Merge, AMICAS Deal Set to Move Forward

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Includes: AMCS, MRGE
by: Zacks Investment Research

Merge Healthcare Inc. (NASDAQ:MRGE) is set to acquire AMICAS, Inc. (AMCS) for $6.05 per share in cash aggregating $248 million. Merge's bid is well ahead of Thoma Bravo LLC's bid of $5.35 per share in cash. The acquisition is expected to be completed in the second quarter of 2010.

The companies have opted for a cash tender offer for all of AMICAS' outstanding common stock. The offer is expected to commence in about two weeks. Any untendered shares of AMICAS common stock will be converted into the right to receive the same at $6.05 per share in cash.

Merge has already obtained $200 million of bridge financing from Morgan Stanley and $40 million of equity purchase commitments from private investors to fund the acquisition.

The successful acquisition of AMICAS will enable Merge to acquire one of its main competitors and widen its customer base. This will, in turn, expand the company's top-line.

Merge is a healthcare software and services company focused on integrating radiology workflow to improve productivity, profitability and patient care by fusing business and clinical workflow, and intelligently managing and distributing diagnostic images and information throughout the healthcare enterprise.

Merge was paralyzed by several issues in the past like a dwindling cash balance, management turnover, accounting miscues and litigations. The real turnaround started from the second quarter of 2008 when the company received the much-needed cash infusion of $20 million from Merrick RIS, LLC in May 2008.

Presently, we have an Underperform recommendation for Merge.