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Analysis

Veritas Capital Closes Athenahealth Acquisition

By Jack O'Brien  
   February 11, 2019

After nearly a year of pursuing a sale, the Watertown, Mass.-based health technology servicer was officially sold for $5.7 billion.

Veritas Capital, the New York-based private equity firm, completed its $5.7 billion acquisition of athenahealth, the embattled health technology servicer Monday afternoon.

The transaction was first announced in mid-November, when Veritas and Elliott Management Corp., another New York private equity firm, announced a joint bid to buy athenahealth.

The close of the deal follows months of public negotiations involving Elliott, the resignation of founder Jonathan Bush in June amid domestic violence allegations, and several shareholder lawsuits following the sale announcement in November.

Late last month, three separate lawsuits over the sale price of $135-per-share were dropped ahead of a special session for shareholders to vote on the principles of the sale agreement.

That session was held on February 7, nearly three months after the transaction was first announced, and resulted in shareholder approval for the deal. 

Bob Segert, CEO of Virence Health, the former GE Healthcare value-based care assets purchased by Veritas last year, will helm the new combined company, according to a press release. Segert described athenahealth as "most unique and valuable assets in healthcare."

C-suite perspective:

"The combination of athenahealth and Virence brings together two innovative companies with complementary expertise and a shared focus and passion for improving healthcare outcomes. With a network of over 160,000 providers, the combined company is positioned for future growth and new market opportunities and has the necessary scale to make a transformational impact in the healthcare industry,” Ramzi Musallam, CEO and Managing Partner of Veritas Capital, said in a statement. “We look forward to leveraging our experience in healthcare IT to support Bob Segert and the leadership team in their mission to help clients succeed."

Conclusion reached, finally

It was a rocky 2018 for athenahealth en route to its eventual multibillion dollar purchase by Veritas.  

Athenahealth was initially offered a $7 billion cash bid by Elliott founder Paul Singer last May, which instigated a war of words between the company, Elliott, and ClearBridge, one of its largest shareholders.

For a 20-year-old company entrenched as a healthcare fixture, its destiny was primarily influenced by outside leaders: Singer, who pursued an aggressive purchase price for athenahealth, and Jeff Immelt, the former CEO of General Electric who took over as executive chairman following Bush's resignation. 

A major issue that swirled around the company, both internally and externally, was the sale price.

Athenahealth ultimately sold for $135-per-share but had been valued conservatively in the $150 to $160-per-share range and even targeted near $180-per-share by analysts during the middle of 2018.

Shareholders who sued the company stated in court documents that athenahealth leadership had filed a "materially incomplete and misleading preliminary proxy statement" regarding the merger in November.

The lawsuits presented two third-party analyses of the company's financials, which projected a sale value above $135-per-share and high EBITDA growth through December 2022.

Jack O'Brien is the finance editor at HealthLeaders. 


KEY TAKEAWAYS

The sale followed months of public negotiating drama, including several lawsuits and the resignation of founder Jonathan Bush.

Bob Segert, CEO of Virence Health, the former GE Healthcare value-based care assets purchased by Veritas last year, will helm the new combined company.

The deal closed after a special session last Thursday where shareholders voted to approve the $5.7 billion transaction.


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