Athenahealth’s top shareholder sets up potential takeover battle for company

Athenahealth's largest investor wants the company to explore a sale, and sources say other top investors are making similar demands. (athenahealth)

Athenahealth's largest shareholder has urged the company’s board of directors to consider selling the company, setting up what could be a contentious takeover.

Janus Henderson Group, which owns an 11.9% stake in the EHR vendor, said in a financial filing issued Friday that it spoke with Athenahealth’s board of directors and urged them to initiate a formal sale process. The investment firm is one of several top investors urging Athenahealth's board to consider offers, people familiar with the matter told FierceHealthcare.

The filing comes several weeks after Elliott Management publicly offered to buy the company for $160 per share. During a May 15 meeting, representatives with Janus Henderson Group told the board it would be in the best interest of shareholders to evaluate any third-party offers and "open up a broader sales process,” according to the SEC filing.

The investment firm cited concerns about “management's execution of strategic initiatives.” Together, Janus Henderson Group and Elliott Management own more than 20% of the company.

RELATED: Elliott Management proposes Athenahealth takeover worth almost $7B

The push from the company’s top investor draws a line in the sand, potentially forcing the company’s top shareholders to take a stance on the proposed acquisition. The company's top investors could have a considerable impact since nearly half of Athenahealth’s ownership is concentrated among six investment firms, including Elliott and Janus Henderson.

Fidelity Investments, which at one point owned a 15% stake in the company, has sold off shares, cutting down its ownership to 6.2%.

“I wouldn’t be surprised if in the coming weeks we hear from some of the top shareholders that they want to do this,” said Andrew Freedman, a healthcare analyst with Hedgeye Risk Management. 

Athenahealth spokesperson Finley Hines said the company has reviewed Janus Henderson’s filing and said the board is “committed to a thorough analysis of Elliott Management’s offer.

“We intend to respond to this proposal as promptly as possible and in conjunction with advice from our legal and financial advisers,” she said.

Last week, Elliot told its board it has heard nothing from Athenahealth “beyond its cursory, boilerplate press release.”

RELATED: Athenahealth’s recent SEC filing stokes speculation about a potential takeover

The EHR vendor could be in for a fight, particularly if the company decides to reject calls to consider a sale. While the situation doesn’t meet the classic definition of a hostile takeover, which typically involves one company rather than a group of investors, “it feels like we’re not that far from it,” said Sean Dodge, an equity analyst at Jefferies Group.

“If Athenahealth continues not to respond and says they aren’t hiring investment banks to evaluate potential offers, then Elliott will probably try and call a vote of shareholders to try and force the board’s hand,” Freeman said.

It's not the first time Elliot Management has played an active role in the sale of a healthcare company. Last year, The Advisory Board was split and its healthcare business was sold to UnitedHealth Group for $1.3 billion after it was targeted by the investment firm.

The wild card continues to be Athenahealth CEO Jonathan Bush, who owns a small stake in the company but continues to be a cultural force. Bush may also have Jeffrey Immelt in his corner. The former GE CEO was brought on in February to be the board chair, a move that Elliott specifically questioned in its offer to Athenahealth earlier this month.

Following Elliott’s proposal, Dodge thought Bush might be content leaving the company if an activist investor was constraining his ability to innovate. But he changed his mind after seeing Bush present at the HLTH Conference two weeks ago.

“He’s an emotional guy and the emotions he showed were different,” he said. “Even though Jonathan doesn’t own a lot of the stock, he’s very much embedded in that culture, and I think he has a handful of large shareholders in his corner.”