(Reuters) - Elliott Management has proposed an all cash offer of $160 per share for Athenahealth Inc (ATHN.O) that would value the healthcare software maker at about $6.9 billion including debt, the hedge fund said in a letter Monday.
The offer from Elliott, which has pressured Athenahealth to make operational and strategic changes, represents a premium of about 27 percent to the healthcare company’s Friday closing price.
The hedge fund said it had “extensive private engagement” with Athenahealth’s management and board during the past year, and believes that the company, which former General Electric Co (GE.N) Chief Executive Jeff Immelt joined as chairman this year, cannot make the changes it needs while it remains a public company.
Athenahealth shares jumped on the news, which was first reported by CNBC. They closed up 16.4 percent at $146.75.
Athenahealth said in a statement it had received an unsolicited proposal from Elliott and that the board will review it. It is being advised by the investment bank Lazard Ltd (LAZ.N) and the law firm Weil, Gotshal & Manges LLP.
A KeyBanc Capital Markets research note said that Elliott’s offer price was relatively low given the company’s margins, cloud service model and growing revenue profile.
About a year ago, Elliott disclosed a 9 percent stake in Athenahealth and said it planned to push for changes at the Watertown, Massachusetts-based company. It said in the letter that it had approached it last November about the possibility of taking the company private and the company refused to engage.
Elliott said that the company had also not followed through with changes including finding a president to oversee operations.
Athenahealth announced last year it would separate the role of chairman and CEO and brought in Immelt to be the company’s chairman in February.
Athenahealth was co-founded by Chief Executive Jonathan Bush, a cousin to former U.S. President George W. Bush and an executive who has publicly criticized the Republican party’s plan to overhaul the U.S. healthcare system.
While activists have made offers for companies in the past and investors such as Carl Icahn have acquired companies before, New York-based Elliott, with assets of more than $33 billion, is one of the few hedge funds with a dedicated team chasing buyouts.
If Elliott is successful in this buyout, it would represent the largest deal to date for its Evergreen private equity arm, based in Menlo Park, California, spearheaded by partner Jesse Cohn.
Elliott said it had received “financing indications” from banks to support its bid.
Reporting by Liana B. Baker in New York and Manas Mishra in Bengaluru; Editing by Shailesh Kuber and Susan Thomas