Elliott Management Corp, a hedge fund, has offered $6.5 billion to acquire Athenahealth and take the company private. According to the hedge fund the performance of Athenahealth has become increasingly frustrating. Shares of Athenahealth rose following the unsolicited bid from the shareholder. Currently Elliott Management owns a stake of around 9% in Athenahealth. Per Elliott Management Athenahealth has failed to make changes that are necessary for a public company to grow as well as create value.
“[W]e are faced now with the stark reality that athenahealth as a public-company investment, despite all of its promise, has not worked for many years, is not working today and will not work in the future,” the hedge fund wrote to the board of Athenahealth.
According to the letter which was signed by senior portfolio manager and partner of Elliott Management, Jesse Cohn, Athenahealth possesses a lot of potential which can be turned into shareholder value but the leadership of the company was a problem. Cohn pointed out that the problem with the leadership team was mainly a lack of stability. In the past four years Athenahealth has had five CFOs. Per Cohn other problems have include poor product execution as well as missed guidance targets.
In the letter Cohn also disclosed that Athenahealth had been approached by Elliott Management as well as other entities last year in November concerning a deal but Athenahealth declined to engage. According to Cohn Athenahealth has failed to look into strategic alternatives which have the potential of maximizing value leading to the conclusion that it will only get worse for shareholders.
Elliott Management has also accused Athenahealth of not following through with plans to get a president who will oversee operations. Last year Athenahealth disclosed that the roles of chairman and chief executive officer would be separated. Earlier in the year former chief executive officer of General Electric, Jeff Immelt, was brought to become the chairman of the firm.
On Monday Athenahealth revealed that the board of the company intended to undertake a careful review of the proposal. By offering to acquire Athenahealth at a price of $160 a share, Elliott Management will be buying it at a premium of 27% relative the closing price on Friday which was $126.08. If permitted to conduct additional private diligence Elliott Management has indicated that it could improve the price substantially. If Elliott Management succeeds in its intended takeover of Athenahealth it would be the biggest deal for its private equity arm, Evergreen.