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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
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HEALTHMARKETS, INC.
(Name of Issuer)
CLASS A-1 COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
902737105
(CUSIP Number)
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BLACKSTONE CAPITAL PARTNERS IV L.P., BLACKSTONE CAPITAL PARTNERS IV-A L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP IV-A L.P.,
BLACKSTONE PARTICIPATION PARTNERSHIP IV L.P.,
BLACKSTONE MANAGEMENT ASSOCIATES IV L.L.C., PETER G. PETERSON
AND STEPHEN A. SCHWARZMAN
C/O THE BLACKSTONE GROUP
345 PARK AVENUE
NEW YORK, NEW YORK 10154
(212) 583-5000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
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APRIL 5, 2006
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. |_|
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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1. Names of Reporting Persons
-----------------------------------------------------------------------
BLACKSTONE CAPITAL PARTNERS IV L.P.
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 15,499,354.7
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 15,499,354.7
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
15,499,354.7
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
57.9%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
PN
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-2-
-------- -----------------------------------------------------------------------
1. Names of Reporting Persons
BLACKSTONE CAPITAL PARTNERS IV-A L.P.
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 245,239.9
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 245,239.9
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
245,239.9
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
0.9%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
PN
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-3-
-------- -----------------------------------------------------------------------
1. Names of Reporting Persons
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP IV-A L.P.
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 694,658.1
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 694,658.1
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
694,658.1
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
2.6%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
PN
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-4-
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1. Names of Reporting Persons
BLACKSTONE PARTICIPATION PARTNERSHIP IV L.P.
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 47,233.8
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 47,233.8
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
47,233.8
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
0.2%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
PN
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-5-
-------- -----------------------------------------------------------------------
1. Names of Reporting Persons
BLACKSTONE MANAGEMENT ASSOCIATES IV L.L.C.
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 16,486,486.5
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 16,486,486.5
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
16,486,486.5
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
61.5%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
OO
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-6-
-------- -----------------------------------------------------------------------
1. Names of Reporting Persons
PETER G. PETERSON
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 16,486,486.5
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 16,486,486.5
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
16,486,486.5
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
61.5%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
IN
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-7-
-------- -----------------------------------------------------------------------
1. Names of Reporting Persons
STEPHEN A. SCHWARZMAN
I.R.S. Identification Nos. of above persons (entities only)
-------- -----------------------------------------------------------------------
2. Check the Appropriate Box If a Member of a Group (See Instructions)
(a) |_|
(b) |X|
-------- -----------------------------------------------------------------------
3. SEC Use Only
-------- -----------------------------------------------------------------------
4. Source of Funds (See Instructions)
OO (SEE ITEM 3)
-------- -----------------------------------------------------------------------
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) |_|
-------- -----------------------------------------------------------------------
6. Citizenship or Place of Organization
DELAWARE
-------- -----------------------------------------------------------------------
------ ------------------------------------------------
7. Sole Voting Power
Number of 16,486,486.5
Shares ------ ------------------------------------------------
Beneficially 8. Shared Voting Power
Owned by 0
Each ------ ------------------------------------------------
Reporting 9. Sole Dispositive Power
Person With 16,486,486.5
------ ------------------------------------------------
10. Shared Dispositive Power
0
------ ------------------------------------------------
-------- -----------------------------------------------------------------------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
16,486,486.5
-------- -----------------------------------------------------------------------
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) |_|
-------- -----------------------------------------------------------------------
13. Percent of Class Represented by Amount in Row (11)
61.5%*
-------- -----------------------------------------------------------------------
14. Type of Reporting Person (See Instructions)
IN
-------- -----------------------------------------------------------------------
* The calculation of the foregoing percentage is based on 26,790,979.2 shares of
Class A-1 Common Stock of HealthMarkets, Inc., outstanding as of April 5, 2006,
as reported to the Reporting Persons by the Company.
-8-
ITEM 1. SECURITY AND ISSUER
This statement relates to the class A-1 common stock, par value $0.01 per share
("Class A-1 Common Stock"), of HealthMarkets, Inc., a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 9151
Grapevine Highway, North Richland Hills, Texas 76180.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed jointly by Blackstone Capital Partners IV L.P.
("BCP IV"), Blackstone Capital Partners IV-A L.P. ("BCP IV-A"), Blackstone
Family Investment Partnership IV-A L.P. ("BFIP"), Blackstone Participation
Partnership IV L.P. ("BPP", and together with BCP IV, BCP IV-A and BFIP, the
"Blackstone Funds"), Blackstone Management Associates IV L.L.C. ("BMA"), Peter
G. Peterson and Stephen A. Schwarzman (the foregoing, collectively, the
"Reporting Persons").
The principal business of the Blackstone Funds is investing in securities and
committing capital to facilitate corporate restructurings, leveraged buyouts,
bridge financings and other investments. The principal business of BMA consists
of performing the functions of, and serving as, the general partner of the
Blackstone Funds. The principal business address of each of the Blackstone Funds
and BMA is 345 Park Avenue, New York, New York 10154. Delaware is the
jurisdiction of formation for each of the Blackstone Funds and BMA.
Messrs. Peterson and Schwarzman are the founding members (the "Founding
Members") of and control BMA. Each of the Founding Members is a United States
citizen. The principal occupation of each of the Founding Members is serving as
a principal executive officer and director of BMA, the Blackstone Funds, and
other affiliated entities. The business address of the Founding Members is 345
Park Avenue, New York, New York 10154.
During the last five years, none of the Reporting Persons: (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
As described more fully in Item 6 of this Schedule 13D, on April 5, 2006 (the
"Closing Date"), the Blackstone Funds acquired an aggregate of 16,486,486.4865
shares of Class A-1 Common Stock for an aggregate purchase price of
$610,000,000.00, or $37.00 per share, in cash, upon completion of the Merger (as
defined in Item 6 below) contemplated by the Agreement and Plan of Merger, dated
as of September 15, 2005 (the "Merger Agreement"), by and among Premium Finance
LLC, a Delaware limited liability company, Mulberry Finance Co., Inc., a
Delaware corporation, DLJMB IV First Merger LLC, a Delaware limited liability
company, Premium Acquisition, Inc., a Delaware corporation, Mulberry
Acquisition, Inc., a Delaware corporation, DLJMB IV First Merger Co Acquisition
Inc., a Delaware corporation, and the Company. The amount paid and the number of
shares of Class A-1 Common Stock acquired by each Blackstone Fund in connection
with the Merger is as follows:
SHARES OF
CLASS A-1 COMMON STOCK AGGREGATE
ENTITY ACQUIRED PRICE PAID
-9-
BCP IV 15,499,354.6865 $573,476,123.34
BCP IV-A 245,239.9100 $9,073,876.66
BFIP 694,658.1100 $25,702,350.00
BPP 47,233.7800 $1,747,650.00
The Blackstone Funds funded such capital contributions by means of short-term
borrowing from JPMorgan Chase, and subsequently called capital from their
respective investors.
ITEM 4. PURPOSE OF TRANSACTIONS
The responses set forth in Items 3 and 6 of this Schedule 13D are incorporated
by reference into this Item 4 in their entirety. The Reporting Persons acquired
the shares of Class A-1 Common Stock primarily for investment purposes.
Except as described in this Schedule 13D, the Reporting Persons currently have
no plans or proposals which relate to or would result in any transaction, event
or action enumerated in paragraphs (a) through (j) of Item 4 of the form of
Schedule 13D promulgated under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act").
The shares of Class A-1 Common Stock held by Blackstone Funds in the aggregate
represent a majority of the voting power of all of the outstanding common stock
of the Company and, pursu-ant to the Stockholders Agreement (as defined in Item
6 below), the Blackstone Funds currently have the right to designate directors
having a majority of the voting power of all directors of the Company.
Each of the Reporting Persons reserves the right, in light of its ongoing
evaluation of the Company's financial condition, business, operations and
prospects, conditions in the securities markets generally, general economic and
industry conditions, its business objectives and other relevant factors, to
change its plans and intentions at any time, as it deems appropriate. In
particular, any one or more of the Reporting Persons (and their respective
affiliates) reserves the right, in each case subject to (a) the restrictions
contained in the Stockholders Agreement described in Item 6 of this Schedule
13D, and (b) any applicable limitations imposed on the sale of any of their
Company securities by the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act") or other applicable
law, to (i) purchase additional shares of Class A-1 Common Stock or other
securities of the Company, (ii) sell or transfer shares of Class A-1 Common
Stock beneficially owned by them from time to time in public or private
transactions, and (iii) cause any of the Blackstone Funds to distribute in kind
to their respective investors shares of Class A-1 Common Stock or other
securities owned by such Blackstone Funds. In addition, the Reporting Persons or
their designees to the Company board of directors may, if circumstances warrant,
encourage, cause or seek to cause the Company or its subsidiaries to consider or
explore: (i) extraordinary corporate transactions, such as a merger, (ii) sales
or acquisitions of assets or businesses, (iii) changes to the capitalization or
dividend policy of the issuer, and (iv) other material changes to the issuer's
business or corporate structure. In addition, the Reporting Persons are aware
that the Company may add additional directors to Company's board of directors
during 2006.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(A) and (B) The information contained on the cover pages to this Schedule 13D is
incorporated
-10-
herein by reference.
The Company has informed the Reporting Persons that, as of the Closing Date,
after giving effect to the transactions contemplated by the Merger Agreement,
there were 26,790,979.2016 shares of Class A-1 Common Stock issued and
outstanding.
The Blackstone Funds, acting through their sole general partner BMA, have the
sole power to vote or to direct the vote, and to dispose or to direct the
disposition of, the Class A-1 Common Stock respectively owned by them. As a
result, for purposes of section 13(d) of the Exchange Act, BMA may be deemed to
beneficially own the shares of Class A-1 Common Stock directly owned by the
respective Blackstone Funds of which it is the general partner. The Founding
Members have power to vote or to direct the vote of, and to dispose or to direct
the disposition of, the shares of Class A-1 Common Stock that may be deemed to
be beneficially owned by BMA. As a result, each of the Founding Members may be
deemed to beneficially own the shares of Class A-1 Common Stock that BMA may be
deemed to beneficially own. Each of BMA and each Founding Member disclaims
beneficial ownership of such shares, except (in the case of the Founding
Members) to the extent of his pecuniary interest in such shares.
Neither the filing of this Schedule 13D nor any of its contents shall be deemed
to constitute an admission that any Reporting Person or any other person
described in Item 2 hereof is the beneficial owner of the Issuer Common Stock
referred to herein for purposes of Section 13(d) of the Exchange Act or for any
other purpose, and such beneficial ownership is expressly disclaimed.
The GS Investors (as defined below) beneficially own 6,756,756.7567 shares of
Class A-1 Common Stock, representing approximately 25.2% of the class. The DLJ
Investors (as defined below) beneficially own 3,378,378.3784 shares of Class A-1
Common Stock, representing approximately 12.6% of the class. The Blackstone
Funds, the GS Investors and the DLJ Investors have entered into certain
agreements with the Company, described in Item 6 below. To the extent that, as a
result of these agreements or otherwise, the Blackstone Funds, the GS Investors
and the DLJ Investors may be deemed to comprise a group within the meaning of
Section 13(d)(3) of the Exchange Act, each of the Reporting Persons expressly
disclaims membership in such group.
(C) Except as set forth in this Item 5, to the best knowledge of each of
the Reporting Persons, none of the Reporting Persons has beneficial ownership
of, or has engaged in any transaction during the past 60 days in, any shares of
Class A-1 Common Stock.
(D) Not applicable.
(E) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The responses set forth in Items 3 and 4 of this Schedule 13D are incorporated
herein by reference in their entirety.
THE MERGER
Pursuant to the Merger Agreement, on April 5, 2006, each of Premium Acquisition,
Inc. ("Merger Co 1"), Mulberry Acquisition, Inc. ("Merger Co 2") and DLJMB IV
First Merger Co Acquisition Inc. ("Merger Co 3", and each of Merger Co 1, Merger
Co 2 and Merger Co 3, a "Merger Co") merged with and into the Company , with the
Company being the surviving corporation (the "Merger"). Upon consummation of the
Merger, (i) each share of common stock
-11-
of the Company, par value $0.01 per share (except for dissenting shares, shares
held by certain senior managers of the Company and shares held in the Company's
agent stock accumulation plans), was converted into the right to receive $37.00
in cash; (ii) each share of common stock of the Company held by certain senior
managers of the Company was renamed Class A-1 Common Stock; (iii) each share of
common stock of the Company beneficially owned through the Company's agent stock
accumulation plans by the Company's independent insurance agents was converted
into one share of Class A-2 Common Stock, par value $.01 per share, of the
Company; and (iv) each share of common stock of each Merger Co was converted
into one share of Class A-1 Common Stock of the Company. The Blackstone Funds
held 16,486,486.4865 shares of common stock of Merger Co 1, which were converted
into 16,486,486.4865 shares of Class A-1 Common Stock in the Merger. In
connection with the Merger, the Company transferred substantially all of its
assets and liabilities to HealthMarkets, LLC, a Delaware limited liability
company and wholly-owned subsidiary of the Company.
The aggregate amount of cash consideration paid to former stockholders of the
Company in the Merger was $1,611,618,324. This cash consideration was funded by
(i) equity contributions of $610,000,000 by the Blackstone Funds, $250,000,000
by certain affiliates of Goldman Sachs Capital Partners, and $125,000,000 by
certain affiliates of DLJ Merchant Banking Partners; (ii) borrowings of
$500,000,000 under a senior credit facility of HealthMarkets, LLC; (iii) the
issuance by HealthMarkets, LLC, a subsidiary of the Company, of $103,100,000
aggregate principal amount of junior subordinated notes to HealthMarkets Capital
Trust I and HealthMarkets Capital Trust II, which issued to several third party
investors preferred stock having an aggregate liquidation value of $100,000,000;
and (iv) available cash of the Company. As a result of the Merger, (i) the
Blackstone Funds acquired an aggregate of 16,486,486.4865 shares of Class A-1
Common Stock, representing approximately 61.5% of the total outstanding shares
of Class A-1 Common Stock, (ii) Mulberry Holdings I, LLC, and Mulberry Holdings
II, LLC (collectively, the "GS Investors") acquired 6,756,756.7567 shares of
Class A-1 Common Stock, representing approximately 25.2% of the total
outstanding shares of Class A-1 Common Stock, and (iii) DLJ Merchant Banking
Partners IV, L.P., DLJ Offshore Partners IV, L.P., MBP IV Plan Investors, L.P.,
CSFB Strategic Partners Holdings III, L.P. and CSFB Strategic Partners Parallel
Holdings III, L.P. (collectively, the "DLJ Investors") acquired an aggregate of
3,378,378.3784 shares of Class A-1 Common Stock, representing approximately
12.6% of the total outstanding shares of Class A-1 Common Stock.
The foregoing summary is qualified in its entirety by reference to the Merger
Agreement, which is filed as Exhibit 1 hereto and is incorporated by reference
in its entirety into this Item 6.
In connection with the Merger, the Company amended and restated its certificate
of incorporation and bylaws, which are filed as Exhibits 2 and 4 hereto and are
incorporated by reference in their entirety into this Item 6. On April 17, 2006,
the Company amended its certificate of incorporation to change its name from
UICI to HealthMarkets, Inc.; the certificate of amendment relating to this
amendment is filed as Exhibit 3 hereto. The Company has applied to delist its
Class A-1 Common Stock from the New York Stock Exchange.
STOCKHOLDERS AGREEMENT
In connection with the Merger, the Blackstone Funds entered into a Stockholders
Agreement, dated as of April 5, 2006 (the "Stockholders Agreement") with the
Company, the GS Investors, the DLJ Investors, and the management stockholders
named therein (the "Management Stockholders").
COMPOSITION OF THE BOARD OF DIRECTORS
The Stockholders Agreement provides that following the Merger, the initial board
of directors of the Company will consist of:
-12-
o up to up to 6 directors nominated or designated by the Blackstone Funds and
any permitted transferee thereof (collectively, the "Blackstone Investor
Group");
o up to 2 directors nominated or designated by the GS Investors and any
permitted transferee thereof (collectively, the "GS Investor Group");
o up to one director nominated or designated by the DLJ Investors and any
permitted transferee thereof (collectively, the "DLJ Investor Group" and
each of the Blackstone Investor Group, GS Investor Group and DLJ Investor
Group, an "Investor Group");
o one member of management of the Company to be nominated by Investor Groups
holding a majority of the Class A-1 Common Stock held by the Investor Groups
("Management Director"); and
o additional directors, including directors who may be considered independent
under various definitions of the Securities and Exchange Commission and
stock exchanges to the extent deemed necessary or advisable ("Additional
Director").
Pursuant to the Stockholders Agreement, the Blackstone Investor Group designated
Messrs. Chinh E. Chu and Matthew S. Kabaker, the GS Investor Gropu designated
Mr. Jones and Mr. Zilka, and the DLJ Investor Group designated Mr. Kamil M.
Salame, as members of the board of directors of the Company. In addition, Mr.
William J. Gedwed, President and Chief Executive Officer of the Company, and Mr.
Mural R. Josephson have been appointed to the board of directors of the Company
as Management Director and Additional Director, respectively.
The allocation of board representation to the Investor Groups will be reduced as
the ownership interest of Class A-1 Common Stock of such Investor Group is
reduced. The Blackstone Investor Group will have the ability to designate a
majority of the directors for so long as it holds a majority of the shares of
Class A-1 Common Stock issued to the Investor Groups in the Merger. Each
Investor Group will lose its right to designate directors entirely when its
ownership of shares of Class A-1 Common Stock is less than the greater of (i)
five percent of the shares of Class A-1 Common Stock issued to the Investor
Groups in the Merger and (ii) three percent of the then-outstanding shares of
Class A-1 Common Stock. Generally, each director will have one vote. However, if
the Blackstone Investor Group nominates or designates fewer than the maximum
number of directors to which they are entitled, then the directors nominated or
designated by the Blackstone Investor Group will have aggregate voting power on
board matters equal to the maximum number of directors that the Blackstone
Investor Group is entitled to nominate or designate divided by the number of
directors they have actually nominated or designated.
APPROVAL RIGHTS
The Stockholders Agreement provides that without the approval of directors
designated by at least two Investor Groups, in addition to any customary board
approval, the Company will not, and will cause its subsidiaries not to, take
certain actions, including:
o certain mergers, consolidations, business combinations, reorganizations or
liquidations;
o certain acquisitions or dispositions of business or assets valued in excess
of 20% of the fair market value of the total assets of the Company and its
subsidiaries; certain debt and preferred stock issuances that would increase
the aggregate debt and preferred stock level by an amount in excess of 20%
of the fair market value of the total assets of the Company and its
subsidiaries;
o transactions with affiliates, other than de minimis transactions on arm's
length terms; or
o amendments to the certificate of incorporation or bylaws with the purpose or
effect of the transactions described above or that would conflict with other
terms of the Stockholders Agreement.
The Stockholders Agreement also provides that, without the approval of the
affected Investor Group, if the affected party is an Investor Group, or the
approval of a majority (by ownership of
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shares of Class A-1 Common Stock) of the Management Stockholders, if the
affected party is a Management Stockholder, neither the Stockholders Agreement
nor the Company's certificate of incorporation or bylaws may be amended in a
manner that imposes additional transfer restrictions, limits any Investor
Group's right to designate directors or further limits "tag-along" rights or the
rights of a stockholder to participate in public offerings. The Stockholders
Agreement and the Company's certificate of incorporation and bylaws may not be
amended without the approval of each affected Investor Group, if such amendment
would subject any Investor Group to materially adverse differential treatment as
compared to the other Investor Groups.
In addition, as long as any GS Investor Group remains party to the Stockholders
Agreement, the Company and its subsidiaries are not permitted to directly or
indirectly acquire or otherwise control equity securities of any bank holding
company, depositary institution or certain other bank entities without the
approval of the GS Investor Group and at least one other Investor Group.
TRANSFER RESTRICTIONS
Under the Stockholders Agreement, transfers of shares of Class A-1 Common Stock
are generally prohibited except:
o pursuant to "tag-along" sales and "drag-along" sales, as described below in
"-- Tag-Along Rights" and "-- Drag-Along Rights", respectively;
o after an initial public offering of the Company (and subject to the
provisions of the Registration Rights and Coordination Committee Agreement
described below):
o in a registered public offering;
o pursuant to Rule 144 promulgated under the Securities Act; or
o in a distribution of shares of Class A-1 Common Stock by an Investor Group
to its general or limited partners, members, managers or shareholders; or
o with the approval of the Investor Groups holding a majority of the shares
held by the Investor Groups.
In addition, members of each Investor Group are permitted to transfer their
shares of Class A-1 Common Stock to investment funds that are directly or
indirectly managed or advised by the manager or advisor of such Investor Group.
Finally, Management Stockholders are permitted to transfer their shares of Class
A-1 Common Stock:
o to the Company;
o upon the death of the holder, pursuant to applicable laws of descent and
distribution; or
o for estate planning purposes, pursuant to a transfer to the holder's
immediate family, whether directly or indirectly by means of a trust or
partnership or other bona fide estate-planning vehicle the only
beneficiaries of which are the holder's immediate family.
TAG-ALONG RIGHTS
If any Investor Group proposes to transfer shares of Class A-1 Common Stock in a
"tag-along sale" (as described below), then that Investor Group will be required
to offer to each other Investor Group the right to sell a pro rata portion of
its shares on the same terms and conditions as the proposed transfer. This right
to tag-along is also provided to Management Stockholders if the shares proposed
to be transferred by the Investor Groups initiating the sale represent more than
50% of the outstanding shares of Class A-1 Common Stock.
A "tag-along sale" means:
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o before an initial public offering of the common stock of the Company, a
transfer (1) of at least 1% of the outstanding shares of Class A-1 Common
Stock by the Investor Groups holding a majority of the outstanding shares of
Class A-1 Common Stock held by the Investor Groups in the aggregate or (2)
of at least 5% of the outstanding shares of Class A-1 Common Stock held by
any Investor Group; and
o after an initial public offering of the common stock of the Company, a
transfer by an Investor Group of at least 10% of the total amount of shares
of Class A-1 Common Stock outstanding.
DRAG-ALONG RIGHTS
If the Investor Groups collectively own at least fifty percent (50%) of the
Company's outstanding Class A-1 Common Stock, and Investor Groups owning at
least thirty-five percent (35%) of the Company's Class A-1 Common Stock propose
to sell shares of the Company's common stock to any third party which, taking
into account all shares to be transferred in this or similar transactions, would
result in the transfer of greater than 50% of the outstanding common stock of
the Company, then the selling Investor Groups will have the option to obligate
each holder of Class A-1 Common Stock to sell the same proportion of the
holder's shares as is sold by the selling Investor Groups. Upon the exercise of
this drag-along option, each holder of Class A-1 Common Stock that is party to
the Stockholders Agreement will be subject to many of the same terms as those
applicable to shares held by the selling Investor Groups.
INFORMATION RIGHTS
The Stockholders Agreement requires the Company to prepare and furnish to each
Investor Group and Management Stockholder annual and quarterly financial
statements, operating and capital expenditure budgets, and to the extent
otherwise prepared, other periodic information relating to the operations and
cash flows of the Company and its subsidiaries.
PREEMPTIVE RIGHTS
Under the Stockholders Agreement, each Investor Group and Management Stockholder
will have preemptive rights to acquire securities to be issued by the Company in
order to maintain their then-current proportionate ownership of common stock,
subject to certain exceptions.
LINE OF BUSINESS COVENANT
The Stockholders Agreement requires the Company to advise each Investor Group
before the Company directly or indirectly enters into any line of business
materially different from its existing lines of business and to discuss in good
faith and reasonably cooperate with the Investor Groups' efforts toward
resolving any regulatory problem that such actions may cause them.
COMPANY REPURCHASE RIGHT
Prior to an initial public offering of the Company's stock, in the event the
employment of a Management Stockholder is terminated "for cause," as such term
is defined in the manager's employment agreement, the Company will have the
right to purchase such holder's Class A-1 Common Stock at a price equal to the
lesser of: (x) the weighted average price paid by the Management Stockholder or
(y) the fair market value of the shares to be redeemed (as determined in good
faith by the board of directors). In the event the employment of a Management
Stockholder is terminated other than "for cause" or if the Management
Stockholder terminates his or her employment, the Company will have the right to
purchase the holder's Class A-1 Common Stock at the fair market value of the
shares. In these circumstances, at the discretion of the board of directors, in
light of the availability under or limitations imposed by any credit agreement
or other debt agreement and the capital and liquidity position of the Company,
it may pay the repurchase price in the form of a note.
-15-
The foregoing description of the Stockholders Agreement is qualified in its
entirety by reference to the full text of the Stockholders Agreement, which is
filed as Exhibit 5 hereto and is incorporated by reference in its entirety into
this Item 6.
REGISTRATION RIGHTS AND COORDINATION COMMITTEE AGREEMENT
The Blackstone Funds also entered into a Registration Rights and Coordination
Committee Agreement, dated as of April 5, 2006 (the "Registration Rights and
Coordination Committee Agreement") with the Company, the GS Investors, the DLJ
Investors and the Management Stockholders. Under the Registration Rights and
Coordination Committee Agreement, following an initial public offering of the
Company's stock, the Blackstone Investor Group will have the right to demand
registration under the Securities Act of its shares for public sale on up to
five occasions, the GS Investor Group will have the right to demand such
registration on up to two occasions, and the DLJ Investor Group will have the
right to demand such registration on one occasion. No more than one such demand
is permitted to be made in any 180-day period without the consent of the board
of directors of the Company. In addition, both the Investor Groups and
Management Stockholders have "piggy-back" rights, or rights to request that
their shares be included in registrations initiated by the Company or by an
Investor Group.
Following an initial public offering of the Company's stock, sales or other
transfers of the Company's stock by parties to the Registration Rights and
Coordination Committee Agreement will be subject to pre-approval by a
Coordination Committee that will consist of representatives from each of the
Investor Groups with certain limited exceptions. In addition, the Coordination
Committee shall have the right to request that the Company effect a "shelf"
registration.
The foregoing description of the Registration Rights and Coordination Committee
Agreement is qualified in its entirety by reference to the full text of the
Registration Rights and Coordination Committee Agreement, which is filed as
Exhibit 6 hereto and is incorporated by reference in its entirety into this Item
6.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
See the Exhibit Index to this Schedule 13D, which is incorporated herein by
reference.
-16-
EXHIBIT INDEX
Exhibit Description
----------- -----------------------------------------------------------------
1. Agreement and Plan of Merger, dated as of September 15,
2005, by and among Premium Finance LLC, Mulberry Finance
Co., Inc., DLJMB IV First Merger LLC, Premium Acquisition,
Inc., Mulberry Acquisition, Inc., DLJMB IV First Merger Co
Acquisition Inc., and the Company (incorporated by reference
to Exhibit 2.1 to the Company's Registration Statement on
Form S-4 filed on January 20, 2006)
2. Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A filed on April 5, 2006)
3. Certificate of Amendment to Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K filed on April 17,
2006)
4. By-Laws of the Company (incorporated by reference to Exhibit
2 to the Company's Registration Statement on Form 8-A filed
on April 5, 2006)
5. Stockholders Agreement, dated as of April 5, 2006, by and
among the Company and certain stockholders named therein
(incorporated by reference to Exhibit 4.1 to Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8
for the UICI Restated and Amended 1987 Stock Option Plan
filed by the Company on April 6, 2006)
6. Registration Rights and Coordination Committee Agreement,
dated as of April 5, 2006, by and among the Company and
certain stockholders named therein (incorporated by
reference to Exhibit 10.3 to the Current Report on Form 8-K
filed by the Company on April 11, 2006).
-17-
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
April 17, 2006
BLACKSTONE CAPITAL PARTNERS IV L.P.
By: Blackstone Management Associates
IV L.L.C., its General Partner
By: /s/ Chinh Chu
----------------------------------
Name: Chinh Chu
Title: Member
BLACKSTONE CAPITAL PARTNERS IV-A L.P.
By: Blackstone Management Associates
IV L.L.C., its General Partner
By: /s/ Chinh Chu
----------------------------------
Name: Chinh Chu
Title: Member
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP IV-A L.P.
By: Blackstone Management
Associates IV L.L.C., its
General Partner
By: /s/ Chinh Chu
----------------------------------
Name: Chinh Chu
Title: Member
[Signature Page to Schedule 13D]
BLACKSTONE PARTICIPATION PARTNERSHIP
IV L.P.
By: Blackstone Management
Associates IV L.L.C., its
General Partner
By: /s/ Chinh Chu
----------------------------------
Name: Chinh Chu
Title: Member
BLACKSTONE MANAGEMENT ASSOCIATES IV
L.L.C.
By: /s/ Chinh Chu
----------------------------------
Name: Chinh Chu
Title: Member
PETER G. PETERSON
/s/ Peter G. Peterson
-------------------------------------
STEPHEN A. SCHWARZMAN
/s/ Stephen A. Schwarzman
-------------------------------------