On a quiet Columbus Day, on Bloomberg it was announced that Allscripts Healthcare Solutions Inc. (MDRX), the electronic health-records company received first-round bids from private-equity firms including Blackstone Group (BX), Carlyle Group (CG), and Silver Lake Management LLC. The company, looking to be taken private after a board shakeup, and a legal fight with its second-biggest shareholder this year, wants second-round offers within the next three to four weeks. The company was not available for any comments.
HealthCor Management LP, which held 7.4 percent of the common stock outstanding as of June 30, sued Allscripts in May after the board shakeup. New York-based HealthCor dropped the lawsuit a month later when Allscripts agreed to nominate three independent directors to the board.
Another notable event that might have been a catalyst for this possible takeout is that Allscripts lost a bid for a $302 million contract to supply its technology to New York city’s public hospitals on September 27th.
Also, to be noted, MDRX is the worst performer of 33 companies in the S&P Midcap Healthcare Index (MID) in 2012, falling 30%. In terms of valuation, the stock is trading at $13.9 versus its 52-week range of $8.84-$21.66, and at a trailing twelve month EV/EBITDA multiple of 10x. Although we don’t have more details on the possible takeout bid, the best comparison for this takeout would be the Emdeon deal in 2011, which occurred at 11x trailing EBITDA, which implies a $15-$16 buyout for MDRX. Emdeon was acquired by Blackstone in August 2011 for $3 billion, including debt.
The top holders of Allscripts stock include Manning Napier Advisors (9.35%), HealthCor Management (7.5%), BlackRock (6.7%), and Wellington Management (6.15%).
Conclusion: Given where MDRX is trading versus its best takeout peer Emdeon, there seems to be no reason to run after this stock. That being said, we would take a look at candidates in the space depicted by the Compar-O-Matic below: