Athenahealth to be acquired, combined with former GE Healthcare operation
Athenahealth endured a year of turmoil as stock market investors wrangled over control of its fortunes. After a series of dramatic changes, including the removal of its longtime chief executive, the company is returning to what it hopes will be the calmer waters of private ownership.
The Watertown health technology company said Monday that two New York financial firms are buying athenahealth and combining it with a Seattle-based health technology company recently spun out from General Electric.
The Watertown company confirmed that it had agreed to the merger with Virence Health as part of an acquisition by the private equity firms Veritas Capital and Evergreen Coast Capital for $135 per share in cash. The companies said the deal is worth $5.7 billion.
Jeff Immelt, the longtime chief executive of GE who has been leading athenahealth on a provisional basis, said in a statement that its new private owners would “provide athenahealth with increased flexibility to achieve our purpose of unleashing our collective potential to transform healthcare.”
Evergreen is part of Elliott Management, a hedge fund that is a major shareholder at athenahealth and had been pushing for a sale. The price of the deal, however, is lower than an earlier offer by Elliott at $160 per share. Veritas will be the lead buyer under the deal announced Monday.
Athenahealth makes online-enabled information technology tools for medical practices, including electronic health records systems.
Veritas paid GE Healthcare about $1 billion this year for Virence Health, which makes tools to help doctors offices manage their revenues, employees, and patients. The two companies will operate under the athenahealth brand, and retain their headquarters in Watertown, where athenahealth has about 2,000 of its 5,000 global employees.
Athenahealth did not say whether there would be any change to employment levels under deal. Virence has a total of 1,250 employees.
The chief executive of the company will be Bob Segert, who leads Virence.
“Athenahealth and Virence have complementary portfolios and highly talented people, and this combination expands our depth and reach across the continuum of care,” Segert said in a statement.
Athenahealth was led for most of its two-decade history by cofounder Jonathan Bush, a member of the Bush political dynasty. He had sought to hold onto the company, but left in June amid revelations about his past, including a years-old domestic violence incident.
In an interview on Monday, Bush said he was hopeful that the sale would end “a traumatic period for the company, for the employees, and for the board.”
But he remains suspicious of the timing of the revelations that led to his departure — and he believes the situation may have hurt the sale price.
“Obviously the right thing for me to do as a man and a father and husband is to just take the hit and let it go, but the shareholders then had to turn around and sell the company without a CEO,” Bush said.
He said that after the merger, the company would still be capable of pursuing its mission, which made Bush a well-known figure in health care, of giving doctors more time to focus on patients by simplifying their administrative tasks.
Stephanie Demko, an analyst who follows health care technology for Citi, said the uncertainty at athenahealth may have been a drag on its sales of products to doctors’ offices, which are an important metric driving its stock performance. Demko said attrition had been an issue at the company recently.
“You can’t sell new software and new solutions when you have people leaving,” she said. “It’s just not sustainable when your work force isn’t there, but more stability should help regrow that longer term.”
Now that the company will be private, she said, the company will have fewer worries about quarterly fluctuations of sales bookings. And they may have more to sell. Virence has several products that can be integrated into Athenahealth’s platforms.
Sean Wieland, an analyst at Piper Jaffray, said he thinks major job cuts at athenahealth are unlikely after the merger. The company laid off about 500 people last fall in offices companywide.
The deal needs the approval of shareholders and is set to close early next year.
Wieland and Demko both said they believe shareholders will accept the deal, despite the fact that it is smaller than Elliott’s original offer. It’s not clear that there’s a better offer out there, Wieland said.
“Probably the lack of other interested parties coming to the table prevented any kind of bidding war for the asset,” he said. “Ultimately, to use the real estate parlance, it became a buyer’s market for athenahealth.”
Athenahealth stock was up nearly 10 percent in trading Monday, with its stock price ending the day close to $132.