A Medical Device Daily

Merge Healthcare (Milwaukee) said it has entered into definitive agreements to raise up to $27.3 million in gross proceeds, before deducting placement agent fees and other offering expenses, in a registered direct offering with select institutional investors. The transaction is expected to close Nov. 18. The offering consists of the sale and issuance of up to 9,084,032 shares of the company's common stock at a purchase price of $3 a share.

Merge said it intends to use the net proceeds from this offering to prepay in full its senior secured note held by Merrick RIS, due June 2010. The remaining net proceeds from this offering will be used for general corporate purposes, including working capital. William Blair & Company acted as the lead placement agent for the offering. Craig-Hallum Capital Group and Robert W. Baird & Co. acted as co-placement agents for the offering.

In other financing activity:

• Cardo Medical (Beverly Hills, California), an orthopedic medical device company, said it has completed the previously disclosed private placement transaction in which it successfully raised about $6.2 million in gross proceeds through the sale of common stock.

Cardo said it intends to use the proceeds for working capital, general corporate purposes and R&D, including the integration of its recent acquisitions and the release of its total knee system.

Ladenburg Thalmann & Co. acted as the exclusive placement agent for the transaction.

• HealthSouth (Birmingham, Alabama) said it plans to commence a public offering of senior notes pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission. The company intends to use the net proceeds from this offering of senior notes, together with cash on hand, to pay the consideration required in connection with the company's tender offer for all of its outstanding floating rate senior notes due 2014, including any applicable accrued and unpaid interest on such notes, and redeem any floating rate senior notes due 2014 that may remain outstanding following completion of the tender offer, including the payment of any applicable accrued and unpaid interest on such notes.

J.P. Morgan Securities, Barclays Capital, and Goldman, Sachs & Co. will act as joint book-running managers of the debt offering.

The total consideration for each $1,000 principal amount of the notes validly tendered and accepted for payment pursuant to the tender offer on or prior to the early tender deadline of 5 p.m., EST on Nov. 30, unless extended or earlier terminated by HealthSouth, will be $1,030, which includes an early tender amount of $30.

The total consideration for each $1,000 principal amount of notes validly tendered and accepted for payment after the early tender deadline will be $1,000.

In addition, each holder will receive accrued and unpaid interest on such notes from the last interest payment date to, but not including, the payment date for the notes. Tendered notes may not be withdrawn and consents may not be revoked after the early tender deadline.

Currently, the aggregate principal amount of notes outstanding is $329.6 million, HealthSouth said.

• The Ensign Group (Mission Viejo, California) said that a group of its real estate holding subsidiaries has placed mortgages on six of the company's 27 unencumbered properties to secure a $40 million five-year term loan from GE Capital's Healthcare Financial Services business.

Ensign said it still has 21 unencumbered facilities in its 73-facility portfolio, and has historically borrowed against its assets at conservative levels to fund new acquisitions.

The new loan carries a five-year term, with a combination of LIBOR-based fixed-rate and floating-rate interest provisions that apply over the loan term.

Ensign's operating subsidiaries provide a broad spectrum of skilled nursing and assisted living services, hospice services, physical, occupational and speech therapies, and other rehabilitative and healthcare services for both long-term residents and short-stay rehabilitation patients at 73 care facilities in California, Arizona, Texas, Washington, Utah, Idaho and Colorado.