Currently fighting a takeover offer from Elliott Management, and on the heels of damaging allegations of sexual harassment against founder Jonathan Bush, athenahealth announced this morning that it is considering “strategic alternatives,” while also announcing that Bush is stepping down as CEO, president and as a member of the company’s board, effective immediately.
The Watertown, Mass-based health IT vendor said in a press release that its Board of Directors has initiated a process to explore strategic alternatives, which includes the possibility of a sale, merger or other transaction involving the company as well as continuing as an independent company.
“In parallel to having discussions with third parties regarding a potential business combination, the athenahealth Board has initiated a search process to identify qualified CEO candidates. The Board’s strategic exploration process is designed to maximize shareholder value and better position athenahealth to capitalize on its premier healthcare technology platform,” the company stated in the press release.
athenahealth is fighting a takeover offer for $160 a share from activist firm Elliott Management. Before Wednesday's announcement, the stock was at $151 a share, about 6 percent below the offer price. Ahead of the announcement, athenahealth shares were halted. They initially rose nearly 6 percent once trading resumed, according to reporting from CNBC.
With Bush's departure, athenahealth officials said Jeff Immelt, chairman of athenahealth, has been appointed executive chairman, in order to support the company’s operations and ensure a smooth transition as the Board conducts its strategic review. In addition, Marc Levine, executive vice president, chief financial officer, chief accounting officer and treasurer, will assume greater day-to-day operational responsibilities and oversight, the company stated, and current Board member Amy Abernethy, M.D., Ph.D., will be advising the executive leadership team on data strategy within her role as a director.
Michelle Mattson-Hamilton, associate principal, ST Advisors, a strategic and financial advisory firm focused on healthcare IT, said this recent turn of events at athenahealth is not surprising given the developments over the past month.
“With Elliott aggressively pushing its acquisition bid and the recent news of Jonathan's behavior hitting the airwaves, it's a perfect storm. As the company explores alternatives, I'm sure there will be multiple financial sponsors interested in taking a look, and Cerner is a logical strategic option,” she notes, adding that Cerner has publicly stated their lack of interest in athenahealth. “The next 8 to 16 weeks, as things progress, will be very interesting.”
Mattson-Hamilton adds, "What would be more exciting would be if Apple or one of the other tech giants were to look at athenahealth in an attempt to gain access to the market," while also noting that Apple's involvement with athenahealth is "unlikely."
In a statement, Immelt said the company is approaching this process “with an open mind and a commitment to continuing to strengthen the company – including its rich data asset, platform strategy, and culture of innovation. We are fully focused on serving the best interests of our shareholders, employees and clients.”
“On behalf of the Board, I want to thank Jonathan for guiding athenahealth to this point and for building an incredible team, which is deeply focused on our clients and on driving disruptive, positive change across the healthcare industry. The Board and Jonathan agree that this change in leadership is appropriate as athenahealth turns to its next chapter,” Immelt stated.
In a statement, Bush, who co-founded the company in 1997, said, “I believe that working for something larger than yourself is the greatest thing a human can do. A family, a cause, a company, a country – these things give shape and purpose to an otherwise mechanical and brief human existence. athenahealth is a near once in a life time example of such a thing. With that lens on, it’s easy for me to see that the very things that made me useful to the company and cause in these past twenty-one years, are now exactly the things that are in the way. I cannot imagine a single organization more loaded with potential to transform healthcare.”
Lazard and Centerview Partners are acting as the company’s financial advisors, and Weil, Gotshal & Manges LLP is legal counsel to the company. A leading executive search firm has been retained to assist with the CEO search process.
As previousy reported by Healthcare Informatics, Elliott, the New York hedge fund which says it owns 8.9 percent of the company’s common stock, and is led by billionaire Paul Singer, made an all-cash takeover offer, which would value athenahealth at $6.9 billion.
In a letter sent to athenahealth’s board of directors on May 7, the investors acknowledge “how rare it is for a company to achieve the level of success realized by athenahealth,” and that “athenahealth has great potential with a differentiated opportunity to fundamentally change the healthcare IT industry.” However, the investors also criticized leadership at the electronic health record (EHR) vendor for failing to make the changes necessary “to enable it to grow as it should and to create the kind of value its shareholders deserve.”