After escalating pressure from Elliott Management for Athenahealth to accept its offer to purchase the company, the electronic health record vendor said its board of directors is still deliberating over the proposal.
Not all Athenahealth shareholders are in favor of the deal with the hedge fund, according to Athenahealth, despite Elliott Management's claims in a letter sent Thursday that includes shareholders' and analysts' reactions in support of the offer.
Elliott Management, which has a roughly 9% stake in Athenahealth, first proposed buying the company in November 2017—an offer Athenahealth refused. Elliott Management made another offer in May for $160 per share in cash—or nearly $7 billion. Athenahealth's stock price rose sharply the day of the offer, increasing 16%, and has remained high since.
In the most recent offer, the hedge fund asserted that "Athenahealth as a public company has not made the changes necessary to enable it to grow as it should." Shareholders are concerned about sales execution, product focus and executive turnover, among other issues, according to the offer letter.
"At this point in Athenahealth's life cycle, there is little benefit to being a public company," Hedgeye Risk Management said, as cited in Elliott Management's letter.
Some investors—including Janus Henderson Group, which has a roughly 12% stake in Athenahealth—met with the Athenahealth board this month to urge a sale and to raise concerns about Athenahealth management's "execution of strategic initiatives."
Investors and shareholders surveyed by Evercore ISI Research unanimously agreed that Athenahealth ultimately will sell, according to the Elliott Management letter.
"Our read is that patience has worn out," according to Evercore ISI Research.
Athenahealth had a relatively rough first quarter in 2018, booking less business compared to the same period a year earlier. Athenahealth CEO Jonathan Bush attributed the drop-off to weak demand and stressed Athenahealth's strong positioning for growth.
The company also had a rocky end to 2017, when it laid off about 9% of its workforce. During 2017, the company lost 13 acute-care hospital clients in 2017, according to KLAS. But the company, which sells cloud-based software, fared well with smaller hospitals, with more new small-hospitals contracts signed than any other vendor in 2017. Athenahealth holds about 2% of the U.S. acute care hospital market.
Though Athenahealth's board of directors is still considering the offer, the vendor offered some resistance in a statement Thursday. "We do not believe the positions set forth in Elliott Management's letter are representative of the positions of all of our shareholders," the company said. Athenahealth "will continue to take the time necessary to complete this review notwithstanding Elliott Management's attempts to publicly pressure the board and management team," according to the statement.
An edited version of this story can also be found in Modern Healthcare's May 28 print edition.
