Kyphon says 1%, 1.25% notes convertible following merger, starts change of control tender

By Jennifer Chiou

New York, Nov. 8 - Kyphon Inc. said holders can convert its $200 million of 1% convertible senior notes due 2012 and $200 million of 1.25% convertible senior notes due 2014 due to the fundamental change caused by Medtronic, Inc.'s acquisition of the company, according to an 8-K filing with the Securities and Exchange Commission. It also started a change of control tender offer.

In the tender offer, the company will offer to purchase the notes at par plus accrued interest to Dec. 12, the payment date.

As already reported, Medtronic acquired all of the outstanding shares of Kyphon common stock for $71 per share in cash.

As already reported, holders may convert their until 35 calendar days after the actual effective date of the merger, which is expected to mean a Dec. 12 deadline.

Notes will be converted into receive cash, less any withholding taxes, and, if applicable, shares of common stock of Kyphon.

For each $1,000 principal amount of notes converted, holders are entitled to receive $1,220.85 plus (based on a conversion rate of 17.1951 shares per $1,000 principal amount):

• An additional $101.07 of cash for the 1% notes; and

• An additional $110.41 of cash for the 1.25% notes.

Medtronic's spinal surgery focus has been on younger patients suffering from scoliosis and degenerative disc disease in the cervical and lumbar spine. The company is based in Minneapolis.

Kyphon, a Sunnyvale, Calif., medical device company, specializes in the treatment of older patients suffering from vertebral compression fractures and spinal stenosis.

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