Merge Healthcare, Ophthalmic Imaging Systems enter definitive merger agreement

Jun 6 2011

Merge Healthcare (NASDAQ: MRGE), a leading provider of healthcare enterprise imaging and interoperability solutions, and Ophthalmic Imaging Systems (OIS) (OTCBB: OISI), a leading provider of digital imaging and informatics solutions for ophthalmology and other medical specialties, today announced the signing of a definitive merger agreement pursuant to which Merge Healthcare will acquire OIS.

“Merge Healthcare is a leader in virtually every image-intensive healthcare specialty, and with OIS we will add the important specialty of ophthalmology”

Under the terms of the definitive merger agreement, OIS shareholders will receive 0.1693 share of Merge Healthcare common stock for each share of OIS common stock. The exchange ratio was calculated to equal $1.00 per OIS share using the five-day volume-weighted average price of Merge Healthcare common stock as of the close of trading on June 3, 2011, which was the last trading day before the definitive merger agreement was signed. Based on currently outstanding shares of OIS common stock, the aggregate value of the Merge Healthcare common stock to be issued as consideration will be approximately $30.3 million, before anticipated costs related to outstanding OIS debt, options and warrants. It is anticipated that the transaction will qualify as a tax-free reorganization for Federal income tax purposes with respect to Merge Healthcare common stock received by OIS shareholders.

Shareholders representing approximately 72% of OIS outstanding shares have agreed, pursuant to a shareholder support agreement, to support the transaction and to vote in favor of the proposed merger. Pending customary closing conditions and the successful completion of a California Fairness Hearing, the transaction is expected to close in the third quarter of 2011.

Upon the closing of this merger, Merge Healthcare will add ophthalmic imaging and informatics to its current portfolio of enterprise imaging solutions for radiology, cardiology and orthopaedics; a suite of products for clinical trials; software for financial and pre-surgical management, and applications that fuel the largest modality vendors in the world.

"Merge Healthcare is a leader in virtually every image-intensive healthcare specialty, and with OIS we will add the important specialty of ophthalmology," said Jeff Surges, CEO of Merge Healthcare. "Demand for ophthalmic imaging solutions is increasing due to factors such as an aging population, improved treatment results based on early disease recognition and increased incidence of visual impairment, as well as the growing need for portable diagnostic equipment. OIS is a recognized leader in ophthalmic imaging and informatics. The OIS solution suite and client base of prominent clinics and hospital networks are an ideal complement to our enterprise imaging capabilities and will be a great addition to our solutions portfolio."

"Merge Healthcare has extensive technical expertise and industry knowledge, and a solid infrastructure to support the continued growth of our ophthalmic imaging and informatics businesses," said Gil Allon, CEO of OIS. "We believe that joining forces with this leader is in the best interest of our company, our shareholders and our customers, and the all-stock nature of this transaction allows OIS shareholders to benefit from Merge Healthcare's future market success."

HGP Securities, LLC, an affiliate of Healthcare Growth Partners, LLC, acted as financial advisor to OIS on the merger and provided a fairness opinion to the OIS Board of Directors. Troutman Sanders LLP is serving as legal counsel to OIS, and McDermott Will & Emery LLP is legal counsel to Merge Healthcare.

Merge has agreed to seek a "fairness hearing" with respect to the transaction before the California Department of Corporations (the "CDC") under California Corporations Code section 25142. Upon completion of this process, the Merge Healthcare common stock to be issued as consideration will be exempt from registration under the Federal securities laws pursuant to the exemption provided in Section 3(a)(10) of the Securities Act of 1933, as amended.