Tuesday, March 18, 2008

New Era on Horizon....Weak & Weaker Continues...

Misys Pays $330 Million to Merge Unit With Allscripts

Misys, the IT software group, is spinning off its healthcare division and merging it with smaller US rival Allscripts to create a more powerful player in the growing market for electronic medical records.
The complex deal, which will see Mike Lawrie, Misys chief executive, become executive chairman of the enlarged group, is being paid for via a share placing of 43m shares to raise £75m.
ValueAct Capital, the US hedge fund and largest shareholder in Misys, will underwrite the 175p a share placing and will enlarge its holding from 19.4 per cent to 25.8 per cent on completion of the deal.
Misys will contribute $330m in cash to the enlarged group and will own 54.5 per cent on a fully diluted basis. Allscripts’ existing shareholders will receive a $330m special dividend following the completion of the deal. The enlarged US group will retain a Nasdaq listing.
Misys will retain control of its banking, Treasury and capital markets division, which will retain its London listing.
The London listed shares of Misys surged more than 18 per cent or 25¾p in lunchtime trading to 167½p as investors noted the significant premium payed by ValueAct to increase its shareholding in the group.
“There is a huge opportunity to capitalise on the fundamental shift taking place in the high growth, ambulatory healthcare sector where innovative technology can improve the delivery of care,” Mr Lawrie said in a statement to announce the deal.
“Combining our businesses will create a company better able to take advantage of this opportunity and to maximise value for both sets of shareholders.”
Glen Tullman, chief executive of Allscripts, said the clinical software sector was growing rapidly. “Merging two of the leading businesses within this sector will create a comprehensive platform of products and services that can better serve a wider range of customers and will capitalise on this opportunity.”
Both groups said the enlarged company would provide a range of software services to the healthcare industry in the US. The merger will create savings of $25m to $30m within three years.
The number of physicians using electronic health records in the US is growing. The federal government is expected to encourage its development and the market as a whole is expected to grow to about $5bn by 2015.
Allscripts is headquartered in Chicago and distributes medications to 40,000 physicians in the US and more than 700 hospitals.
Misys said as well as the share placing it had agreed a new $305m debt financing package to complete the deal, which is expected to increase earnings after its first full year.
The group said trading at its other divisions was ahead of expectations and it expected revenue for this year to be between £479m and £488m compared with £469.7m last year.
The demerger of the healthcare division is the latest upheaval for a company that has faced significant change in the last few years.
Less than two years ago Kevin Lomax, co-founder and significant shareholder of the software group, led an attempt to buy Misys which failed. The collapse of the auction led to the departure of Mr Lomax and the appointment of Mr Lawrie, a veteran of the IT industry, who joined from ValueAct.
Mr Lawrie said on Tuesday the agreement with Allscripts will “transform Misys into a growth company.”
The company said that it would drop dividend payments following this year’s payment at the end of the financial year in May.
ValueAct, which has gradually increased its ownership of Misys in the last two years, welcomed the agreement with Allscripts.
“I applaud Mike Lawrie’s turnround of Misys,” said Jeff Ubben, founder of ValueAct. “This is a major step in pursuit of Misys’ growth strategy.”
Source: Financial Times, London

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