Veritas Capital, Elliott clinch $5.5 billion acquisition of Athenahealth: sources

Jeff Immelt delivers a speech during the opening of a new tower of the Global Operations Center in San Pedro Garza Garcia, neighbouring Monterrey, Mexico May 12, 2017. REUTERS/Daniel Becerril

(Reuters) - Private equity firm Veritas Capital and hedge fund Elliott Management have agreed to acquire U.S. healthcare software maker Athenahealth Inc ATHN.O for $5.5 billion in cash, people familiar with the matter said on Sunday.

Athenahealth, whose cloud-based service is used to track revenue from patients, physicians and hospitals, had been under pressure to sell itself from Elliott, which has about a 9 percent stake in the company. As part of a restructuring effort this year, it has cut jobs and hired former General Electric Co GE.N Chief Executive Jeff Immelt as chairman.

The acquisition, which values Athenahealth at around $135 per share, will be announced on Monday, the sources said, asking not to be identified ahead of any official statement. Athnahealth shares ended trading on Friday at $120.35.

Athenahealth, Elliott and Veritas Capital did not immediately respond to requests for comment.

The deal comes just a few months after the departure of CEO Jonathan Bush last June. Bush, a nephew of former U.S. President George H.W. Bush, founded Athenahealth in 1997. He stepped down after issuing an apology following a newspaper report alleging he had assaulted his former wife 14 years earlier.

Elliott first made an unsolicited bid for Athenahealth in May of $160 per share. Since then, it has been in talks with various private equity firms about trying to buy the company, sources have said.

While activist investors such as Carl Icahn have acquired companies before, New York-based Elliott, with assets of more than $35 billion, is one of the few hedge funds with a dedicated team chasing buyouts.

A deal for Watertown, Massachusetts-based Athenahealth represents the largest deal to date for Elliott’s private equity arm, which is called Evergreen. It is based in Menlo Park, California, and it is spearheaded by partner Jesse Cohn.

In its third-quarter results reported last Friday, Athenahealth said its revenue under its previous accounting standards was $331.4 million, an increase of 9 percent compared to the same period last year. Its net income over the three months that ended Sept. 30, 2018 was $44.5 million, or $1.08 per diluted share.

Reporting by Carl O’Donnell and Greg Roumeliotis in New York; Additional reporting by Liana B. Baker in New York; Editing by Peter Cooney and Sandra Maler