Citi says can’t rule out athenahealth sale with Elliott involved
potential acquirers of athenahealth include tech companies aiming to build a healthcare presence
#Citi analyst Garen #Sarafia raised his price target on #athenahealh $ATHN saying Elliot Associates’ recently disclosed stake in the company reinforces his favorable view and likely provides a support level for shares.
Additionally, a sale of the company “cannot be ruled out” given the activist investor’s track record, Sarafia argues.
On May 18, Elliott Associates, Elliott International and #EICA disclosed in a regulatory filing that they collectively have combined economic exposure in athenahealth of approximately 9.2% of the common stock outstanding.
Elliott said it may “consider, explore and/or develop plans and/or make proposals” to athenahealth and intends to communicate with the company’s management and board “about a broad range of operational and strategic matters.”
CITI UPS TARGET
Sarafia raised his price target for athenahealth to $163 from $128 citing Elliott’s involvement, pointing out that in the investors’ engagement in nearly 40 campaigns since 2013, slightly over half of which resulted in a sale.
As a result, he believes potential #M&A scenarios “cannot be ruled out.” The analyst said potential acquirers of athenahealth would include tech companies aiming to build a healthcare presence, including #IBM $IBM , which has made several recent acquisitions to bolster its healthcare network. He added that #Aetna $AET ) and #UnitedHealth $UNH , through its Optum business, may also be potential suitors, although UnitedHealth is currently under agreement to use #Allscripts $MDRX software.
Sarafia added more distant possibilities include healthcare tech companies #Cerner $CERN or privately-held Epic. He, however, believes a “collaborative engagement to unlock sustainable value” is a likely scenario over an acquisition, citing the company’s history of engagement with large shareholders.
In addition, Sarafia said the activist stake will make operational improvements at the company a high priority, with a renewed focus on core strengths, potential cost-cutting in general and administrative expenses and possibly research and development, and increased free cash flow. He keeps a Buy rating on the shares.
PRICE ACTION: In Monday trading, athenahealth rose nearly 1% to $139.30. The stock has a 52-week trading range of $90.11 – $142.40.
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