The acquisition will value each share of Atlanta-based Eclipsys at 1.2 Allscripts shares -- meaning a 19 percent premium on the basis of yesterday’s closing prices in Nasdaq composite trading. Misys Plc, the U.K. company that owns 54.6 percent of Chicago-based Allscripts, must sell much of its stake to facilitate the transaction, Misys said in a statement today.
Last year’s $862 billion U.S. economic stimulus plan allotted about $30 billion for the adoption of electronic medical records to improve patient care and reduce costly errors. Allscripts and Eclipsys will try to capitalize on this new demand, creating a network of more than 180,000 doctors, 1,500 hospitals and almost 10,000 nursing homes as clients.
“There are many moving pieces to this transaction,” said Steven Halper, an analyst at Thomas Weisel Partners LLC in New York, in a note to clients today. “Allscripts on a standalone basis has performed well recently, but the Eclypsis purchase complicated the outlook.”
Allscripts fell $1.78, or 9.7 percent, to $16.64 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Eclipsys rose 51 cents, or 2.8 percent, to $19.02.
Allscripts specializes in information systems for doctors’ offices, and Eclipsys provides software to hospitals and health systems. Allscripts Chief Executive Officer Glen Tullman will be CEO of the combined company. Philip Pead, Eclipsys’s president and CEO, will be chairman, working on client and strategic relationships, the companies said. The board will initially include directors from both Eclipsys and Allscripts, and the transaction will close in about four to six months.
The stimulus funding “has really had some profound impact on how decisions about technology are being made, who is making them,” and created “some emerging markets segments that frankly didn’t exist two years ago,” said Mike Lawrie, CEO of Misys, on a conference call today with investors.
The sale by Misys will follow 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 to merge its health-care unit with Allscripts.
Misys will sell about 68 million Allscripts shares through a secondary offering and 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.
“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 25.5 pence, or 11 percent, to 249 pence at the close of trading in London. It was the stock’s biggest advance since a 12 percent increase on April 9, 2009.
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.
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.