Notable Mergers and Acquisitions of the Day 09/27: (ZZ)/(TPX) (FACE) (NKBP) (MSL)

• Tempur-Pedic International Inc. (NYSE: TPX) and Sealy Corporation (NYSE: ZZ) announced that they have signed a definitive agreement to create a $2.7 billion global bedding provider.
  
  The combination brings together two highly complementary companies with iconic brands and significant opportunities for global innovation and growth. Founded in 1992, Tempur-Pedic is the leading manufacturer, marketer and distributor of premium mattresses and pillows made from its proprietary TEMPUR® pressure-relieving material in over 80 countries under the Tempur® and Tempur-Pedic® brand names. Sealy, with roots dating back to 1881 is a leader in the manufacturing and marketing of a broad range of high quality mattresses and foundations with a portfolio of well-known bedding brands, including Sealy®, Sealy Posturepedic®, and Stearns & Foster.
  
  The transaction has been approved by the Boards of Directors of both companies. Stockholders holding approximately 51% of Sealy's outstanding common stock have executed a written consent approving the transaction. No additional shareholder approvals are required to complete the transaction. Tempur-Pedic will acquire all of the outstanding common stock of Sealy for $2.20 per share, representing a premium of approximately 23 percent to Sealy's 30-day average closing price on Wednesday, September 26, 2012. In addition, Tempur-Pedic will assume or repay all of Sealy's outstanding convertible and non-convertible debt, for a total transaction value of approximately $1.3 billion. The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to close during the first half of 2013.
  
  Tempur-Pedic intends to finance the acquisition through debt financings, for which BofA Merrill Lynch has already provided customary commitment letters.
  
  BofA Merrill Lynch is acting as Tempur-Pedic's exclusive financial advisor and Citigroup as lead financial advisor to Sealy. Perella Weinberg Partners acted as the financial advisor and Blank Rome LLP as the legal advisor to an independent committee of Sealy's Board. Bingham McCutchen LLP is acting as legal advisor to Tempur-Pedic and Simpson Thacher & Bartlett LLP as legal advisor to Sealy.
  
  
• Physicians Formula Holdings, Inc. (Nasdaq: FACE) and Markwins International Corporation entered into a definitive merger agreement under which Markwins will acquire all of the outstanding shares of common stock of Physicians Formula for $4.90 per share in cash, or approximately $74.9 million. The per share price represents a premium of approximately 33% to Physicians Formula's closing stock price on August 14, 2012 (the trading day prior to the announcement that Physicians Formula entered into a merger agreement with affiliates of Swander Pace Capital) and a premium of approximately 40% to Physicians Formula's one-month volume-weighted average price as of that same date.
  
  Physicians Formula also announced that, immediately prior to entering into the merger agreement with Markwins, Physicians Formula terminated its previously announced merger agreement with affiliates of Swander Pace Capital—Physicians Formula Superior Holdings, LLC and Physicians Formula Merger Sub, Inc. In accordance with the terms of that previous merger agreement, Physicians Formula is required to pay a termination fee of $1,285,000 to the affiliates of Swander Pace Capital.
  
  The Physicians Formula's Board of Directors, acting upon the unanimous recommendation of its Special Committee composed solely of independent directors, unanimously approved the merger agreement with Markwins and resolved to recommend that the stockholders of Physicians Formula vote to adopt that agreement.
  
  Upon the closing of the merger, Physicians Formula will be owned by Markwins and the employees of Physicians Formula will become employees of Markwins. At this time, the employees of Physicians Formula will continue to be located at the company's existing facilities in Azusa, CA.
  
  The proposed merger with Markwins, which is subject to various closing conditions including receipt of Physicians Formula stockholder approval, is expected to close later this year. This approval will be sought at a special meeting of stockholders. In connection with the merger, certain stockholders of Physicians Formula who collectively own approximately 22% of the outstanding shares of its common stock have entered into voting agreements pursuant to which they have agreed to, among other things, vote their shares for the adoption of the Markwins merger agreement, subject to certain exceptions.
  
  Blackstone Advisory Partners L.P. is serving as exclusive financial advisor to the Special Committee of the Board of Directors of Physicians Formula, and has delivered a fairness opinion in connection with this transaction. Sheppard Mullin Richter & Hampton LLP is serving as legal advisor to Physicians Formula in connection with the transaction. The Spartan Group LLC and Buchalter Nemer, a professional corporation, are serving as financial and legal advisor, respectively, to Markwins in connection with the transaction.
  
  
• China Nuokang Bio-Pharmaceutical Inc. (Nasdaq: NKBP) ("Nuokang" or the "Company"), a leading China-based biopharmaceutical company focused on the research, development, manufacture, marketing and sales of hospital-based medical products, today announced that it has entered into an Agreement and Plan of Merger (the "Merger Agreement") with Kingbird Investment Inc. ("Parent"), a Cayman Islands exempted company with limited liability and beneficially owned by Ms. Yuhuan Zhu, the wife of Mr. Baizhong Xue, the Company's Chairman and Chief Executive Officer, and Kingbird Mergerco. Inc., a Cayman Islands exempted company with limited liability and a direct wholly-owned subsidiary of Parentt.
  
  Subject to satisfaction of the Merger Agreement's terms and conditions, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation (the "Merger"). Pursuant to the Merger Agreement, each of the Company's ordinary shares issued and outstanding immediately prior to the effective time of the Merger (the "Shares") will be canceled and cease to exist in exchange for the right to receive $0.725 without interest, and each ADS, which represents eight Shares, will represent the right to surrender the ADS in exchange for $5.80 in cash without interest, except for (a) Shares owned by Parent, Merger Sub or the Company (as treasury shares, if any), or by any direct or indirect wholly owned subsidiary of Parent, Merger Sub or the Company, in each case immediately prior to the effective time of the Merger, which will be cancelled, cease to exist and receive no consideration, (b) Shares beneficially owned by Mr. Xue or his affiliates immediately prior to the effective time of the Merger, which will survive the Merger and receive no consideration, and (c) Shares owned by shareholders who have validly exercised and have not effectively withdrawn or lost their rights to dissent from the Merger under the Cayman Companies Law (the "Dissenting Shares"), which will be cancelled for the right to payment of fair value of the Dissenting Shares in accordance with the Cayman Companies Law. The offer represents a premium of 56.8% over the Company's closing price of $3.70 per ADS on May 8, 2012, the last trading day prior to the Company's announcement of its receipt of a "going-private" proposal and a premium of 101.1% to the volume-weighted average closing price of the Company's ADSs during the 90 trading days prior to May 8, 2012.
  
  Merger Sub has entered into a facility agreement with China Grand Enterprises (HK) Limited, a company incorporated in Hong Kong, to finance the transactions contemplated by the Merger Agreement. Subject to the completion of, and immediately following, the Merger, Mr. Baizhong Xue and Ms. Yuhuan Zhu will cause Surplus International Investment Limited, the Hong Kong subsidiary of the Company, to transfer 55% of the equity interests in the three PRC subsidiaries of the Company to China Grand Enterprises Group Co., Ltd. ("CGE"), an investment management company based in China covering a wide range of sectors including healthcare, real estate, logistics and financial services, and an affiliate of China Grand Enterprises (HK) Limited, in accordance with a framework agreement among Mr. Baizhong Xue, Ms. Yuhuan Zhu and CGE. The proceeds from the transfer of equity interests will be used to repay the loan under, and in accordance with the terms and conditions, of the facility agreement.
  
  The Company's Board of Directors, acting upon the unanimous recommendation of an independent committee of the Board of Directors comprising solely independent and disinterested directors (the "Independent Committee"), approved the Merger Agreement and the Merger and resolved to recommend that the Company's shareholders vote to authorize and approve the Merger Agreement and the Merger. The Independent Committee negotiated the terms of the Merger Agreement with the assistance of its financial and legal advisors.
  
  The Merger, which is currently expected to close before the end of the first quarter of 2013, is subject to the approval of the Merger Agreement by an affirmative vote of shareholders representing at least two-thirds of the Shares present and voting in person or by proxy as a single class at a meeting of the Company's shareholders which will be convened to consider the approval of the Merger Agreement and the Merger, as well as certain other customary closing conditions. If completed, the Merger will result in the Company becoming a privately-held company and its ADSs will no longer be listed on The NASDAQ Global Market.
  
  Lazard Asia (Hong Kong) Limited and Houlihan Lokey (China) Limited are serving as financial advisors to the Independent Committee. Skadden, Arps, Slate, Meagher & Flom LLP is serving as U.S. legal advisor to the Independent Committee, and Maples and Calder is serving as Cayman Islands legal advisor to the Independent Committee. Kirkland & Ellis International LLP is serving as U.S. legal advisor to Mr. Baizhong Xue.
  
  
• MidSouth Bancorp, Inc. (AMEX: MSL) and PSB Financial Corporation signed a definitive agreement for MidSouth to acquire PSB. The transaction has been approved by the Board of Directors of each company and is expected to close in the fourth quarter of 2012. Completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of PSB shareholders.
  
  Following the closing of the transaction, Leonard Q. "Pete" Abington, Chairman and CEO of PSB, will be named to the board of directors of MidSouth and its subsidiary, MidSouth Bank, and John J. "JJ" Blake III, President and CEO of Peoples State Bank, will be named Senior Vice President and Regional President of MidSouth Bank's Timber Region. Conversion of all 16 Peoples State branches to MidSouth Bank's computer systems is expected by March 30, 2013.
  
  Under the terms of the agreement, shareholders of PSB will receive, in the aggregate, approximately $16 million in cash, subject to certain adjustments, 756,534 shares of MidSouth common stock and $10 million liquidation value of 4% noncumulative convertible preferred stock. In addition, the agreement provides for potential additional cash consideration of up to $2 million based on the resolution of certain identified loans over a three-year period after the acquisition. As part of the transaction, PSB's preferred stock issued under the U.S. Treasury's Community Development Capital Initiative will also be redeemed in full.
  
  Based on MidSouth's 20-day average closing stock price as of September 25 of $14.54, the transaction would have an estimated pro forma value of $39.0 million, including the potential contingent cash consideration, roughly 1.5 times tangible book value at June 30, 2012. MidSouth expects the transaction to be accretive to earnings per share by 30% in 2013 based on annual pre-tax expense savings of 25%, excluding estimated merger and conversion related costs of approximately $0.5 million on an after-tax basis. The estimated internal rate of return for the transaction is expected to be in the "mid-teens" and in excess of MidSouth's cost of capital.

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