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In connection with the transaction, Oaktree and MTS have entered into a governance and standstill agreement with the Company pursuant to which, among other things, they are prohibited, for a period of three years after closing of the transaction, from increasing their combined beneficial ownership of the Company beyond 49.9% of the outstanding shares of common stock without the prior consent of a majority of independent directors. Upon completion of the transaction, three of the Company’s directors affiliated with KKR will resign from the Company’s Board of Directors and each of its committees, three nominees of Oaktree and MTS will join the Board and the Board size will remain at seven directors, unless modified by an affirmative vote of two-thirds of the directors then serving. A Nominating and Corporate Governance Committee consisting of four members will be formed, the Compensation Committee will be increased in size to four members, and two members of each committee will be nominees of Oaktree and MTS. A Finance Committee consisting of three members will also be formed, with one member being a nominee of Oaktree and MTS. The Executive Committee will be discontinued.
Oaktree and MTS have agreed to reimburse the Company up to $1.25 million of expenses upon completion of the transaction. In connection with the transaction, Oaktree and MTS are not entering into any management fee arrangement with the Company.
The Board of Directors of the Company authorized a Special Committee, composed of the Company’s independent directors not affiliated with KKR, to review the sale of the shares of common stock by KKR. The Special Committee hired an independent financial advisor and independent legal counsel. In reviewing the transaction, the Special Committee negotiated the terms of the governance and standstill agreement described above on behalf of the Company, and as part of the sale of the shares of common stock by KKR, approved and recommended the terms of such agreement to the Board of Directors of the Company. The Special Committee also approved the three nominees of Oaktree and MTS to the Company’s Board of Directors, Michael P. Harmon, Curtis S. Lane and Stephen Kaplan.
The Board of Directors approved changes to the severance arrangements of certain key executives of the Company consisting of increasing the period during which severance is to be paid to these officers by 6 to 15 months. The Board of Directors also approved, subject to shareholder approval, an amendment to the Company’s stock option plan to increase by 1,000,000 the number of shares of common stock reserved for grants pursuant to the plan.
The transaction is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and will require the consent of the Company’s lenders under its term loan and revolving credit facilities. The transaction is expected to close during the first half of 2007.
Paul Viviano, Alliance Imaging’s Chairman of the Board and Chief Executive Officer, said, “For over seven years, Alliance has greatly benefited from KKR’s advice and input as our majority shareholder, and I look forward to the contribution of Oaktree and MTS as they assume a significant equity position in the Company and join our Board of Directors. Together, we will continue to pursue the successful implementation of our company-wide initiatives: our focus on providing outstanding, high quality clinical care to our patients and investing in our growth products -- fixed site imaging centers, PET / CT services and radiation oncology centers.”
Michael P. Harmon, Managing Director of Oaktree Capital Management, LLC said, “We are pleased and enthusiastic about our investment in Alliance Imaging, which we believe to be the strongest independent platform in the imaging industry. Oaktree and MTS take great pride in this investment and we look forward to supporting the Alliance management team with our collective resources and industry experience.”
Curtis Lane, Founder and Senior Managing Director of MTS Health Investors said, “We’ve done a considerable amount of work in the diagnostic imaging industry. We believe it is the right time to invest, particularly given the opportunity to partner with the industry’s premier management team.”
About Alliance Imaging
Alliance Imaging is a leading national provider of shared-service and fixed-site diagnostic imaging services, based upon annual revenue and number of diagnostic imaging systems deployed. Alliance provides imaging and therapeutic services primarily to hospitals and other healthcare providers on a shared-service and full-time service basis, in addition to operating a growing number of fixed-site imaging centers. The Company had 489 diagnostic imaging systems, including 331 MRI systems, 73 PET or PET/CT systems, 40 CT systems and 45 other systems, and served over 1,000 clients in 43 states at December 31, 2006. Of these 489 diagnostic imaging systems, 68 were located in fixed-sites, which includes systems installed in hospitals or other buildings on or near hospital campuses, medical group offices, or medical buildings and retail sites.
About Oaktree Capital Management, LLC
Oaktree Capital Management, LLC was founded in 1995 and is headquartered in Los Angeles, California. It is an independent investment management firm with over $37 billion of assets under management in niche investment strategies. These strategies include private equity, real estate, Asian and emerging market equities, Japanese opportunities, power infrastructure, distressed debt, high yield bonds, convertible securities, and mezzanine debt. Oaktree Capital Management, LLC’s institutional clients include Fortune 100 companies, large public pension funds, university endowments, private foundations and high net worth individuals. In addition to Los Angeles, Oaktree Capital Management, LLC has offices in New York, Stamford, Tokyo, Singapore, Hong Kong, Beijing, London, Frankfurt and, through fund affiliates, Luxembourg, and employs over 360 people.
About MTS Health Investors, LLC
MTS Health Investors, LLC, located in New York, New York, is a healthcare private equity firm that makes equity investments in the buyout, recapitalization or growth financing of healthcare operating companies. MTS focuses on businesses that operate in services sectors of the healthcare industry - managed care/health insurance, providers of healthcare services, distributors of medical products and pharmaceuticals, manufacturers of medical products and low-technology devices and providers of outsourced services to the healthcare industry.
This press release contains forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For a complete list of risks and uncertainties, please refer to the Risk Factor section of the Company’s Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission.