CHICAGO – In a deal that could affect more than 150,000 U.S. physicians and another 700 hospitals, Allscripts and Misys Healthcare have announced a merger.
The transaction, announced March 18, gives British-based Misys Plc a 54.5 percent stake in the combined company, in which Raleigh, N.C.-based Misys Healthcare will be folded into a wholly owned subsidiary of Allscripts. The combined company had revenues of about $650 million over the past fiscal year.
Allscripts, based in Chicago, provides electronic prescribing, electronic record and other applications for physicians; Misys Healthcare has a large client base for its physician practice management and other practice-based applications.
“This agreement changes the landscape in healthcare information technology by creating a single company that will serve roughly 150,000 physicians with our portfolio of electronic health record, practice management and other software solutions,” said Allscripts CEO Glen Tullman, who will lead the combined company, to be called Allscripts-Misys. “Improving U.S. healthcare requires the ability to connect all stakeholders through the continuum of care, and today we have taken a major step towards doing that, with nearly one out of three physicians in America as customers of the combined company.
Stock prices soared at first, but Citigroup, UBS, Credit Suisse and Arbuthnot Securities later downgraded their stance on Misys (with Credit Suisse analysts saying the “deal arithmetic doesn’t add up.”). Citigroup officials said they expect some buyers to put contracts with the two companies on hold until it’s determined how the merger between the two competitors shakes out.
Misys had been rumored to be on the market for some time. Following a failed attempt at a management buyout in late 2006, the company, which does considerable global business in the banking and treasury & capital industry, hired Mike Lawrie as its new CEO. Lawrie announced an ambitious three- to five-year plan to turn the sagging healthcare unit around, hired Vern Davenport as vice president and general manager of the healthcare unit in February of 2007, and sold off its diagnostic systems and computerized patient records businesses last August.
The combination, informally discussed for about a year, became feasible because of recent changes in stock prices, including significant declines in Allscripts’ stock price, company executives said.
“In Allscripts, we have found the perfect partner to complement and drive our business and position us to deliver superior value to our shareholders, clients and employees over the long term” said Lawrie. “We have great respect for the Allscripts team and share highly compatible cultures.”
Under terms of the agreement, Misys Plc will contribute $330 million to Allscripts in exchange for shares representing a 54.5 percent ownership in the combined company. Allscripts, meanwhile, will pay a one-time special cash dividend of $330 million, or approximately $4.90 per share, to Allscripts stockholders.
Tullman will continue to serve as CEO of the company and Bill Davis, Chief Financial Officer of Allscripts, will continue to serve as CFO. Lawrie will serve as executive chairman of a 10-member board of directors, which will consist of Lawrie, Tullman, five members appointed by Misys and three members appointed by Allscripts. The combined company, with an estimated 3,700 employees, will be headquartered in Chicago.
Because of the complexity of the transaction, the deal will take about four to six month to close, placing the deal consummation in the fall of this year, Davis said. Synergies between the two companies will include savings of about $15 million per year initially, which include overhead reductions, marketing synergies and combined research and development costs, he said.
“Bringing Allscripts and Misys together represents a compelling opportunity for stockholders of both companies to participate in a combined organization with significant potential, including a major cross-selling opportunity that will drive us forward in the years ahead,” Tullman said.
“This is a highly complementary business in which there is very little overlap,” he added. “There are many things we are doing twice that a coordinated company could do better.”