Shares of Greenway Medical Technologies (GWAY) rose sharply after the company agreed to sell itself to Vitera Health Solutions, owned by Vista Equity Partners.
Given the great returns from the public offering level and the strong recent run-up, investors should be happy to tender at all time highs. The fact that management, which owns a big stake in the business as well, is happy to tender only adds strength to this conclusion.
Unfortunately I was not a holder of the shares. If I were, I would tender at these levels.
Greenway Medical Technologies announced that it has entered into a definitive agreement under which it will be combined with operations of Vitera Healthcare Solutions, in an attempt to create a leader in healthcare information technology and services.
Under terms of the deal, shareholders in Greenway stand to receive $20.35 per share in cash. The deal represents a 20% premium over Monday's closing price, and a 62% premium over the 90-day average closing price. The deal values Greenway at about $644 million.
The new combination will serve some 13,000 medical organizations and 100,000 providers. The combined businesses will market and operate under the Greenway brand. Greenway's solutions have seen high adoption rates given the easy of use of the technology and the fact that it is interoperable between systems.
Founder and Chairman Thomas Green commented on the rationale behind the sale, "We are pleased to approve this agreement and look forward to completing this transaction,. It provides substantial cash value for our stockholders, and reflects our deep commitment to drive innovation that helps healthcare professionals succeed and thrive in today's evolving healthcare landscape."
The Board of Greenway has already approved the deal. The deal is subject to anti-trust provisions, regulatory approval and shareholder approval. The deal is expected to close in the final quarter of this year.
Shareholders collectively owning some 50.9% of Greenway's stock have already agreed to tender at these conditions.
Total revenues for the year came in at $134.8 million, up 8.7% on the year before. The company reported a full year loss of $5.1 million for the year.
The $644 million price tag values the business at 4.8 times annual revenues.
The company does not pay a dividend at the moment.
Some Historical Perspective
Shares of Greenway were sold to the general public as recent as February of 2012. Shares were eventually offered at $10 per share, after being offered in a preliminary $11-$13 price range.
Shares rose to highs of $19 in November of 2012. A profit warning for the final quarter in April of this year send shares from $16 to $12 overnight, as shares fell to $11 in the weeks following.
The proposed take-out at $20.35 per share implies that investors who participated in the public offering, or those who bought on the lows in July, stand to double or nearly doubled their investment in a relative short time period.
Between 2010 and 2013, Greenway has doubled its annual revenues, while it turned a very small profit into a modest loss.
Greenway has seen a short life as a publicly traded company, having seen quite some volatility in the meantime. To be honest, management has done a good job at creating shareholder value for holders of the shares in the meantime.
Given that shareholders, which combined hold little over half the shares outstanding in the firm, have already agreed to tender they should not expect much fireworks ahead, and should agree to tender at these levels. It will be really unlikely to see a competing bid, or low tender levels.
While the business is promising it seems that management, which does own a great stake in the company, is happy to tender at these levels after the fourth quarter results triggered a sell-off in April as large customers were deferring orders. The company saw some headwinds from changing billing systems as well. Like many firms, Greenway has been focusing on subscription services which impact short term sales, but result in more predictable cash flows ahead.
Perhaps the company is better off being owned by Vista Equity which has billions of dollar instruments in software companies. Combined with Vitera both firms should be able to reap millions in synergies, although these have not been specified.
As management which was a real stake in the business is happy to tender, I suggest to tender your belongings as well in a short but very profitable ride for all shareholders involved.