Eclipsys Corporation (ECLP), a leading healthcare information technology (IT) provider, announced that it will be bought by rival Allscripts (MDRX) for $1.3 billion. The all-stock transaction, expected to close in approximately four to six months, allows the shareholders of Eclipsys to receive 1.2 shares of Allscripts per share of Eclipsys. The acquisition represents a 19% premium on the June 8, 2010, closing stock price of Eclipsys.
The transaction, which is expected to boost Allscripts’ adjusted earnings beginning in calendar 2011, is likely to create an undisputed leader in healthcare information technology. Furthermore, the merger is expected to result in $100 million cost savings for the acquirer over the first 3 fiscal years following the completion of the deal.
The client base of the enlarged company should boast more than 180,000 U.S. physicians and 1,500 hospitals, in addition to approximately 10,000 nursing homes, hospices and post-acute organizations. Furthermore, the customers of the merged company will be able to access more effectively the $30 billion federal funds for the adoption of electronic healthcare records (EHR) provided under the American Recovery and Reinvestment Act (ARRA). The incentives are aimed at shifting the healthcare system to more efficient portable electronic records from paper records. They commence in 2011.
In relation to the merger, UK-based software company Misys has decided to reduce its stake in its U.S. subsidiary, Allscripts, from 55% to approximately 10% before the closure of the deal. The stake reduction will help Misys remain compliant with listing requirements of the UK listing authorities. Misys will raise money by selling a minimum of approximately 36 million of its Allscripts shares via a secondary offering. Furthermore, Allscripts will buy back from Misys approximately 24.4 million of its Allscripts stock.
Currently we have a Neutral outlook on Eclipsys in the long-term, implying that it will perform in line with the overall U.S. equity market over the next six to twelve months. We advise investors to retain the stock over the time period.