Veritas and Elliott combine to acquire Athenahealth for $5.7bn

January 2019 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

January 2019 Issue

Private equity firm Veritas Capital and hedge fund Elliott Management have announced a deal to acquire Athenahealth Inc for around $5.7bn.

The deal values Athenahealth at $135 per share, a premium of 12.2 percent to the stock’s closing price on Friday 9 November, the last day of trading before the deal was announced and a premium of approximately 27 percent over the company’s closing stock price on 17 May 2017, the day prior to Elliott Management’s announcement that it had acquired an approximate 9 percent interest in the company.

The question of Atheanhealth’s future has been up for debate for some time, though it came into sharper focus following Elliott’s acquisition of the stake in the company. Athenahealth is believed to have rejected a number of takeover bids during summer 2018. After acquiring its stake in the company, Elliott indicated it was prepared to offer $160 per share for the rest of Athenahealth and take the company private. Though Athenahealth rejected this offer, the company has been exploring a sale since June 2018 when its founding chief executive Jonathan Bush resigned in light of allegations of sexual harassment and domestic abuse.

The sale to Veritas and Evergreen Coast Capital – Elliott’s private equity unit – is expected to close in the first quarter of 2019, subject to the approval of the majority of Athenahealth’s shareholders and the satisfaction of customary closing conditions and regulatory approvals.

Once the deal has been completed, Athenahealth will be combined with Virence Health, Veritas’s healthcare services company, a former GE Healthcare unit which Veritas acquired in 2018, the companies said in a statement. The combined company will keep the Athenahealth name, and will be led by Bob Segert, chief executive of Virence. It is believed that combining with Virence would be beneficial to Athenahealth, allowing the company to consolidate some operations, continue cutting costs and free up capacity to further invest in R&D and innovation.
“We are excited by the opportunity to partner with Athenahealth, one of the largest and most connected provider networks in the nation, to drive outcomes that matter the most to our customers,” said Mr Segert. “Athenahealth and Virence have complementary portfolios and highly-talented people, and this combination expands our depth and reach across the continuum of care. I’m looking forward to combining our mission-driven cultures to create an even stronger healthcare IT company.”

“After a thorough strategic review process, we have decided to enter this agreement with Veritas, which we believe maximises value for our shareholders and accelerates our goal to transform healthcare,” said Jeff Immelt, executive chairman of Athenahealth. “Combining with Virence will create new opportunities for collaboration and growth. Operating as a private company with Veritas’s ownership and support will provide Athenahealth with increased flexibility to achieve our purpose of unleashing our collective potential to transform healthcare.”

“Athenahealth is a market leader and a natural and strategic fit with Virence,” said Ramzi Musallam, chief executive and managing partner of Veritas Capital. “Virence and Athenahealth have differentiated and complementary solutions, deep relationships with their respective customer bases and a shared culture of commitment to innovation. We look forward to leveraging our expertise in the sector, as well as the capabilities and solutions across both companies to provide superior value to customers, and create exciting growth opportunities for both sets of employees as Bob and the team build the future of healthcare IT.”

Athenahealth has undergone a period of considerable upheaval in recent years. In 2017 the company hired Mr Immelt, the former GE chief executive, as its new chairman and then accepted the resignation of Mr Bush. The company was also forced to lay off around 500 employees in October 2017 in order to cut costs.

Richard Summerfield