News broke on Monday morning that Elliott Management, an activist investment firm with an 8.9% stake in athenahealth and $34 billion in assets under management, has made an all-cash offer to buy the company for about $7 billion. After accounting for the company's debt, that equates to a share price of $160, which represents a healthy premium to Friday's closing price of $126 per share.
Elliott Management published a letter stating that athenahealth has underperformed in recent years as a direct result of its "inability to execute across a range of strategic and operational issues." Elliott Management believes that it will be able to address all the company's shortfalls and get it back on track by taking it private. Elliott has also stated that it has already lined up all the financing necessary for the transaction.
Athenahealth's management team quickly sent out a press release confirming that it had received the letter from Elliott Management and stated that it will "carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and athenahealth shareholders."
While it is understandable that shares are soaring today from the news, it is hard to handicap the odds of this deal actually going through. Elliott tried to initiative takeover discussions with the company's management team back in November but didn't get anywhere. Elliott noted in its proposal letter than "athenahealth appears unable to achieve the right outcome for shareholders on its own," which is why it has now chosen to go public with its bid. The idea is to put pressure on management to force it to accept the deal.
At this time, it remains unclear whether or not this offer will be accepted or if another offer might appear. Investors would probably be best served by holding on to their shares until more information surfaces.