Athenahealth faces shareholder lawsuit over its $5.7B merger

Athenahealth shareholders have filed a class-action lawsuit over the proposed sale of the company.

In November 2018, private equity firm Veritas Capital and Elliott Management affiliate Evergreen Coast Capital bought athenahealth for an estimated $5.7 billion in cash, or roughly $135 per share. The decision followed a monthslong debate over whether the Watertown, Mass.-based healthcare software vendor would remain independent or be acquired, which began in May, when activist investment firm Elliott Management issued an unsolicited takeover bid to acquire the company. Veritas and Evergreen plan to combine athenahealth with Virence Health, a value-based care business Veritas acquired from GE Healthcare in July 2018.

The lawsuit, filed Jan. 7 in the U.S. District Court of Massachusetts, claims athenahealth failed to disclose how it arrived at the cost of the sale and recommended shareholders vote to approve the proposed sale of the company, despite athenahealth allegedly omitting certain details and providing shareholders misleading information.

Specifically, it alleges athenahealth failed to disclose the financial projections relied upon to arrive at the cost of the sale, as well as any potential conflicts of interest. When Elliott Management first proposed its takeover bid in May, the firm proposed an all-cash bid at $160 per share.

The complaint is brought under a section of the Securities Exchange Act, which requires companies provide shareholders with a definitive proxy statement that helps ensure shareholders' rights are upheld during a merger or acquisition.

"Unless remedied, athenahealth's public stockholders will be forced to make a voting or appraisal decision on the proposed transaction without full disclosure of all material information concerning the proposed transaction being provided to them," the complaint reads.  

Athenahealth declined Becker's Hospital Review's request for comment, noting it doesn't  comment on pending litigation.

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