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MDRX > SEC Filings for MDRX > Form 8-K on 27-Mar-2008All Recent SEC Filings

Show all filings for ALLSCRIPTS HEALTHCARE SOLUTIONS INC | Request a Trial to NEW EDGAR Online Pro

Form 8-K for ALLSCRIPTS HEALTHCARE SOLUTIONS INC


27-Mar-2008

Other Events, Financial Statements and Exhibits


Item 8.01. Other Events.

As previously disclosed, Allscripts Healthcare Solutions, Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as of March 17, 2008 by and among the Company, Misys plc, a public limited company incorporated under the laws of England ("Parent"), Misys Healthcare Systems LLC, a North Carolina limited liability company and wholly-owned indirect subsidiary of Parent, and Patriot Merger Company, LLC, a North Carolina limited liability company and wholly-owned subsidiary of the Company.

Attached as Exhibit 99.1 is an updated Investor Presentation that the Company expects to use in presentations to analysts and others to describe the transactions related to the Merger Agreement, assuming that the stockholders of the Company and the shareholders of Misys approve the transactions contemplated by the Merger Agreement.

Please refer to pages 15, 20 and 21 of Exhibit 99.1 which are the only pages updated from our previous Investor Presentation filed as Exhibit 99.1 to the Form 8-K dated March 20, 2008.

The presentation attached hereto as Exhibit 99.1 includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). The Company believes that the presentation of this non-GAAP financial information may be useful to investors as it provides general information regarding the proposed business to be acquired and operated by the Company, assuming that the stockholders of the Company approve the Merger Agreement and the related matters.

The following is a question and answer document to be distributed to certain investors describing certain transactions contemplated by the Merger Agreement.

This presentation includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). Allscripts believes that the presentation of this non-GAAP financial information may be useful to investors as it provides general information regarding the proposed business to be acquired and operated by Allscripts, assuming that the stockholders of Allscripts approve the transactions contemplated by the merger agreement described herein.

Q. Why is this a good transaction for Allscripts?

The transaction will significantly enhance Allscripts' position in the overall healthcare information technology sector and create a leading competitor in electronic health records and practice management. As standalone companies Allscripts has an installed base of over 40,000 physicians and Misys Healthcare has approximately 110,000 physicians. The combined company will have a client base of approximately 150,000 physicians, 700 hospitals and 6,000 post-acute facilities. The combined entity covers approximately one third of all physicians in America, enabling us to further expand our clinical solutions in small-to-medium-size physician practice groups. Additionally, the transaction gives Allscripts-Misys Healthcare the ability to network across healthcare from the emergency department to the ambulatory settings, further delivering on our vision of connectivity and interoperability throughout the continuum of care.

The strategic rationale for the transaction is supported by the fact that these two companies can generate significant revenue synergies through cross-selling of Allscripts' electronic health records into the Misys Healthcare customer base. Additionally there exists opportunity for substantial cost synergies through the rationalization of overlapping functions between the two companies.

Q. Why do the transaction at this time?

The current physician practice market dynamics provide an attractive opportunity for a merged Allscripts and Misys Healthcare. By combining, we are able to immediately penetrate the large Misys Healthcare installed base with Allscripts' leading EHR products. Of the 110,000+ physicians using Misys systems, a majority of them do not have an EHR solution today. By bringing the two organizations together now, we can accelerate the adoption of our EHR product in the Misys base and thereby maximize the overall value of the cross-selling opportunity and deliver to our shareholders the savings that come from avoiding significant duplicative EHR development costs in the future.

Q. What is happening in this transaction?

Allscripts and Misys plc (parent of Misys Healthcare) have entered into a definitive merger agreement. Under the terms of this agreement, Misys plc will
(i) contribute Misys Healthcare, its U.S.-based healthcare subsidiary (which we believe has an enterprise value of approximately $460 million-$510 million, as described below), plus (ii) pay $330 million in cash to Allscripts. In exchange for this aggregate $790 million-$840 million contribution, Misys plc will receive a 54.5% ownership in Allscripts, on a fully diluted basis.


Allscripts' existing shareholders will receive the $330 million cash contributed by Misys plc, through a special cash dividend, and will retain all of their existing shares in the company, representing a 45.5% stake in a significantly larger company that is the combination of Allscripts today plus the Misys Healthcare business1. The $330 million in cash will be paid solely to Allscripts shareholders immediately prior to completion of the transaction; Misys will not share in the distribution of this cash. The transaction is not subject to any financing contingencies.

The new combined entity will be renamed Allscripts-Misys Healthcare. Allscripts-Misys Healthcare will continue to trade on the NASDAQ under the ticker "MDRX". Based on comparable company earnings multiples, Allscripts-Misys Healthcare would have an equity value of approximately $1.4-$1.7 billion, which excludes any revenue synergies that will be realized in this transaction.

Overview of Transaction Mechanics

1) Misys Healthcare, a subsidiary of Misys plc, merges with Allscripts subsidiary to create Allscripts-Misys Healthcare.

2) In exchange for Misys plc contributing its Misys Healthcare business plus $330 million cash to Allscripts, Allscripts issues shares to Misys plc.

3) Immediately prior to the completion of the transaction, Allscripts shareholders will be entitled to receive the $330 million through a special cash dividend at a per share amount of approximately $4.90 (based on estimated fully diluted shares of approximately 67.8 million shares)

4) Allscripts equity holders retain a 45.5% ownership on a fully diluted share basis in Allscripts-Misys Healthcare (which consists of both Allscripts and Misys Healthcare)

Q. What is the Misys Healthcare business?

Misys Healthcare, a subsidiary of Misys plc, provides software solutions for supporting and connecting physicians' offices and venues across the healthcare community. Misys Healthcare serves more than 110,000 physicians in 18,000 practice locations and processes approximately 480 million transactions a year. Misys Healthcare is headquartered in Raleigh, North Carolina and generated FY 2007 pre-tax operating profit of approximately $39.5 million (before exceptional items) from revenues of $376 million, in accordance with International Standards on Auditing (UK).

Misys Healthcare's core products focus on practice management (PM) solutions for physicians, which are used by a substantial installed base of over 100,000 physicians. These practice management products are well regarded by customers and complementary to Allscripts' leading EHR software products.

Key Misys Healthcare products include:

¡ Misys Tiger - a practice management solution for small- to medium-sized physician organizations.

¡ Misys Vision - an enterprise practice management system for large healthcare organizations.

¡ Payerpath - a leading and innovative suite of claims management systems and services that manage healthcare financial transactions for providers and payers that addresses each step in the revenue cycle.

¡ Misys Homecare - an industry leading home care system designed to improve clinical quality of care, financial performance, and operational control for large, integrated home care organizations and small home care companies.

1 Note: Equity values and ownership for the purpose of this Q&A are represented on a fully-diluted basis.


¡ Misys MyWay - an integrated PM/EHR solution provided on an ASP basis for use in smaller practices.

The companies are committed to support all products in the future. The transaction is premised on the ability of the combined Allscripts-Misys Healthcare sales organization to sell Allscripts Electronic Health Records into the very large and underpenetrated Misys practice management base. The primary Electronic Health Records will be Allscripts Professional (Allscripts HealthMatics) and Allscripts Enterprise (Allscripts TouchWorks). It is expected that MyWay, the Misys integrated ASP solution, will continue to be offered to smaller physician groups. TouchWorks EHR/PM and HealthMatics EHR/PM integrated solutions will continue to be sold in net new or replacement opportunities.

Q. What is the value of the transaction to Allscripts shareholders?

We believe that the per share value of this transaction to existing Allscripts' shareholders ranges from $14.30-$16.20. Based on the range of per share values described above, the offer represents a 63%-85% premium to Allscripts' closing price of $8.76 on March 17, 2008 (one day prior to announcement) and a 37%-55% premium to Allscripts' 30 day average share price of $10.46 prior to announcement. This is based on the value of what Allscripts' shareholders receive as a result of this transaction (i.e. cash and a retained ownership interest in a significantly larger combined company with opportunities to expand product sales to approximately one-third of all physicians in the United States).

Allscripts' shareholders will receive $330 million in cash, or approximately $4.90 per share on a fully diluted basis, and retain a 45.5% fully diluted ownership in a significantly larger Allscripts-Misys Healthcare combination. By retaining their shares in the newly merged company, Allscripts shareholders retain the ability to participate in the upside of one of the fastest growing sectors of the U.S. economy.

We believe Allscripts-Misys Healthcare would have pro forma 2008 revenue of approximately $720 million-$725 million and non-GAAP pro forma adjusted earnings of $85-$90 million had the merger been consummated on January 1, 2008. Non-GAAP pro forma adjusted earnings is net income with the add-back of deal-related amortization and stock-based compensation, both net of tax. The non-GAAP pro forma adjusted earnings includes an estimated $15-$20 million of first full year pre-tax cost synergies. Based on comparable company earnings multiples, Allscripts-Misys Healthcare would have an equity value of approximately $1.4 -$1.7 billion.


Current Allscripts shareholders will receive two components of value in the transaction: (a) the value of the 45.5% fully diluted ownership they will have in a larger business, Allscripts-Misys Healthcare; and (b) the $330 million cash dividend that will be paid to current Allscripts shareholders. The value of these two components is shown on both an aggregate basis and a per fully diluted share basis in the table below:

                                                    Aggregate Value
                                                         ($mm)           Per Share Value ($)
Total Allscripts-Misys Healthcare Enterprise
Value                                               $ 1,400 - $1,700                       NM

Allscripts' Shareholders 45.5% Ownership in
Allscripts-Misys Healthcare                         $     640 - $770    $       9.40 - $11.30

Special Cash Dividend Paid to Allscripts
Shareholders (Cash Originates from Misys plc)       $            330    $                4.90

Total Aggregate Value to Allscripts Shareholders    $   970 - $1,100    $      14.30 - $16.20

Q. What is the value of Misys Healthcare?

We believe that the Misys Healthcare business has an enterprise value of approximately $460 million-$510 million. Based on FYE May 31, 2007A revenue of $376 million for the Misys Healthcare business, this implies a modest 1.2x - 1.4x revenue multiple. In contrast, comparable companies such as Allscripts, Cerner, Computer Programs and Systems, Eclipsys, and Quality Systems have a median 2007 revenue multiple of 2.1x.

                      Company              2007 EV / Revenue Multiple1
           Allscripts                                 2.2x

           Cerner                                     2.1x

           Computer Programs and Systems              2.1x

           Eclipsys                                   1.9x

           Quality Systems                            4.5x


           Median                                     2.1x

Q. What is the premium being paid by Misys plc to Allscripts' shareholders?

The specific premium ultimately depends on the value at which the shares of Allscripts-Misys Healthcare trade once the transaction is consummated. However, based on the range of per share values described above ($14.30-$16.20 per share), the offer represents a substantial premium (63%-85%) to Allscripts' closing price of $8.76 on March 17, 2008 (one day prior to announcement) and a 37%-55% premium to Allscripts' 30 day average share price of $10.46 prior to announcement.

1 Source: IBES and Capital IQ.



Q. What synergies are assumed in this transaction?

In contemplation of this transaction, Allscripts and Misys Healthcare conducted . . .



Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are filed herewith:

Exhibit No.
Exhibit 99.1 Investor Presentation dated March 26, 2008


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