NEW YORK Private equity and real estate firm Blackstone Group (BX.N) is in talks to buy healthcare IT company Emdeon Inc EM.N, a source familiar with the situation said on Wednesday.
A deal for Emdeon could be valued at about $3 billion, the source said. That number would include debt.
Emdeon had a market capitalization of about $1.5 billion as of the close of trading on Tuesday. Its shares rose 22 percent to $16.10 on Wednesday, giving it a value of more than $1.8 billion. It has long term debt of about $935 million.
Private equity firms have found it hard to clinch deals as they have been increasingly beaten in auctions by strategic firms -- which are in the same sector as the target and can pay more.
However, there has been a small rush of deals in the past month. Apax Partners and two Canadian pension funds struck a $5 billion deal to buy medical devices firm Kinetic Concepts Inc KCI.N, and TPG Capital TPG.UL struck a $2 billion deal to buy diagnostics firm Immucor Inc BLUD.O.
Blackstone's president Tony James said a week ago that in general it is "difficult to find value" for deals, as prices were high due to an abundant availability of credit.
"The plain vanilla auction (of big companies) is pretty expensive, but we continue to look at a lot of things and have come close to a couple of big things in ... the U.S.," said James on the company's earnings call. He said at the time that Blackstone had deals in the pipeline that it was pursuing.
Blackstone was part of a group which tried to buy medical diagnostics firm Beckman Coulter earlier in the year, but was lost out to Danaher Corp (DHR.N).
"Private equity in 2011 has been looking at acquisitions in healthcare IT," said Leo Carpio, analyst with Caris & Co. "They've been trying to build platforms. Emdeon is a nice foundation for building a larger IT platform for private equity."
Healthcare IT helps companies manage billing and claims, helps reduce costs and track customer usage. As companies face spiraling healthcare costs, the use of sophisticated software to manage care has become more prevalent.
"Emdeon is one of the largest claims processors in the U.S. -- they own about 30 percent market share of all healthcare claims processed," said Carpio.
Carpio said the pool of potential buyers of Emdeon is "pretty narrow".
"The only company that makes sense for them is either someone who's private equity, or a large HMO (Health Maintenance
Organization) or someone who is a consulting analytics firm," Carpio said. HMOs are a type of U.S. health insurer.
The Wall Street Journal earlier reported the news.
Blackstone declined comment. Emdeon was not immediately available for comment.
(Reporting by Megan Davies and Bill Berkrot; Additional reporting by Jessica Hall in Philadelphia. Editing by Carol Bishopric, Robert MacMillan and Gunna Dickson)