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Epocrates Investor Suit Calls Athenahealth’s Bid Too Low

Epocrates Inc. (EPOC), the maker of mobile software for calling up drug summaries, was sued by shareholders for accepting Athenahealth Inc. (ATHN)’s takeover offer of about $293 million.

Athenahealth, a provider of online services to doctors and hospitals, said Jan. 7 that it will pay $11.75 a share for San Mateo, California-based Epocrates to gain an iPhone app and expand in electronic records. Athenahealth said the cash offer, which exceeded Epocrates’s Jan. 4 closing price by 22 percent, was approved by both companies’ boards.

The shareholder complaint, filed Jan. 11 in state court in Redwood City, California, alleged that Epocrates and its directors breached their fiduciary duties by agreeing to a merger price that “inadequately compensates Epocrates’ public shareholders,” according to the complaint.

The investors said Epocrates traded as high as $11.97 in the months preceding the takeover announcement and that the agreed-upon merger price represents “practically no actual premium” over the company’s $11.74 closing price on Sept. 27. Epocrates surged 21 percent the day of the announcement, closing at $11.68.

Expanding Business

Athenahealth, based in Watertown, Massachusetts, said the acquisition will help it expand a newer business for software used to prescribe drugs and keep patient records. It also may benefit from name recognition for the Epocrates app, which as of August was used by 338,000 U.S. physicians to call up summaries on drugs, including their side effects and interactions. Athenahealth estimates about 90 percent of doctors had heard of Epocrates, three times the recognition of Athenahealth itself.

Erica Sniad Morgenstern, an Epocrates spokeswoman, said in an e-mail that the company declined to comment on the lawsuit.

The case is Bushansky v. Epocrates Inc., civ519078, California Superior Court, San Mateo County (Redwood City).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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