Information systems vendor HBO & Co. went to its stock vault again last week and agreed to acquire CliniCom, a Boulder, Colo.-based clinical information systems developer, in exchange for 3.5 million shares of common stock.
Depending on fluctuations in trading on the NASDAQ system, the deal could be worth $190 million to $200 million to CliniCom's shareholders.
The acquisition will take CliniCom the final mile of its march into HBO & Co.'s corporate fold during the last six years.
The two companies began going on joint sales calls in 1989, and their cooperation was made formal in December 1993 with HBO & Co.'s agreement to offer a combination of CliniCom's and its own software in the clinical component of its Pathways 2000 software line.
By the end of CliniCom's first quarter of 1995 ended March 31, about 56% of its revenues were related to HBO & Co. business, said Jim Steiner, a stock analyst for Minneapolis-based Dain Bosworth.
During calendar 1994, the infusion of HBO & Co. business helped CliniCom's revenues rise 75% to $35.4 million while net income increased 64% to $5.5 million.
For healthcare providers, the proposed acquisition of CliniCom will provide "a clearer picture for the customer," eliminating some confusion about what to buy from CliniCom and what to buy from HBO & Co., said Steiner.
CliniCom now maintains separate sales staffs for its general business and for its supplier relationship with HBO & Co., said William Brehm, CliniCom's chief executive officer. Its 125 customers are split about evenly between the two business units, he said.
"It could be called a natural evolution, I guess," said Brehm about the decision to be acquired. The company paired up with Atlanta-based HBO & Co. initially to gain access to customers building comprehensive information systems for integrated healthcare delivery networks, he said.
CliniCom realized it had to expand its software reach for the needs of such networks, either by expanding on its own or becoming part of another company's expansion. The decision to be acquired represents "much less risk for much more solid return," Brehm said.
Under the deal, shareholders will receive 0.4 of a share of HBO & Co. common stock for each CliniCom share. CliniCom has nearly 8.7 million shares outstanding.
It's HBO & Co.'s third major acquisition in a year to be financed through stock, which preserves cash for corpo-rate purposes but dilutes earnings per share.
The acquisition of First Data Corp.'s health systems group was completed in mid-June in exchange for 4 million shares (June 26, p. 20). The acquisition of Serving Software in September 1994 was financed by the issuance of 1.5 million shares (Sept. 26, 1994, p. 40).
News of the CliniCom agreement sent HBO & Co. stock down $4.25 a share to $54.25 on July 17, the day the deal was announced. Steiner said the activity wasn't a comment on the wisdom of the acquisition, but rather a price adjustment for CliniCom's worth on the market.
At $58.50 a share-the price at which HBO & Co. stock closed on the previous trading day of July 14-CliniCom shareholders would have gotten $23.40 a share under the exchange formula. But CliniCom stock closed that same day at $17.
The July 17 closing price for HBO & Co. stock made CliniCom stock worth $21.70 in exchange. CliniCom's own stock value rose $4 to close at $21.
The HBO & Co. stock price still was higher than when it split in February 1994. The company split the stock 2-for-1 when it reached $46, which reset its price on the NASDAQ market to $23.
The CliniCom deal was announced as HBO & Co. released second-quarter results that included a $126 million charge against earnings related to the purchase of research and development in the First Data acquisition.
With the charge, the company posted a net loss of $63.5 million, or $1.94 a share, on record revenues of $99.5 million for the three months ended June 30.
For the six months, the company posted a 30% increase in revenues to $190.2 million and a net loss of $54.5 million, or $1.69 a share.