||||||||||
Alphatec Holdings, Inc. |
173 | 1.8x | 1.6x | 7.4 | % | 63.6 | % | |||||||||||||
Misonix, Inc. |
158 | 3.9x | 3.6x | 20.7 | % | N/A | ||||||||||||||
ConforMIS, Inc. |
59 | 0.7x | 0.7x | 9.0 | % | 46.8 | % | |||||||||||||
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Maximum |
10.6x | 7.5x | 52.4 | % | 71.3 | % | ||||||||||||||
Average |
3.5x | 3.1x | 11.3 | % | 60.9 | % | ||||||||||||||
Median |
2.6x | 2.7x | 7.7 | % | 62.9 | % | ||||||||||||||
Minimum |
0.7x | 0.7x | (5.3 | %) | 46.8 | % | ||||||||||||||
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Iron (Street) |
$ | 157 | 3.4x | 2.8x | 20.7 | % | 65.2 | % | ||||||||||||
Iron (Management) |
$ | 157 | 3.4x | 2.6x | 23.5 | % | 64.9 | % |
(1) | K2M Group Holdings, Inc. announced a definitive merger agreement with Stryker on August 30, 2018; K2M metrics shown using the unaffected share price one day prior to the transaction announcement. |
The table following the first paragraph in the subsection entitled Opinion of Invuitys Financial AdvisorSummary of Material Financial Analyses of InvuitySelected Precedent Transactions Analysis in Item 4 of the Schedule 14D-9 is hereby amended in its entirety as follows:
Date Announced |
Target |
Acquirer |
TV |
TV/LTM Revenue | ||||
07/2018 | Bovie Medical Corporation (electrosurgical & cauteries business & Bovie brand) | Symmetry Surgical Inc. | $97 | 3.4x | ||||
03/2018 | Cogentix Medical, Inc. | Laborie Medical Technologies Canada ULC | 212 | 3.9x | ||||
12/2017 | Entellus Medical, Inc. | Stryker Corporation | 636 | 7.4x | ||||
10/2017 | VEXIM | Stryker Corporation | 186 | 8.0x | ||||
10/2017 | Exactech, Inc. | TPG Capital | 736 | 2.8x | ||||
06/2017 | NOVADAQ Technologies Inc. | Stryker Corporation | 644 | 7.7x | ||||
02/2017 | DePuy Synthes, Inc. (Codman Neurosurgery) | Integra LifeSciences Holdings Corporation | 1,045 | 2.8x | ||||
09/2016 | EndoChoice Holdings, Inc. | Boston Scientific Corporation | 196 | 2.6x | ||||
05/2016 | Smith & Nephews gynecology business | Medtronic Public Limited Company | 350 | 6.3x | ||||
05/2016 | Galil Medical Inc. | BTG plc | 85(1) | 3.8x | ||||
05/2016 | Symmetry Surgical Inc. | RoundTable Healthcare Partners IV, L.P. | 131 | 1.5x | ||||
03/2016 | Medi-Globe Corporation | Duke Street Capital | 152 | 1.2x | ||||
11/2015 | SurgiQuest, Inc. | CONMED Corporation | 265 | 6.0x | ||||
09/2015 | Synergetics USA, Inc. | Valeant Pharmaceuticals International | 161 | 2.2x | ||||
06/2015 | Lumenis Ltd. | XIO Group | 459 | 1.6x | ||||
07/2014 | NeuroTherm, Inc. | St. Jude Medical, Inc. | 200 | 4.0x | ||||
12/2013 | Patient Safety Technologies, Inc. | Stryker Corporation | 113 | 4.5x | ||||
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Maximum | 8.0x | |||||||
Mean | 4.1x | |||||||
Median | 3.8x | |||||||
Minimum | 1.2x |
(1) | Excludes contingent payments. |
The subsection entitled Opinion of Invuitys Financial AdvisorMiscellaneous in Item 4 of the Schedule 14D-9 is hereby amended and supplemented by inserting the following at the end of the last paragraph:
Other than in connection with the Transactions, Moelis has not previously provided any services to Invuity.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule 14D-9 is true, complete and correct.
INVUITY, INC. | ||||
By: | /s/ Scott Flora | |||
Name: | Scott Flora | |||
Title: | Interim President and Chief Executive Officer |
Dated: October 16, 2018