iKang’s Merger Agreement for Going Private Transaction


J.P. Morgan Securities (Asia Pacific) Limited is serving as the financial advisor to the Special Committee, Simpson Thacher & Bartlett LLP is serving as U.S. legal counsel to the Special Committee, Walkers is serving as Cayman Islands legal counsel to the Special Committee, and Junhe LLP is serving as PRC legal counsel to the Special Committee. Davis Polk & Wardwell LLP is serving as U.S. legal counsel to the Company, and King & Wood Mallesons is serving as PRC legal counsel to the Company. Wilson Sonsini Goodrich & Rosati is serving as U.S. legal counsel to the Buyer Group, and Fangda Partners is serving as PRC legal counsel to the Buyer Group.

iKang Healthcare Group, Inc. (“iKang” or the “Company”) (Nasdaq:KANG), a major provider in China’s fast growing private preventive healthcare services market, has entered into a definitive Agreement and Plan of Merger with IK Healthcare Investment Limited, a special purpose vehicle wholly-owned by one or more affiliates of Yunfeng Capital and Alibaba Group Holding Limited, and IK Healthcare Merger Limited, a wholly-owned subsidiary of Parent.

Pursuant to the Merger Agreement, Parent will acquire the Company for a cash consideration of US$41.20 per Class A common share or Class C common share of the Company or US$20.60 per American depositary share of the Company, each representing ½ of a Class A Share. This price represents a 15.0% premium over the closing price of US$17.92 per ADS as quoted by the NASDAQ Global Market on March 9, 2018, and a premium of 24.7% and 28.5%, respectively, over the Company’s 30 and 60 trading day volume-weighted average price as quoted by the NASDAQ through March 9, 2018, the last trading day prior to March 12, 2018, the date that the Company announced it had received a “going-private” proposal from the Sponsors.

Immediately following the consummation of the merger, Parent will be beneficially owned by the Sponsors, Mr. Lee Ligang Zhang, the chairman of the board of directors and the chief executive officer of the Company, and Mr. Boquan He, the vice chairman of the board of directors of the Company (the foregoing, together with Parent and Merger Sub, the “Buyer Group”). As of the date of the Merger Agreement, Mr. Lee Ligang Zhang and Mr. Boquan He (collectively, the “Rollover Shareholders”) beneficially owned in the aggregate approximately 25.6% of the outstanding Shares, representing approximately 43.1% of the total voting power of the outstanding Shares, and have agreed with the Sponsors to roll over certain Shares (including Shares represented by ADSs) beneficially owned by the Rollover Shareholders at the consummation of the merger in connection with the Transactions (the “Rollover Shares”).

Subject to the terms and conditions of the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company continuing as the surviving company and a wholly-owned subsidiary of Parent, and each of the Shares (including Shares represented by ADSs) issued and outstanding immediately prior to the effective time of the merger and each of the ADSs will be cancelled and cease to exist in exchange for the right to receive US$41.20 per Share or US$20.60 per ADS, in each case, in cash, without interest, except for (i) Shares held by Parent, the Company or any of their respective subsidiaries, (ii) Shares issued to the depositary of the Company’s ADS program and reserved for the exercise of the options granted under the Company’s share incentive plans, (iii)the Rollover Shares, and (iv) Shares owned by holders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the merger pursuant to Section 238 of the Companies Law of the Cayman Islands, which Shares will be cancelled at the effective time of the merger for the right to receive the fair value of such Shares determined in accordance with the provisions of Section 238 of the Companies Law of the Cayman Islands. At the effective time of the merger, the Rollover Shares will be cancelled for no consideration, and the Rollover Shareholders will subscribe for newly issued shares of an affiliate of Parent. If completed, the merger will result in the Company becoming a privately-held company and its ADSs will no longer be listed on The NASDAQ Global Select Market.

The Company’s board of directors, acting upon the unanimous recommendation of the special committee formed by the independent directors of the board of directors (the “Special Committee”), approved the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Transactions”), including the merger, and resolved to recommend that the Company’s shareholders vote to authorize and approve the Merger Agreement and the Transactions, including the merger. The Special Committee, which is composed solely of independent directors of the Company who are unaffiliated with any member of the Buyer Group or management of the Company, exclusively negotiated the terms of the Merger Agreement with the Buyer Group with the assistance of its independent financial and legal advisors.

The merger, which is currently expected to close during the third quarter of 2018, is subject to customary closing conditions, including a condition that the Merger Agreement be authorized and approved by an affirmative vote of shareholders representing at least two-thirds of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of the Company’s shareholders. The Company also amended its currently effective shareholder rights plan to render it inapplicable to the Merger Agreement and the Transactions, including the merger.

The Buyer Group intends to fund the merger through a combination of (i) equity financing provided by the Sponsors in an aggregate amount equal to approximately US$1.15 billion in cash pursuant to equity commitment letters provided by the Sponsors to the Company and (ii) rollover financing comprised of the Rollover Shares (including Shares represented by ADSs).

The Company and certain other participants in the Transactions will prepare and file with the U.S. Securities and Exchange Commission (the “SEC”) a Schedule 13E-3 transaction statement, which will include a proxy statement of the Company. The Schedule 13E-3 will include a description of the Merger Agreement and contain other important information about the Transactions, including the merger, the Company and the other participants in the Transactions.

Simpson Thacher is representing the Special Committee of the Board of Directors of iKang Healthcare Group, Inc. with Katie Sudol (Picture), Sandra Kister and Sonya Ho (M&A)

Involved fees earner: Kathryn Sudol – Simpson Thacher & Bartlett; Sandra Kister – Simpson Thacher & Bartlett; Sonya Ho – Simpson Thacher & Bartlett;

Law Firms: Simpson Thacher & Bartlett;

Clients: iKang Healthcare Group, Inc.;

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Author: Michael Patrini