Henry Schein $200 million CoCo convertible talked at 2.5%-3.0%, up 41%-46%

Nashville, Aug. 3 - Henry Schein Inc. launched $200 million of 30-year convertible notes talked to yield 2.5% to 3.0% with a 41% to 46% initial conversion premium.

Lehman Brothers and JPMorgan Securities are joint lead managers of the Rule 144A deal, which is slated for Wednesday's business.

The senior notes will be non-callable for six years and then at par. There are puts in years six, 10, 15, 20 and 25.

Also, there is a 130% contingent conversion trigger with no waiver provisions in the event of new accounting rules for those structures, as with the Ocwen Financial Inc. issue recently. In the Ocwen issue, the company has the option to waive the CoCo feature pending a final ruling by the Financial Accounting Standards Board on the treatment of potential dilution from CoCo converts in reporting earnings.

A task force of the FASB has tentatively recommended a change in accounting rules for CoCo convertibles that would require issuers of those securities to report diluted EPS even if the CoCo trigger has not been hit, plus present historical EPS figures on an as-if-diluted basis.

The task force is scheduled to meet again Sept. 29 and 30 to discuss the matter.

There is a $40 million greenshoe available on the Henry Schein offering.

Melville, N.Y.-based Henry Schein, the largest provider of healthcare products and services to office-based practitioners in North America and Europe, intends to use proceeds to repay a $150 million bridge loan incurred in its acquisition of the Demedis GmbH group. In addition, the company plans to use $50 million to repay other borrowings and for general corporate expenses.

JPMorgan Chase and Lehman Brothers Inc. provided the bridge loan.

As part of the €255 million Demedis acquisition, Henry Schein divested of the DentalMV GmbH, or Muller & Weygandt unit, a direct marketing distributor of dental consumable products in Germany, while retaining Krugg SpA., a leading distributor of dental consumable products in Italy, and plans to continue the businesses of Demedis and Euro Dental Holding GmbH as usual.

On July 20, Henry Schein announced the sale of Muller & Weygandt for €50 million.

Last week, Henry Schein reported second-quarter net income of $38.7 million, or 86 cents a share, compared with $32.9 million, or 74 cents a share, for second quarter 2003, while revenue grew to $945.7 million from $776.2 million.

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