KCI Announces Agreement to Be Acquired For $6.3B by Apax Partners, CPPIB and PSP Investments

Posted July 13, 2011

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KCI Shareholders to receive $68.50 per share in cash

SAN ANTONIO--(BUSINESS WIRE)--Kinetic Concepts, Inc. (NYSE: KCI) today announced that it has entered into a definitive merger agreement under which a consortium comprised of funds advised by Apax Partners, together with controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, will acquire KCI for $68.50 per share in cash in a transaction valued at $6.3 billion (including KCI's outstanding debt).

This per share acquisition price represents a premium of approximately 21 percent to the one-month historical average stock price of $56.49 through July 5, 2011 (one day prior to press speculation of a transaction) and a premium of 52 percent to the 12-month historical average stock price of $45.01 through July 5, 2011.

The board of directors of KCI has unanimously approved the merger agreement and recommended that KCI's shareholders adopt the agreement with the consortium. A special meeting of KCI's shareholders will be held as soon as practicable after the filing of a definitive proxy statement with the U.S. Securities and Exchange Commission (SEC) and subsequent mailing to shareholders. The mailing of the proxy statement is expected to take place following the expiration of a 40-day ‘go-shop' period, during which KCI is permitted to encourage and solicit alternative proposals from third parties.

The agreement will bring together KCI's clinical expertise, commercial capabilities and global reach with a seasoned group of investors that has expertise in global markets and a proven track record in healthcare sector investments.

"This consortium is a group of well-respected investors whose interest in KCI represents an endorsement of our market leadership, differentiated products and services and consistently strong performance," said Cathy Burzik, KCI president and CEO. "We're proud of what we've achieved in the marketplace and will continue making the right investments in people, product innovation and commercial capabilities that help the medical community deliver superior outcomes to patients."

"We are highly impressed by the culture of innovation at KCI and are excited to work with a business that produces solutions that dramatically improve the lives of many people around the world," said Buddy Gumina, partner and co-head of the Apax Healthcare team. "Over the years, we have reviewed multiple investments in the medical devices and products industry, having originally identified it as a key growth sector within our overall healthcare investment practice. Based on this experience, we possess a deep understanding of KCI's business and the markets in which the company operates. We are delighted to have the opportunity to partner with CPPIB and PSP Investments to support the company's continued growth."

James R. Leininger, founder of KCI and chairman emeritus, and certain shareholder parties related to or affiliated with him, which collectively hold approximately 11% of the company's outstanding shares, have entered into a voting agreement with the consortium under which those shareholders have agreed to vote their shares in favor of the transaction.

The consortium has secured committed debt financing from Morgan Stanley & Co. LLC, BofA Merrill Lynch and Credit Suisse AG. These funds, in addition to equity financing from funds advised by Apax Partners, CPPIB and PSP Investments, will finance the cash consideration to KCI's shareholders.

J.P. Morgan Securities, LLC is acting as financial advisor to KCI. Skadden, Arps, Slate, Meagher & Flom LLP and Cox Smith Matthews Incorporated are acting as legal advisors to KCI.

Morgan Stanley & Co. LLC is acting as financial advisor to the consortium. Simpson Thacher & Bartlett LLP is acting as legal advisor to the consortium. Kirkland & Ellis LLP is acting as legal advisor on the financing to the consortium. Epstein Becker is acting as healthcare regulatory counsel to the consortium.

The transaction is subject to certain closing conditions, including the approval of KCI's shareholders, regulatory approvals and the satisfaction of other customary closing conditions but is not subject to any condition with regard to the financing of the transaction. The transaction is currently expected to close in the second half of 2011.

KCI will be submitting a current report on form 8-K with the U.S. Securities and Exchange Commission containing a summary of terms and conditions of the proposed acquisition.

About KCI

Kinetic Concepts, Inc. (NYSE:KCI) is a leading global medical technology company devoted to the discovery, development, manufacture and marketing of innovative, high-technology therapies and products for the wound care, tissue regeneration and therapeutic support system markets. Headquartered in San Antonio, Texas, KCI's success spans more than three decades and can be traced to a history deeply rooted in innovation and a passion for significantly improving the healing and the lives of patients around the world. The company employs approximately 7,100 people and markets its products in more than 20 countries. For more information about KCI and how its products are changing the practice of medicine, visit www.KCI1.com.

About Apax Partners

Apax Partners is one of the world's leading private equity investment groups. It operates across the United States, Europe and Asia and has more than 30 years of investing experience. Funds under the advice of Apax Partners total over $40 billion around the world. These Funds provide long-term equity financing to build and strengthen world-class companies. Apax Partners Funds invest in companies across its global sectors of Tech & Telecom, Retail & Consumer, Media, Healthcare and Financial & Business Services. For more information about Apax Partners, please visit www.apax.com.

About Canada Pension Plan Investment Board

Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At March 31, 2011, the CPP Fund totaled $148.2 billion. For more information about CPPIB, please visit www.cppib.ca.

About PSP Investments

The Public Sector Pension Investment Board is a Canadian Crown corporation established to manage investments for the pension funds of the Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. PSP Investments' mandate is to manage funds entrusted to it in the best interests of the contributors and beneficiaries of the pension plans and to maximize investment returns without undue risk of loss having regard to the funding, policies and requirements of the plans and their ability to meet their financial obligations. For more information about PSP Investments, visit www.investpsp.ca.

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