Activist investor Elliott Management is looking to acquire athenahealth in an all-cash offer at about $160 a share, sending shares skyrocketing around 25 percent Monday morning.
Elliott, a New York City-based fund manager, wrote in a seven-page harshly-worded letter to shareholders Monday that it was seeking to acquire the company on an “expedited basis,” saying that they may be able to improve the proposed price with additional diligence.
The offer values the company at $6.4 billion.
“We believe that our proposal represents the best path forward for athenahealth, its shareholders, its employees and its broader mission,” Elliott said in the letter.
Among other things, Elliott said that the company “is not working today and will not work in the future,” namely in the areas of “sales execution, service delivery, product focus, forecasting, executive turnover, capital allocation management discipline and corporate governance.”
An athenahealth spokesperson was not immediately available for comment.
Athenahealth was among the top employers in the state as of last summer, when it told the Business Journal it employed 2,351 people. It since announced layoffs of about 9 percent of its workforce, but did not specify how many Massachusetts workers would be eliminated. The company said that as of Dec. 31, it employed 5,156 people worldwide.
Elliott Management has been involved with athenahealth for the past year, when it acquired 8.9 percent of the company in May 2017. In its letter, the company said it has had extensive private conversations with management and the Board of Directors.
Elliott also bought a stake in another large Massachusetts employer, the technology firm Akamai Corp (Nasdaq: AKAM) in December 2017, and previously helped bring about the same of storage giant EMC Corp. to Dell Technologies as an investor in 2015.
Elliott said in the letter that after doing work to understand the Watertown-based company’s business, it believes that the company has an opportunity to change the health care IT industry.
Yet Elliott said the company isn’t working and hasn’t been able to make strides, despite recent changes at the company, including a massive layoff in October that contributed to $110-115 million in cost cuts. Elliott pointed to the company’s stock price, calling it a “disappointing experience,” and saying it only improved with the presence of Elliott, having increased nearly 40 percent in just the month after it disclosed its initial investment in May 2017.
As of 10:15 a.m. after Elliott confirmed reports that it had offered to buy athenahealth, the company’s stock was trading up 23 percent at $156 a share.
Elliott also criticized the company’s executive turnover, relatively stable operating margin, IT issues, failure to execute on its overall vision, and inability to meet bookings guidance.
“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,” the company said.
The letter went on to say that the stock price has underperformed all “relevant benchmarks” for more than five years, and that strategy and execution of operations have “failed to generate returns for shalreholders.”
“As we will address later, this chronic underperformance is driven by athenahealth-specific factors including poor execution, significant management turnover, inefficient allocation of resources and the loss of strategic focus,” Elliott said.
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