Go­ing pri­vate again

Black­stone to buy Emdeon for $3 bil­lion

Modern Healthcare - - The Week In Healthcare - Me­lanie Evans

Emdeon an­nounced plans last week for the pub­licly traded health­care billing and fi­nance com­pany to re­turn to pri­vate own­er­ship. The Black­stone Group, the pri­vate-equity firm with the largest stake in hos­pi­tal op­er­a­tor Van­guard Health Sys­tems, agreed to pay $19 a share to be­come Emdeon’s ma­jor­ity owner, the com­pa­nies said. The deal is val­ued at about $3 bil­lion.

At $19 a share, the to­tal value of Emdeon’s shares as of March 31 would to­tal about $2.2 bil­lion. Emdeon has roughly $947.5 mil­lion in debt, the com­pany’s most re­cent quar­terly re­port shows.

Emdeon and Black­stone de­clined in­ter­view re­quests, ac­cord­ing to spokeswomen with both com­pa­nies.

Should share­hold­ers and an­titrust reg­u­la­tors ap­prove the deal, Emdeon would aban­don the stock mar­kets for pri­vate equity a lit­tle more than two years af­ter its ini­tial pub­lic of­fer­ing.

Dur­ing the Nashville-based com­pany’s stint trad­ing on the New York Stock Ex­change, it made more than a half-dozen ac­qui­si­tions, in­clud­ing the May deal for EquiClaim, an au­dit and re­cov­ery ser­vices com­pany, and the Oc­to­ber 2010 deal for Cham­ber­lin Ed­monds & As­so­ciates. The deal for Cham­ber­lin Ed­monds, which screens and en­rolls pa­tients in gov­ern­ment health plans, fol­lowed deals for health­care tech­nol­ogy rev­enue cy­cle, data con­ver­sion and phar­macy com­pa­nies; a health­care in­surer IT con­sult­ing com­pany; and a fraud and abuse man­age­ment com­pany.

Emdeon’s board of direc­tors ap­proved the pos­si­ble Black­stone deal, and two pri­va­tee­quity firms hold­ing 70% of the com­pany’s shares, Gen­eral At­lantic and Hell­man & Fried­man, en­dorsed the deal. Hell­man & Fried­man will con­tinue to hold a mi­nor­ity stake af­ter the deal closes, the com­pa­nies said as they an­nounced the deal.

Emdeon CEO Ge­orge Lazenby noted in a writ­ten re­lease that the com­pany’s prospec­tive buyer had knowl­edge of the busi­ness and in­dus­try. Black­stone re­mains the largest owner in Van­guard, a Nashville-based health sys­tem with 26 acute-care and spe­cialty hos­pi­tals, fol­low­ing Van­guard’s IPO (June 27, p. 14).

Neil Simp­kins, se­nior man­ag­ing di­rec­tor of Black­stone, said lit­tle in the re­lease about the in­vestors’ in­ter­est in Emdeon but de­scribed the ac­qui­si­tion tar­get as high qual­ity and said Black­stone looked for­ward to pro­vid­ing the com­pany and its ex­ec­u­tives with sup­port.

Emdeon re­ported $117.5 mil­lion in op­er­at­ing in­come on rev­enue of $1 bil­lion in 2010. That’s com­pared with op­er­at­ing in­come of $101 mil­lion on rev­enue of $918 mil­lion the prior year.

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