Investment firm Elliott Management has proposed a cash offer to take over Athenahealth in a deal worth nearly $7 billion.
The proposal, outlined in a letter sent to Athenahealth’s board of directors on Monday, also suggests Elliott could “substantially improve” the proposed offering of $160 per share. Its initial offer to purchase the company’s remaining shares would be about $6.9 billion.
Elliott already owns 8.9% of the company’s common stock.
Although the letter says the investors “fully appreciate how rare it is for a company to achieve the level of success realized by athenahealth,” it also blasts the EHR vendor for failing to make the strategic initiatives necessary to realize its full potential. The firm pointed to executive turnover, operating margins, product and strategy execution, and an inability to achieve bookings targets.
“Unfortunately, we 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,” Jesse Cohn, a partner and senior portfolio manager at Elliott Management, wrote. “Given athenahealth’s potential, this reality is deeply frustrating, but the fact remains that athenahealth as a public company has not made the changes necessary to enable it to grow as it should and to create the kind of value its shareholders deserve.”
Elliott approached Athenahealth about an acquisition in November that would have involved “other interested parties," but the company refused to engage. An Athenahealth spokesperson did not immediately respond to a request for comment. The company's stock jumped 21% on Monday morning on the heels of the announcement.
RELATED: Athenahealth’s recent SEC filing stokes speculation about a potential takeover
In October, the company approved a new “change in control severance plan” that updated payouts for top executives, including CEO Jonathan Bush. The filing stoked speculation about a possible takeover, and one analyst said that is likely to come from outside the healthcare industry.
The company outpaced first-quarter expectations, and Bush noted that the vendor is well positioned to appeal to pending vertical mergers like CVS and Aetna.
"At a juncture like the one athenahealth presently faces, the case for going private is compelling and cannot be ignored,” Cohn added in the letter.