UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.
1
TO
SCHEDULE
TO
SCHEDULE 13E-3
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) or 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934.
SUNLINK HEALTH
SYSTEMS, INC.
(Name Of Subject Company (Issuer))
SUNLINK HEALTH SYSTEMS, INC.
(Name of Filing Persons (Issuer and Offeror))
Common Shares,
no par value
(Title of Class of Securities)
867370102
(CUSIP Number
of Class of Securities)
Robert M. Thornton, Jr.
Chairman
SunLink Health
Systems, Inc.
900 Circle 75 Parkway
Suite 1120
Atlanta,
Georgia 30339
(Name, address and telephone number of person authorized to receive notices and communications on behalf of filing
persons)
with a copy to:
Howard E. Turner, Esq.
M. Timothy Elder, Esq.
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
(404) 815-3500
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CALCULATION OF FILING FEE
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Transaction Valuation*
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Amount of Filing Fee**
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$2,500,000
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$311.25***
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*
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Estimated solely for purposes of calculating the filing fee pursuant to Rules 0-11 under the Securities Exchange Act of 1934, as amended, based on the dollar amount to be used in the purchase of shares in the tender
offer described in this Schedule TO.
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**
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The amount of the filing fee, calculated in accordance with Rule 0-11(b) of the Securities Exchange Act of 1934, as amended, and Fee Rate Advisory #1 for Fiscal Year 2018 issued by the Securities and Exchange
Commission (the SEC), equals $124.50 per $1,000,000 of the aggregate value of the transaction.
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☒
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Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid: $331.25
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Filing Party: SunLink Health Systems, Inc.
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Form or Registration No.: Schedule TO (File No. 005-03600)
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Date Filed: November 21, 2017
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☐
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
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Check the appropriate boxes below to designate any transactions to which the statement relates:
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☐
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third-party tender offer subject to Rule 14d-1.
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☒
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issuer tender offer subject to Rule 13e-4.
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☒
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going-private transaction subject to Rule 13e-3.
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☐
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amendment to Schedule 13D under Rule 13d-2.
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Check the following box if the filing is
a final amendment reporting the results of the tender offer: ☐
This Amendment No. 1 to the Tender Offer Statement on Schedule TO amends and
supplements the Schedule TO originally filed with the Securities and Exchange Commission (
SEC
) on November 21, 2017 (together with any amendments and supplements thereto and the exhibits hereto, the
Schedule
TO
) relating to a tender offer by SunLink Health Systems, Inc. (
SunLink
or the
Company
) to purchase up to 1,562,500 common shares
of SunLink, no par value, for an aggregate purchase price of up to $2,500,000, to the sellers in cash, without interest, upon the terms and subject to the conditions set forth in the offer to purchase, dated November 21, 2017 (the
Offer to Purchase
) and the accompanying letter of transmittal (the
Letter of Transmittal
) as amended hereby, which together, as each may be amended and supplemented from time to time, constitute
the tender offer (the
Offer
). This Amendment No. 1 to Schedule TO also is intended to satisfy the reporting requirements of
Rule 13e-4(c)(2) of
the Securities
Exchange Act of 1934, as amended, and amend the Schedule TO with respect thereto.
The information contained in the Offer to Purchase and
the accompanying Letter of Transmittal, copies of which were attached to the Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively, which, except as amended and supplemented hereby, is incorporated herein by reference in response to all of
the items of this Schedule TO as more particularly described below.
The Offer to Purchase and the Schedule TO, to the extent Item 1, Item 2, Item 10, and
Item 13 incorporate by reference the information contained in the Offer to Purchase are hereby amended and supplemented as set forth below.
1. In the Offer to Purchase, the second sentence of Section 1 of the Offer to Purchase under the subheading entitled
Has
SunLink or its board of directors adopted a position on the Offer?
is hereby amended and supplemented by amending the second sentence thereof to read as follows:
As discussed in Section 2, the Companys Board, on behalf of the Company, believes that the Offer, taken as a
whole, is procedurally and substantively fair to the unaffiliated shareholders of the Company including both those who tender their shares and receive payment and those who continue to hold the Companys common shares after the Offer.
2. In the Offer to Purchase, the first sentence of the seventh paragraph under the subheading entitled
INTRODUCTION
, the first sentence of the sixth paragraph under the subheading
Purpose of the Offer
in Section 2, and the first sentence under the subheading
Fairness of the Offer
in
Section 2, each are amended and supplemented to read as follows:
The Board, on behalf of the Company, believes
that the Offer, as a whole, is procedurally and substantively fair to the unaffiliated shareholders of the Company, both those who tender their shares and receive payment and those who continue to hold the Companys common shares after the
Offer is completed.
3. In the Offer to Purchase, the information in Section 2 under the subheading
Certain Effects of the Offer
is amended and supplemented by adding the following text at the end of the ninth paragraph after such subheading:
SunLink may be the beneficiary of existing and future operating loss carryforwards (
NOLs
). As of
September 30, 2017, SunLink had estimated NOL carryforwards for federal income tax purposes of $12,400,000 million. Such NOLs expire in 2025. Use of this NOL carry-forward is subject to (a) the Company achieving taxable income, and
(b) the limitation provisions of Internal Revenue Code Section 382. As a result, some or all of the NOLs carry-forward may not be applied in the future. SunLink cannot estimate the exact amount of NOLs that it would be able to use to
reduce any future income tax liability because SunLink cannot predict the amount and timing of its future taxable income. SunLink believes its NOLs are a valuable assets and has taken steps to avoid the IRC Section 382 limitation of its NOLs,
including a shareholder rights provision and a Code of Regulations amendment to limit the risk of an IRC Section 382 limitation. Nevertheless, if an ownership change were to occur, the limitations imposed by Section 382 could result in a
material amount of SunLinks NOLs expiring unused and, therefore, significantly impair the value of SunLinks NOLs. While the complexity of Section 382s provisions and the limited knowledge that SunLink, like other public
companies generally, has about the ownership of its publicly traded common equity make it difficult to determine whether an ownership change has occurred, SunLink currently believes that an ownership change has not occurred and will not occur solely
as a result of the tender offer even if fully subscribed.
2
ITEM 13.
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INFORMATION REQUIRED BY SCHEDULE
13E-3
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4. The information in the Schedule TO is amended and supplemented to add the following sentence immediately after the Item 13 heading in
the Schedule TO:
The following sets forth the information required by Schedule
13E-3
that has not already been set forth in Items
1-12
above. The information set forth in the Offer to Purchase is incorporated herein by reference to the items
required by Schedule
13E-3.
Schedule 13E-3,
Item 2.
Subject Company Information is amended and supplemented as follows:
5. In the Offer to Purchase, the information set forth
under the heading
Section
9 Certain Information Concerning the Company
in the
Unaudited Pro Forma Financial Data
table is amended and supplemented to add line item disclosure for noncurrent liabilities
and noncurrent assets such that such table reads in its entirety as follows:
Unaudited Pro Forma
Financial Data
(All amounts
in thousands, except for per share)
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As of June 30, 2017
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As of September 30, 2017
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As
Reported
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Trace
Prepayment
1
Pro Forma
Adjustments
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Tender Offer
Pro Forma
Adjustments
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Pro Forma
Results
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As
Reported
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Trace
Prepayment
Pro Forma
Adjustments
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Tender
Offer
Pro Forma
Adjustments
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Pro Forma
Results
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Cash and cash equivalents
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$
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10,494
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$
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(2,548
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)
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$
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(2,700
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)
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$
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5,246
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$
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9,909
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$
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(2,548
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)
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$
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(2,700
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$
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4,661
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Restricted cash
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1,000
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(1,000
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)
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0
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1,000
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(1,000
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)
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0
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Other current assets
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11,127
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11,127
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11,607
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11,607
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Total current assets
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22,621
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(3,548
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(2,700
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16,373
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22,516
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(3,548
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(2,700
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16,268
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Noncurrent assets
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12,715
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12,715
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12,886
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12,886
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Total assets
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35,336
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(3,548
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(2,700
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29,088
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35,402
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(3,548
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(2,700
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29,154
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Current liabilities
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12,314
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(3,305
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9,009
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12,658
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(3,308
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9,350
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Noncurrent liabilities
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1,329
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1,329
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1,322
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1,322
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Total shareholders equity
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21,693
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(243
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(2,700
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18,750
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21,422
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(240
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(2,700
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18,482
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Total liabilities and shareholders equity
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$
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35,336
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$
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(3,548
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$
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(2,700
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$
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29,088
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$
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35,402
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$
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(3,548
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$
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(2,700
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$
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29,154
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Book value per share
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$
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2.37
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$
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2.47
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$
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2.34
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$
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2.43
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1
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The Company, as guarantor, and Southern Health Corporation of Houston, Inc. (Trace), as borrower, a wholly owned subsidiary of the Company which operates the Companys sole remaining hospital, are
parties to a mortgage loan agreement (Trace RDA Loan) with a bank, originally entered into on July 5, 2012, which loan had an outstanding principal amount of approximately $7,000 at October 30, 2017. The Company and Trace are
discussing and believe they have reached an agreement in principal with the bank for a modification of the Trace RDA Loan. If completed the modification would require a prepayment of approximately $3,500 of the outstanding principal loan balance.
The outstanding loan balance after the prepayment would be
re-amortized
over the remaining term of the Trace RDA Loan, which matures in July 2027, resulting in monthly payments of approximately $39 per
month at an interest rate equal to the prime rate (as published in The Wall Street Journal) plus 1% with an interest rate floor of 5.5%. The loan covenants also would be modified, including a waiver of covenant violations for the quarters ended
June 30 and September 30, 2017. Such modification, if completed November 30, 2017, would result in a loss on early extinguishment of debt of approximately $234. In connection with such proposed modification, an existing deposit of
$1,000 into a blocked interest bearing account with the lender would be released. There can be no assurance any such modification will be achieved or that Trace will receive waivers of its existing covenant violations under the Trace RDA Loan, and
if the modification is completed, there can be no assurance Trace will be able to achieve compliance with the modified loan covenants.
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3
EXHIBIT INDEX
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Exhibit
Number
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Document
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(a)(1)(A)**
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Offer to Purchase dated November 21, 2017.
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(a)(1)(B)**
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Form of Letter of Transmittal.
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(a)(1)(C)**
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Form of Notice of Guaranteed Delivery (including Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number
on
substitute Form W-9).
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(a)(1)(D)**
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Form of Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees.
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(a)(1)(E)**
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Form of Letter to Clients for Use by Brokers, Dealers, Banks, Trust Companies and Other Nominees.
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(a)(1)(F)**
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Form of Notice of Withdrawal of Tender for Individual Investors
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(a)(1)(G)**
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Form of Notice of Withdrawal of Tender for Brokers, Dealers, Banks, Trust Companies and other Nominees and DTC Participants
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(a)(5)(A)**
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Notice to Executive Officers and Directors of Blackout Period, dated November
9, 2017.
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(a)(5)(B)
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Press Release regarding Tender Offer dated November 21, 2017 (incorporated by reference to Exhibit 99.1 to the Current Report on
Form 8-K filed
November 21, 2017).
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(a)(5)(C)**
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Press Release announcing commencement of the Tender Offer dated November 21, 2017.
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(b)
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Not applicable.
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(c)
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Not applicable.
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(d)(1)
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2005 Equity Incentive Plan (incorporated by reference from Exhibit 99.1 of the Companys Registration Statement on
Form S-8filed
September 20, 2006). (Commission File No. 061100389).
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(d)(2)
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SunLink Health Systems, Inc. 2011 Director Stock Option Plan (incorporated by reference from Appendix
A to the Companys Schedule 14A Definitive Proxy Statement filed September 29, 2011) (Commission File No. 111115265).
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(d)(3)
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Agreement of Understanding between SunLink Health Systems, Inc. and Christopher H.B. Mills regarding service as a director (incorporated by reference
from Exhibit 99.2 of the Companys Current Report on
Form 8-K dated
July 1, 2007 filed July 16, 2007)
(Commission File No. 001-12607).
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(f)
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Not applicable.
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(g)
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Not applicable.
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(h)
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Not applicable.
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4
SIGNATURES
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.
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SunLink Health Systems, Inc.
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Dated: December 7, 2017
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By:
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/s/ Robert M. Thornton, Jr.
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Name:
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Robert M. Thornton, Jr.
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Title:
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Chief Executive Officer
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5
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