Veritas Capital, Elliott Management Acquire athenahealth in $5.7B Deal

By | November 12, 2018

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Private equity firm Veritas Capital and hedge fund Elliott Management will acquire athenahealth, the Watertown, Massachusetts-based electronic health record (EHR) and practice management vendor, for $ 5.7 billion, according to an announcement released Monday.

Veritas and Evergreen Coast Capital, a subsidiary of Elliott Management, will pay $ 135 per share for the health IT company, which represents a premium of approximately 12 percent over the company’s closing stock price on Friday. The deal also represents a premium of approximately 27 percent over the company’s closing stock price on May 17, 2017, the day prior to Elliott Management Corporation’s announcement that it had acquired an approximate 9 percent interest in the company.

The deal concludes a six-month acquisition process and a tumultuous period for athenahealth and its leadership. Elliott Management, the sometimes-activist fund run by billionaire Paul Singer, has put pressure on athenahealth leadership to take the company private or explore a sale since the hedge fund acquired a 9-percent stake in the company in 2017.

Following the deal’s closing, Veritas and Evergreen expect to combine athenahealth with Virence Health, the GE Healthcare value-based care assets that Veritas acquired earlier this year. The combined business is expected to be a leading, privately-held healthcare information technology company with an extensive national provider network of customers and world-class products and solutions to help them thrive in an increasingly complex environment, the companies said in a press release.


For years, healthcare institutions have attempted to manage paper documents and electronically captured PDF files. These documents can be electronically stored in various databases like EHRs, ERPs…

“After a thorough strategic review process, we have decided to enter this agreement with Veritas, which we believe maximizes value for our shareholders and accelerates our goal to transform healthcare,

Jeff Immelt, executive chairman of athenahealth, said in a statement. Immelt was appointed to that position after company founder and CEO Jonathan Bush stepped down back in June. “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.”

This past May, Elliott Management made an all-cash takeover offer to buy athenahealth, at a valuation of $ 6.9 billion. The investors sent a letter to athenahealth’s board proposing to acquire the company for $ 160 per share. In the letter, the investors criticized leadership at the electronic health record (EHR) vendor for failing to make the changes necessary “to enable it to grow as it should and to create the kind of value its shareholders deserve.”

The story continued to take turns throughout the summer, particularly following the resignation of CEO and President Jonathan Bush in June. Bush’s resignation came just a few weeks after Elliott Management’s takeover bid, and just a few days after reports surfaced that the athenahealth chief had allegedly assaulted his ex-wife more than a decade ago, and also created a “sexually hostile environment” at the company.   

Following the news, various companies, both inside and outside of healthcare, were brought up as possibilities to buy athenahealth, including the Kansas City-based EHR giant Cerner Corp. According to a report in the New York Post  published in early September, Elliott Management was cited as the favorite to win the athenahealth takeover bid, reporting that Cerner and UnitedHealth declined an opportunity to acquire the health IT company.

The transaction is expected to close in the first quarter of 2019, subject to the approval of the holders of a majority of athenahealth’s outstanding shares and the satisfaction of customary closing conditions and regulatory approvals. The athenahealth Board of Directors has unanimously approved the merger agreement and intends to recommend that athenahealth shareholders vote in favor of it at a Special Meeting of Stockholder.

The combined company is expected to operate under the athenahealth brand and be headquartered in Watertown, Massachusetts. The company will be led by Virence chairman and CEO Bob Segert and an executive leadership team comprised of executives from both companies. Following the completion of the transaction, Virence’s workforce management business will become a separate Veritas portfolio company under the API Healthcare brand.

Athenahealth got its start in the health IT space as a developer of practice management systems for physician practices and has steadily expanded its suite of network-enabled services for revenue cycle management and medical billing, electronic health record (EHR) systems, patient engagement, care coordination, and population health services. The company ranked at No. 13 on the Healthcare Informatics 100 list for 2018, with $ 1.2 billion in revenue.

For the past 20 years, the company’s culture was driven by its outspoken CEO, Bush, and many athenahealth customers have said they like the strong culture and the company’s service business. It remains to be seen how this deal with impact new and existing customers.

In an interview back in June, Erik Bermudez, senior research director at Orem, Utah-based KLAS Research, said he had spoken with a number of key athenahealth customers about the potential for new management. “What I heard is, because of athenahealth being who they are and because of the strong culture that they have built, they are less worried about athenahealth than they would be if it were another company. And, they indicated that it might be a good thing.”

He continued, “It’s been a public company and it’s really hard to serve two masters, Wall Street and customers and other stakeholders. Customers I talked to indicated that a sale would bring in new ownership and perhaps bring in a different set of priorities, and that could really help athenahealth get back to their roots and back to the culture they had when they began. I think there’s still a lot of excitement, and there’s some hesitancy as well.”

In Monday’s announcement about the deal, Ramzi Musallam, CEO and managing partner of Veritas Capital said in a statement, “athenahealth is a market leader and a natural and strategic fit with Virence. 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.”

Veritas, a government and technology focused investor, has been adding health IT companies to its portfolio in the past few years. The investor bought Truven Health Analytics from Thomson Reuters for $ 1.25 billion in 2012 and then sold Truven to IBM Watson for $ 2.6 billion in 2016. Veritas acquired the healthcare business (now known as Verscend Technologies) from Verisk Analytics for $ 820 million, in 2016. The investment then bought GE Healthcare’s value-based care division for $ 1 billion in April 2018, followed a few months later, in June, with Veritas-backed Verscend Technologies buying Cotiviti, a provider of payment accuracy and analytics driven solutions, for $ 4.82 billion.

Bob Segert, chairman and CEO of Virence, said in a statement about the athenahealth deal: “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. 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.”

Elliott Management Partner Jesse Cohn said, “We are pleased to support this transformative transaction combining athenahealth and Virence, which we believe represents an outstanding, value-maximizing outcome for athenahealth shareholders.”

 Upon completion of the transaction, Elliott’s private equity subsidiary, Evergreen Coast Capital, will retain a minority investment stake in the combined company. Evergreen Managing Director Isaac Kim said, “We look forward to taking part in this unique opportunity. Under Bob’s leadership and with Veritas’ strategic oversight and strong track record of value creation, we believe the combined company will be a true leader in healthcare IT, ideally positioned to improve outcomes and reduce the cost of care.


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