News | August 25, 2011

MedQuist Holdings Inc. Completes Merger with M*Modal

August 25, 2011 — MedQuist Holdings Inc., provider of integrated clinical documentation solutions for the United States healthcare system, announced it has closed on the acquisition of M*Modal. The closing price included $48.4 million in cash and the issuance of 4.1 million shares of MedQuist Holdings common stock paid at closing. The company received notification of early termination of the mandatory, pre-merger waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 on Aug. 15.

The two companies are moving aggressively with integration plans, including organizational structure and product strategies.

MedQuist has projected the acquisition of M*Modal, which was not included in the company's recent guidance for fiscal 2011, will be modestly accretive to adjusted net income per fully diluted share in the fourth quarter of 2011. The acquisition will also increase the company's annualized adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) run-rate by approximately $20 million by year-end 2012.

MedQuist will also make $28.8 million in installments paid in cash over the next three years to M*Modal. The company funded the cash component of the purchase price from available cash.

Additionally, MedQuist expects to incur fees and expenses, including additional restructuring and integration costs associated with this transaction, of approximately $13 million over the next 12 months. The founders and senior executives of M*Modal, Michael Finke, Detlef Koll and Juergen Fritsch will remain deeply involved in the company on a go-forward basis.

In connection with and on the closing date of the merger, MedQuist granted inducement awards of 195,894 restricted shares of common stock to Michael Finke, 117,536 restricted shares of common stock to Detlef Koll and 78,358 restricted shares of common stock to Juergen Fritsch.  

All of these shares will vest on the third anniversary of their grant date so long as they remain in continued service to the company. The restricted shares will become fully vested upon a change in control of the company or their deaths, or if their service terminates without cause due to disability or due to resignation with good reason, so long as they timely execute a release of claims. The shares were granted to Finke, Koll and Fritsch as "inducement awards" and therefore, consistent with applicable NASDAQ rules, did not reduce the shares reserved for issuance under MedQuist’s stockholder approved equity plans.

MedQuist also granted up to an aggregate of 391,782 restricted shares of the company's common stock to 89 M*Modal employees who agreed to stay on at MedQuist or a subsidiary. 

For each such employee, their restricted shares will vest proportionally over a three-year period based on continued service, subject to full acceleration upon termination without cause or resignation with good reason. The shares were granted "inducement awards" and therefore, consistent with applicable NASDAQ rules, did not reduce the shares reserved for issuance under the company's stockholder approved equity plans.

For more information: www.medquist.com

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