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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9/A
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 4
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CENTERPULSE LTD.
(NAME OF SUBJECT COMPANY)
CENTERPULSE LTD.
(NAME OF PERSON FILING STATEMENT)
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REGISTERED SHARES, PAR VALUE CHF 30 PER SHARE, INCLUDING SHARES
REPRESENTED BY AMERICAN DEPOSITARY SHARES
(TITLE AND CLASS OF SECURITIES)
-------------------------
NOT APPLICABLE*
(CUSIP NUMBER OF CLASS OF SECURITIES)
-------------------------
DR. MAX LINK
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
CENTERPULSE LTD.
ANDREASSTRASSE 15
CH-8050, ZURICH
SWITZERLAND
+41-1-306-9696
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPY TO:
ELLEN J. ODONER, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
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* There is no CUSIP Number assigned to the Registered Shares. CUSIP No.
152005104 has been assigned to the American Depositary Shares of Centerpulse
Ltd. that are quoted on the New York Stock Exchange under the symbol "CEP".
CUSIP No. 152005203 has been assigned to the American Depositary Shares of
Centerpulse Ltd. that were issued pursuant to a restricted ADR facility and are
not publicly traded.
|_| CHECK THE BOX IF THE FILING RELATES SOLELY TO PRELIMINARY COMMUNICATIONS
MADE BEFORE THE COMMENCEMENT OF A TENDER OFFER.
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This constitutes Amendment No. 4 to the Solicitation/Recommendation
Statement on Schedule 14D-9 initially filed with the Securities and Exchange
Commission (the "SEC") on July 2, 2003 (as previously amended, the "Schedule
14D-9") by Centerpulse Ltd., a corporation organized under the laws of
Switzerland ("Centerpulse" or the "Company"), relating to the exchange offer by
Zimmer Holdings, Inc., a Delaware corporation ("Zimmer"), being made pursuant to
the Prospectus, dated June 19, 2003, forming a part of Zimmer's Registration
Statement (No. 333-105561) on Form S-4 filed with the SEC.
The information in the Schedule 14D-9 is hereby expressly
incorporated by reference, except as otherwise set forth below. Capitalized
terms used, but not otherwise defined, herein shall have the meanings given to
them in the Schedule 14D-9.
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
The information set forth in the caption entitled "Other Interests of
Mr. Braginsky" is hereby amended and supplemented by adding the following
sentence as the last sentence of the last paragraph thereof:
"On July 23, 2003, the Swiss Banking Commission confirmed the
recommendation of the STOB which held that the limitations on the withdrawal
rights of the InCentive Shareholders were invalid."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
The information set forth in the caption entitled "Background;
Contacts between Zimmer and Centerpulse" is hereby amended and supplemented by
adding the following paragraphs at the end thereof:
"On August 6, 2003, S&N issued a press release in which it announced
that, after a detailed review of the options in relation to the S&N Offer and
the S&N InCentive Offer, it had determined not to increase the consideration to
be offered in the S&N Offer and the S&N InCentive Offer.
On August 7, 2003, the Centerpulse Board met to review the situation
with representatives of Lehman Brothers, UBS Securities and Goldman Sachs.
On August 14, 2003, the Centerpulse Board met with senior management
of Centerpulse and representatives of Lehman Brothers, UBS Securities and
Goldman Sachs to consider the Zimmer Offer and the S&N Offer. At the meeting,
the senior management of Centerpulse reported to the Centerpulse Board the
receipt of the written opinion of KPMG Fides Peat ("KPMG"), dated August 14,
2003 (the "KPMG Opinion"), a copy of which is attached to this Statement as
Annex D), that as of the date of the KPMG Opinion and based on and subject to
the matters described in the KPMG Opinion, (1) the consideration to be received
by the holders (other than InCentive and its affiliates) of Centerpulse Shares
pursuant to the Zimmer Offer is fair, from a financial point of view, to such
holders and (2) the Zimmer Offer constitutes, from a financial point of view, a
higher value than the S&N Offer. KPMG rendered its opinion in accordance with
applicable Swiss law and pursuant to the requirements of the STOB. After
discussion, the Centerpulse Board decided to recommend the Zimmer Offer to
Centerpulse shareholders. The Centerpulse Board's recommendation is conditional
upon Zimmer's shareholders approving the issuance of the new Zimmer Shares as
part of the consideration to be paid to Centerpulse shareholders in the Zimmer
Offer. The Centerpulse Board also decided that a board report including the
recommendation will be published once this condition is met.
2
On August 15, 2003, Centerpulse issued a press release, a copy of
which is attached to this Statement as Exhibit (a)(5)(H), Dr. Link sent a letter
to Centerpulse shareholders, a copy of which is attached to this Statement as
Annex C, and Dr. Link sent a letter to Centerpulse employees, a copy of
which is attached to this Statement as Exhibit (a)(2)(F), with respect to these
developments."
The information set forth in the caption entitled "Position of the
Centerpulse Board with Respect to the Zimmer Offer and the Reasons Therefor" is
hereby deleted in its entirety and replaced by the following paragraphs:
"At a meeting on August 14, 2003, the Centerpulse Board decided to
recommend the Zimmer Offer to Centerpulse shareholders. The recommendation is
conditional upon Zimmer's shareholders approving the issuance of the new Zimmer
Shares as consideration to be paid to Centerpulse shareholders in the Zimmer
Offer.
The Centerpulse Board, together with senior management, has
repeatedly analyzed the short- and long- term prospects of Centerpulse as an
independent enterprise and carefully evaluated, with a view to the market
position of Centerpulse in certain key markets, the advantages of joining forces
with a strategic partner, particularly with either Zimmer or S&N. The
Centerpulse Board has, supported by an independent advisor, evaluated the
strategic implications of the Zimmer Offer and the S&N Offer from the
perspective of all stakeholders. In addition, the Centerpulse Board has weighed
the financial aspects of the Zimmer Offer and the S&N Offer with its strategic
and financial advisors and, together with external auditors and legal counsel,
has conducted due diligence reviews of both Zimmer and S&N, comparable in both
scope and depth.
The Centerpulse Board has examined and compared both the Zimmer Offer
and the S&N Offer and, based on its analysis and after consultation with its
advisors, has concluded that joining forces with either Zimmer or S&N would be
in the interests of Centerpulse, its customers, employees and shareholders. In
light of S&N's announcement on August 6, 2003 that it would not increase the S&N
Offer and as the Zimmer Offer constitutes the better value for Centerpulse
shareholders (based upon current stock market prices and currency exchange
rates), the Centerpulse Board is recommending the Zimmer Offer to Centerpulse
shareholders, conditional upon Zimmer shareholders approving the issuance of new
Zimmer Shares as part of the consideration to be paid to Centerpulse
shareholders in the Zimmer Offer.
In its consideration of the Zimmer Offer and the S&N Offer and in
response to the STOB's requirements, the Centerpulse Board has commissioned and
received the KPMG Opinion. A summary of the KPMG Opinion is provided below.
SUMMARY OF THE KPMG OPINION
THE FULL TEXT OF THE WRITTEN KPMG OPINION, DATED AUGUST 14, 2003, IS
ATTACHED AS ANNEX D TO THIS STATEMENT. THE KPMG OPINION CONTAINS A DISCUSSION OF
THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, FACTORS CONSIDERED AND LIMITATIONS
UPON THE REVIEW UNDERTAKEN BY KPMG IN RENDERING ITS OPINION. THE FOLLOWING IS A
SUMMARY OF THE KPMG OPINION AND THE METHODOLOGY THAT KPMG USED TO RENDER ITS
FAIRNESS OPINION.
KPMG rendered its opinion in accordance with applicable Swiss law and
pursuant to the requirements of the STOB. The KPMG Opinion is not intended to be
and does not constitute a recommendation to any shareholder of Centerpulse as to
whether to accept the consideration to be offered to the shareholders in
connection with the Zimmer Offer or as to whether to elect to receive fewer
Zimmer Shares or more Zimmer Shares in the Zimmer Offer. KPMG was not requested
to opine as to, and the KPMG Opinion does not address, Centerpulse's underlying
3
business decision to effect the business combination with Zimmer. The KPMG
Opinion is necessarily based upon economic, monetary, market and other
conditions as in effect on, and the information made available to KPMG as of,
the date of the KPMG Opinion.
In arriving at its opinion, KPMG, among other things:
o reviewed and analyzed the Zimmer Offer, the pre-announcement made in
accordance with the STOB regulations and the specific terms of the
proposed transaction;
o reviewed certain publicly available business and historical financial
information relating to Centerpulse and Zimmer;
o reviewed certain internal financial information and other data
relating to the business and financial prospects of Centerpulse,
including estimates and financial forecasts prepared by the management
of Centerpulse, which were provided to KPMG by Centerpulse and not
publicly available;
o reviewed publicly available financial and stock market data with
respect to selected other companies in lines of business KPMG believed
to be generally comparable to those of Centerpulse and Zimmer;
o compared the financial terms of the transaction with the publicly
available financial terms of selected other transactions which KPMG
believed to be generally relevant; and
o conducted such other financial studies, analyses and investigations
and considered such other information as KPMG deemed necessary or
appropriate.
In rendering its opinion, KPMG assumed and relied, without independent
verification, upon the accuracy and completeness of all financial information,
analyses and other information and data publicly available or furnished to or
otherwise reviewed by or discussed with it, including the information and data
referred to above, as well as certain of the analyses, reports and information
prepared for the Centerpulse Board and provided to KPMG for purposes of
rendering its opinion. KPMG also received assurances of the management of
Centerpulse that it was not aware of any facts that would make any of the
information inaccurate or misleading.
The KPMG Opinion was necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, August 11, 2003.
Minor fluctuations of stock prices and exchange rates did not result in a
material change of the results of the analysis between August 11, 2003 and the
date of the KPMG Opinion on August 14, 2003. In connection with its review, with
the consent of or at the direction Centerpulse, KPMG did not:
o make any independent evaluation or appraisal of any of the assets or
liabilities (contingent or otherwise) of Centerpulse or Zimmer, nor
was KPMG furnished with any such evaluation or appraisal;
o conduct meetings with management of Centerpulse or Zimmer or request
or receive any financial or business information or data from either
Centerpulse or Zimmer; or
o review non-public financial or business information, data or prospects
of Zimmer including, without limitation, estimates or financial
forecasts prepared by Zimmer management.
KPMG was not asked to, and did not, recommend the specific form or
amount of consideration payable in the Zimmer Offer, which was solely determined
by Zimmer as the offeror. In addition, KPMG was not asked to, and did not offer
any opinion as to the form of the transaction contemplated in the Zimmer Offer,
and expressed no opinion as to the actual value of the Zimmer Shares at the time
of the KPMG Opinion or in the future. For purposes of its opinion, KPMG was
instructed to assume that the fair market value of the Zimmer Shares were, as of
the date of the KPMG Opinion, the closing price of the Zimmer Shares as reported
by the New York Stock Exchange (the "NYSE") on such date.
4
KPMG expressed no opinion as to the effect of the proposed
transaction on shareholders who do not tender their Centerpulse Shares in the
Zimmer Offer or as to what the value of such shares will be or whether and at
what prices such shares will trade after the Zimmer Offer. In addition, KPMG
expressed no opinion as to whether the consideration that may have been received
by Centerpulse shareholders if Centerpulse's divisions were sold in separate
transactions would have been higher or lower than the consideration to be
offered to Centerpulse shareholders in the Zimmer Offer.
The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, is not susceptible to partial analysis or summary
descriptions. In arriving at its opinion, KPMG did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor
considered by it based on the results of all of the analyses reviewed by it and
assessed as a whole. Accordingly, KPMG believes that its analysis must be
considered as a whole and that selecting portions of its analysis and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the processes underlying the analysis set forth in
its opinion.
With regard to the value of the Zimmer Shares, KPMG reviewed certain
publicly available business and historical financial and stock trading
information concerning Zimmer. However, because of KPMG's assumption concerning
the valuation of the Zimmer Shares as described above, KPMG did not perform any
independent valuation of the Zimmer Shares. With regard to the value of the S&N
Offer, KPMG assumed that the fair market value of the S&N Shares was, as of
August 11, 2003, the closing price of the S&N Shares as reported by the London
Stock Exchange on such date and the value of the S&N ADSs was, as of August 11,
2003, the closing price of the S&N ADSs as reported by the NYSE on such date.
ANALYSIS PERFORMED BY KPMG
The following is a summary of the material financial analyses
performed by KPMG in arriving at its opinion.
Analysis of Centerpulse
-----------------------
Comparable Public Company Analysis
In order to assess how the public market values shares of publicly
traded companies similar to Centerpulse, KPMG compared specific financial
information, ratios and public market data relating to Centerpulse with selected
companies that KPMG deemed comparable to Centerpulse, including Biomet, Inc.,
S&N, Stryker Corporation, Synthes Stratec, Inc. and Zimmer. The selected public
companies may significantly differ from Centerpulse based on, among other
things, the size of the companies, the geographic coverage of the companies'
operations and the particular business segments in which the companies focus.
Using publicly available information, KPMG calculated and analyzed each
company's current stock price to its projected earnings per share (commonly
referred to as a price earnings ratio, or P/E) and each company's enterprise
value to certain historical and projected financial criteria (such as revenues
and earnings before interest, taxes, depreciation and amortization (EBITDA)).
The enterprise value of each company was obtained by adding its short and
long-term debt to the sum of the market value of its fully-diluted common
equity, the value of any preferred stock (at liquidation value), the book value
5
of any minority interest, the value of any material debt-equivalent liabilities,
and subtracting its cash and cash equivalents. KPMG determined, based on the
geographic scope of Centerpulse's operations that global orthopedics companies
are the most appropriate comparables. As of August 11, 2003, the global
comparable companies' mean enterprise value multiple of actual latest twelve
months revenues and EBITDA were 5.6x and 18.1x, respectively. Additionally, the
global comparable companies' mean multiple of current stock price to the
projected calendar years (CY) 2003 and 2004 earnings per share (P/Es) based upon
data from Bloomberg, were 27.4x and 23x, respectively.
However, because of the inherent differences between the business,
operations and prospects of Centerpulse and the business, operations and
prospects of the companies included in the comparable companies, KPMG believed
that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the comparable company analysis and accordingly also
made qualitative judgments concerning differences between the financial and
operating characteristics and prospects of Centerpulse and the companies
included in the comparable company analysis that would affect the public trading
values of each.
KPMG determined that, because equity analysts primarily value these
comparable companies on the next twelve months' earnings, the use of a CY 2003
P/E multiple range was the most appropriate reference range in analyzing how the
public market values Centerpulse Shares. Moreover, due to certain differences in
the treatment of goodwill under the accounting policies followed by these
comparable companies, KPMG calculated the P/Es by excluding the impact of
goodwill amortization expense. Using these multiples, KPMG calculated the
implied equity values per Centerpulse Share for a range of CY 2003 P/E multiples
from 26.5x to 28.5x. The range of CY 2003 P/E multiples yielded a range of per
share values from CHF 359 to CHF 386. KPMG noted that the CHF 365 per share
implied value in the exchange offer as of August 11, 2003 was in the range
implied by the comparable company analysis.
Comparable Transaction Analysis
KPMG reviewed publicly available financial information relating to
Stryker Corporation's acquisition of Howmedica from Pfizer, Inc. and Johnson &
Johnson's acquisition of DePuy, Inc., both of which were announced in 1998. More
recent transaction details were not available and the selected transactions may
differ significantly from the business combination of Zimmer and Centerpulse
based on, among other things, the size of the transactions, the structure of the
transactions and the dates that the transactions were announced and consummated.
KPMG reviewed, among other things, the transaction values implied in the
relevant transactions as a multiple of the target's last twelve months' (LTM)
revenue and LTM EBITDA, and the equity values implied in the relevant
transactions as a multiple of the target's estimated net income for the fiscal
year following the fiscal year in which the relevant transaction was announced.
The comparable acquisitions' mean multiple of transaction values to
LTM EBITDA was 11.3x. KPMG deemed the multiple of EBITDA to be a more
appropriate benchmark than other metrics, because multiples of EBITDA are the
most consistent and available of the set of metrics across the comparable set of
transactions, and because it is easily calculated using the same methodology for
each comparable transaction. Using a range of LTM EBITDA multiples from 9.8x to
12.8, KPMG calculated a range of implied equity values per Centerpulse share
from CHF 235 to CHF 317. KPMG noted that the CHF 365 per share implied value in
the Zimmer Offer as of August 11, 2003, was above the range implied by the
comparable transaction analysis.
6
Discounted Cash Flow Analysis
As part of its analysis, KPMG prepared a discounted after-tax cash
flow model that was based upon the Centerpulse projections. KPMG used after tax
discount rates of 11.0% to 15.0% and a terminal value based on a range of
multiples of estimated EBITDA in 2007 of 9.0x to 11.0x. Based on these discount
rates and the range of the terminal values, KPMG calculated a range of implied
equity values per Centerpulse Share from CHF 255 to CHF 357. KPMG noted that the
CHF 365 per share implied value in the Zimmer Offer as of August 11, 2003, was
above the range implied by the discounted cash flow analysis.
Relative Contribution Analysis
------------------------------
KPMG analyzed the respective contributions of Zimmer and Centerpulse
to the estimated CY 2003 and 2004 revenues, EBITDA, and net income excluding
goodwill amortization expense and non-recurring items of the combined company
based on the publicly available Zimmer earnings analysis and the Centerpulse
projections, and prior to any transaction related adjustments, including any
potential cost savings, operating synergies and revenue enhancements expected by
the management of Zimmer. This analysis indicated the 2003 and 2004 percentage
contributions of Centerpulse to Zimmer's estimated revenue, EBITDA and net
income excluding goodwill amortization expense and non-recurring items was
consistent with the implied exchange ratio of 5.48 Zimmer Shares for each
Centerpulse Share to be received by Centerpulse shareholders in the Zimmer
Offer, and the associated ownership percentage of 25%, both assuming an
all-stock transaction.
In arriving at its opinion, because of KPMG's assumption concerning
the valuation of the Zimmer Shares as described above, KPMG did not perform any
independent analysis of the valuation of Zimmer, nor of companies comparable to
Zimmer. KPMG has assumed that the fair market value of the Zimmer Shares are, as
of August 11, 2003, the closing price of the Zimmer Shares as reported by the
NYSE as of August 11, 2003.
Stock Trading History
---------------------
KPMG considered historical data with regard to the trading prices of
Centerpulse Shares and the Zimmer Shares for the period from March 20, 2002 to
August 11, 2003 and the relative stock price performances during this same
period of Centerpulse and Zimmer. Furthermore KPMG considered historical data
with regard to the relative exchange rate of the Swiss franc and USD for the
period from March 20, 2002 to August 11, 2003.
During this period the closing stock price of Centerpulse ranged from
CHF 133.17 to CHF 377 per share, and the closing price of Zimmer ranged from USD
29.4 to USD 50.4 per share. KPMG noted that, during this timeframe, the share
price of Centerpulse increased 167%. The share price of Zimmer increased 40%
during this time period. KPMG also noted that during this time period, the Swiss
franc appreciated 18.1% relative to the USD.
Historical Exchange Ratio Analysis
----------------------------------
KPMG also compared the historical share prices of Centerpulse and
Zimmer during different periods between March 20, 2002 and August 11, 2003, in
order to determine the implied average exchange ratio that existed for those
periods. The following table indicates the average exchange ratio of Zimmer
Shares for each Centerpulse Share for the periods indicated, and is based upon
the average exchange rate between the Swiss franc and the USD for the periods
indicated:
7
Average Exchange Ratio
August 11, 2003 5.5x
June 19, 2003 5.7x
March 20, 2003 5.6x
Three months period 5.6x
Six months period 5.7x
Twelve months period 5.8x
Comparison to S&N Offer
-----------------------
At the request of the Centerpulse Board, KPMG compared, from a
financial point of view, the Zimmer Offer and the S&N Offer. In completing such
comparison, KPMG did not take into account or evaluate any other terms of the
proposed transactions and did not in any manner address the relative merits of
either transaction to the Company. KPMG assumed that the fair market value of
the S&N Shares was, as of August 11, 2003, the closing price of the S&N Shares
as reported by the London Stock Exchange on such date and the value of the S&N
ADSs was, as of August 11, 2003, the closing price of the S&N ADSs as reported
by the NYSE on such date. KPMG determined that, as of August 11, 2003, the
Zimmer Offer constitutes, from a financial point of view, a higher value than
the S&N Offer. KPMG does not express any opinion as to the future potential
development of the share prices of Zimmer, S&N or the Company. Minor
fluctuations of stock prices and exchange rates did not result in a material
change of the results of the analysis between August 11, 2003 and the date of
the KPMG Opinion on August 14, 2003.
Fee Arrangement
---------------
For its services in rendering the fairness opinion, KPMG has earned a
fee of CHF400,000, which was not dependent upon the result of the KPMG Opinion
or upon the completion of the business combination. In addition, Centerpulse has
agreed to pay any applicable value added tax, to reimburse KPMG for reasonable
out-of-pocket expenses incurred in connection with the proposed transaction and
to indemnify KPMG for certain liabilities that may arise out of its engagement
by Centerpulse and the rendering of the KPMG Opinion."
The information set forth in the caption entitled "Intent of Certain
Persons to Tender" is hereby deleted in its entirety and replaced by the
following paragraph:
"The executive officers and directors of Centerpulse have advised
Centerpulse that they intend to tender their Centerpulse Shares or Centerpulse
ADSs, as the case may be, into the Zimmer Offer. InCentive shareholders who
tendered their shares into the S&N Offer have publicly announced that they will
withdraw from the S&N Offer and will tender into the Zimmer Offer, if the
conditions are met."
ITEM 8. ADDITIONAL INFORMATION.
A copy of the press release issued by the Company on August 15, 2003,
relating to the release of its first half and second quarter of 2003 results, is
attached hereto as Exhibit (a)(5)(I).
8
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
(a)(2)(E) Letter of the Chairman and Chief Executive Officer of
Centerpulse to Centerpulse Shareholders, dated August 15,
2003 (included as Annex C hereto).
(a)(2)(F) Letter of the Chairman and Chief Executive Officer of
Centerpulse to Centerpulse Employees, dated August 15,
2003.
(a)(5)(G) Opinion of KPMG Fides Peat, dated August 14, 2003
(included as Annex D hereto).
(a)(5)(H) Press release issued by the Company, dated August 15,
2003, relating to the recommendation of the Centerpulse
Board of Directors.
(a)(5)(I) Press release issued by the Company, dated August 15,
2003, relating to the release of the Company's first half
and second quarter of 2003 results.
9
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
CENTERPULSE, LTD.
By: /s/ Max Link
--------------------------------------
Max Link
Chairman and Chief Executive Officer
By: /s/ Urs Kamber
--------------------------------------
Urs Kamber
Chief Financial Officer
Dated: August 19, 2003
10
ANNEX C
CENTERPULSE
Implanting trust
Centerpulse Ltd
Andreasstrasse 15
CH-8050 Zurich
Phone +41 1 306 96 96
Fax +41 1 306 96 97
www.centerpulse.com
Helpline for tender offer:
Phone +41 (0)848 372 436
Zurich, August 15, 2003
Dear shareholder,
The Board of Centerpulse Ltd announced today that it RECOMMENDS THE
TENDER OFFER FROM ZIMMER HOLDINGS, INC. contingent upon Zimmer's
shareholders approving the transaction.
As stated in the Board report dated July 8, 2003, the Board, together
with management, has analysed the short- and long-term prospects of
Centerpulse as an independent enterprise and evaluated the advantages
of joining forces with a strategic partner, particularly with one of
the bidders. The Board examined and compared both offers and has
concluded that joining forces with either Smith & Nephew or Zimmer
would be in the interest of the company, its customers, employees and
shareholders.
However, following the Smith & Nephew announcement on August 6, 2003
that it would not increase its offer, the Board is recommending the
Zimmer offer. This recommendation is CONDITIONAL upon Zimmer's
shareholders approving the issuance of new shares as part of the
consideration to be paid to Centerpulse shareholders in the Zimmer
Offer. The special meeting of Zimmer's stockholders is scheduled for
August 21 and once the Zimmer shareholders have approved the issuance
of shares and the condition is met, the Board report including the
recommendation will be published. The Board recommendation is
supported by an independent fairness opinion prepared by KPMG.
We believe the Zimmer offer delivers better value for our shareholders
and recommend that you tender your shares to the Zimmer offer. The
offer period is expected to close on August 27.
If you have already tendered your shares to the Smith & Nephew offer,
you have the right to withdraw your shares at any time. If you wish to
withdraw tendered shares, please contact the institution where you
sent the acceptance forms as soon as possible.
If you have any questions, please also feel free to contact the
Centerpulse Shareholder Helpline, telephone +41 (0) 848 372 436,
Monday to Friday 8.30 a.m. to 5.30 p.m. CET.
A combination of Centerpulse and Zimmer will create a global leader in
the orthopaedic sector; we are very excited about the changes ahead
and are looking forward to start working with Zimmer on the successful
integration of the two companies.
Yours sincerely,
/s/ Max Link
Max Link
Chairman of the Board and Chief Executive Officer
ANNEX D
KPMG Fides Peat Telephone +41 1 249 31 08
Badenerstrasse 172 P.O. Box Telefax +41 1 249 27 70
CH-8004 Zurich CH-8026 Zurich www.kpmg.ch
To the Board of Directors of
Centerpulse AG
Andreasstrasse 15
8050 Zurich
Zurich, August 14, 2003
FAIRNESS OPINION
Dear Sirs
We understand that Centerpulse AG intends to enter into a transaction whereby
Zimmer Holdings, Inc., will acquire control of Centerpulse AG (the
"Transaction"). The terms of the public Offer dated June 19, 2003 of Zimmer
Holdings, Inc., a company organized under the Delaware General Corporation Law,
having its registered office in Wilmington, Delaware, U.S.A., and its
headquarters in Warsaw, Indiana, U.S.A. ("Zimmer") provide, among others, that
Zimmer offers to purchase all outstanding registered shares of Centerpulse AG
(the "Company"), nominal value CHF 30 per share. Zimmer will offer (the "Offer")
for each Company Share 3.68 shares of Zimmer common stock, par value USD 0.01
per share together with CHF 120 in cash (the "Consideration").
We understand that Zimmer is making a separate offer to acquire all of the
outstanding shares of InCentive Capital AG ("InCentive"), an investment company
listed on the SWX Swiss Exchange, which is the beneficial owner of approximately
18.9% of the outstanding registered shares of the Company, pursuant to a public
offer (the "Parallel Public Offer"), dated June 19, 2003 and conducted in
parallel to the Offer.
You have requested our opinion as to the fairness from a financial point of view
to the holders (other than InCentive and its affiliates) of Company Shares of
the Consideration to be received by such holders pursuant to the Offer.
Our opinion does not address the Company's underlying business decision to
effect the Transaction or constitute a recommendation to any shareholder of the
Company as to whether such holder should tender its shares in the Offer. We have
not been asked to, nor do we, offer any opinion as to the material conditions of
the Offer or the form of the Transaction.
We express no opinion as to what the value of the Zimmer shares will be when
issued pursuant to the Offer or the prices at which such shares will trade in
the future. We also express no opinion as to the effect of the Transaction on
shareholders who do not tender their Company Shares in the Offer or as to what
the value of such shares will be or whether and at what prices such shares will
trade after the Offer. We have assumed that the fair market value of the Zimmer
shares are, as of the date of the opinion, the closing price of the Zimmer
shares as reported by the New York Stock Exchange as of the date of the opinion.
In arriving at our opinion, we have among other things:
o reviewed certain publicly available business and historical financial
information relating to the Company and Zimmer
o reviewed certain internal financial information and other data
relating to the business and financial prospects of the Company,
including estimates and financial forecasts prepared by management of
the Company, that were provided to us by the Company and not publicly
available
o reviewed publicly available financial and stock market data with
respect to certain other companies in lines of business we believe to
be generally comparable to those of the Company and Zimmer
o compared the financial terms of the Transaction with the publicly
available financial terms of certain other transactions which we
believe to be generally relevant
o conducted such other financial studies, analysis, and investigations,
and considered such other information as we deemed necessary or
appropriate.
In connection with our review, with your consent, we do not assume any
responsibility for independent verification for any of the information reviewed
by us for the purpose of this opinion and have, with your consent, relied on
such information being complete and accurate in all material respects. In
addition, at your direction, we have not made any independent evaluation
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company or Zimmer, nor have we been furnished with any such evaluation or
appraisal.
With respect to the financial forecasts, estimates and pro forma effects
referred to above, we have assumed, at your direction that they have been
prepared on a basis reflecting the best currently available estimates and
judgements of the management of the Company as to the future of the Company. Our
opinion is necessarily based on economic, monetary, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof.
This opinion is not intended to be and does not constitute a recommendation to
any shareholder of the Company as to whether to accept the Consideration to be
offered to the shareholders in connection with the Offer or as to whether to
elect to receive fewer Zimmer common stock and more cash or more Zimmer common
stock and less cash under the "mix and match" option as explained in the Offer.
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Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders (other than InCentive
and its affiliates) of Company Shares pursuant to the Offer is fair, from a
financial point of view, to such holders.
As of the date hereof, the offer made by Zimmer constitutes, from a financial
point of view, a higher value than the offer published by Smith & Nephew on
April 25, 2003. However, we do not express any opinion as to the future
potential development of the share prices of Zimmer, Smith & Nephew or the
Company. Our opinion does not in any manner address the relative merits of
either transaction to the Company.
This Fairness Opinion is subject to Swiss law, the place of jurisdiction being
Zurich.
Yours sincerely
KPMG Fides Peat
/s/ Renat Nussbaumer /s/ Rolf Langenegger
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Renat Nussbaumer Rolf Langenegger
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