Allscripts Buys Eclipsys for $1.3 Billion to Expand in Software - June 9, 2010
Orlando Florida -- Allscripts-Misys Healthcare Solutions Inc. agreed to buy Eclipsys Corp. for $1.3 billion in stock, creating a software company that will allow U.S. doctors and hospitals to share patients’ records.
The acquisition values Atlanta-based Eclipsys at $22.10 a share, 19 percent above yesterday’s closing price on the Nasdaq Stock Market. Misys Plc, the U.K. company that owns 54.6 percent of Allscripts, will sell much of its stake to facilitate the transaction, Misys said in a statement. Misys rose the most since September 2008 in London trading after saying it will return most of the proceeds to shareholders.
U.S. health-care computing providers are looking to take advantage of laws in the U.S. that emphasize new technologies to reduce the costs of patient care. The combined company will have more than 180,000 U.S. doctors, 1,500 hospitals and almost 10,000 nursing homes as clients, the companies said in a statement today.
The combination “creates a ‘hub’ of large and well- respected hospitals that will accelerate connections” to physicians’ practices, Allscripts Chief Executive Officer Glen Tullman said in the statement. “We are at the beginning of what we believe will be the single fastest transformation of any industry in U.S. history.”
Allscripts specializes in information systems for doctors’ offices, while Eclipsys provides software to hospitals and health systems, the companies said. A U.S. law passed last year to boost the economy provides about $30 billion in federal funding for hospitals and doctors to adopt electronic health records, they said.
Tullman CEO
Tullman will be chief executive of the combined company. Philip Pead, Eclipsys’s president and CEO, will serve as chairman, working full-time on client and strategic relationships, the companies said. The board will initially include directors from both Eclipsys and Allscripts and the deal will close in about four to six months, they said.
Shareholders of Eclipsys, based in Atlanta, will receive 1.2 Allscripts shares for each Eclipsys share. The deal, which the companies described as a merger, values Eclipsys at about 30 times this year’s estimated earnings per share, according to Bloomberg data. U.S. medical-information technology companies on average sell for about 24 times this year’s expected earnings, the data show.
The purchase will add to Allscripts earnings in 2011, using a method that doesn’t meet generally accepted accounting principles, Allscripts said. Savings over the first three years after completion of the deal will total more than $100 million, the company said.
Shares Fall
Eclipsys fell 23 cents, or 1.2 percent, to close at $18.51 yesterday in Nasdaq Stock Market trading. The stock has risen 6.3 percent in the past year, compared with a 27 percent rise in the S&P 600 Health Care Index. Allscripts fell 25 cents, or 1.3 percent, to close at $18.42 yesterday in Nasdaq trading.
The sale by Misys ends an investment of less than two years in Allscripts. Shares of the U.S. company have more than tripled since October 2008, when Misys paid $330 million in cash to merge its health-care unit with Allscripts.
Misys will sell about 68 million Allscript shares through a secondary offering and via share repurchases by Allscripts, raising about $1.3 billion, the Evesham, U.K.-based provider of industry-specific software said. Misys plans to return about $1 billion to shareholders by starting a tender offer for stock, the company said.
‘Great Deal’
“It’s a great deal for Misys and their shareholders,” Roger Phillips, an analyst at Evolution Securities in London, said by phone. “They had been talking about the long-term future of the health-care business and now they’re selling out, but at an extremely good price.” He has a “neutral” recommendation on the stock.
Misys rose 44 pence, or 20 percent, to 267.5 pence at 9:10 a.m. in London. The stock gained as much as 26 percent, the biggest intraday advance since September 2008.
Investment bankers from UBS AG, Barclays Capital and JPMorgan Chase & Co. advised Allscripts on the deal, while Blackstone Group LP and William Blair & Co. were financial advisers to the Allscripts audit committee. Perella Weinberg Partners worked on the transaction for Eclipsys, while Credit Suisse AG worked for Misys
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