Please ensure Javascript is enabled for purposes of website accessibility

NDCHealth Checks Out

By Nate Parmelee – Updated Nov 16, 2016 at 12:40PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Per-Se Technologies and Wolters Kluwer divide and conquer NDCHealth.

A few months ago, when NDCHealth (NYSE:NDC) held its conference call for earnings and a litany of other issues, I noted how much the analysts focused on when all of the company's restatements, restructurings, and negativity would finally be over.

With today's announcement that Per-Se Technologies (NASDAQ:PSTI) and Dutch firm Wolters Kluwer are purchasing the company's operations, it appears that the storm clouds may have finally passed. True, the sale price per share isn't much more than NDC's stock price back in January -- or just last week -- though it is about 40% higher than the shares' low last March, when discussions of a sale apparently began in earnest.

The combined payments from Per-Se and Wolters Kluwer will yield NDCHealth shareholders $19.50 per share in a mix of cash and Per-Se stock. For shareholders, this means a buyout at approximately 20 times the company's average free cash flow over the last three years. Free cash flow at both NDCHealth and Per-Se has steadily declined over that period, largely due to competition driven by McKesson (NYSE:MCK), WebMD (NASDAQ:HLTH), and others in the crowded field of medical data management.

The combined Per-Se and NDCHealth business would appear to offer customers more of a one-stop shop. Both businesses focus primarily on physician and hospital markets, but Per-Se is focused more on internal administrative processes, while the portion of NDCHealth it acquired primarily specializes in transactions between organizations and connectivity to retail pharmacies. (Wolters Kluwer snapped up NDCHealth's pharmaceutical information management business.)

The combined company also expects to realize $15 million - $20 million in potential cost savings in the first year. While these synergies are very likely to exist, I'd caution investors against expecting that entire sum's savings in a single year; it often takes a bit more time to merge operations and cultures than planners expect.

For NDCHealth, it's the end of a long, strange saga that saw the company go from a free-cash-flow growth machine with a stock price above $40 a few years ago to a cash-bleeder beset by SEC investigations, restatements, and restructurings.While its buyout may not be the cure-all some NDCHealth investors hoped for, it certainly does them no harm.

Vital signs of further Foolishness:

Nathan Parmelee has no financial interest in any of the companies mentioned.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McKesson Corporation Stock Quote
McKesson Corporation
MCK
$343.27 (-1.06%) $-3.69
Pluristem Therapeutics Inc. Stock Quote
Pluristem Therapeutics Inc.
PSTI
$0.70 (-9.09%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.