Zacks_Analysts' Blog : Merge Arranges Funds - Analyst Blog

Merge Healthcare Inc. (MRGE) recently arranged funds for financing its proposed acquisition of AMICAS, Inc. (AMCS) by signing an agreement with a division of Morgan Stanley (MS). Per the agreement, Morgan Stanley has decided to offer $200 million of bridge financing to Merge for the proposed acquisition.

The AMICAS acquisition is valued at $6.05 cash per share for an aggregate of $248 million. Merge has established an account with $40 million of pre-funded proceeds from its mezzanine investors. A portion of such pre-funded proceeds will be escrowed, which will be directly accessible by AMICAS, post-merger. AMICAS is a leader in image and information management solutions.

Merge’s bid is well ahead of Thoma Bravo LLC’s bid of $5.35 per share in cash. The company has already incurred several million dollars of non-refundable fees and expenses for this acquisition.

The successful acquisition of AMICAS will enable Merge to acquire one of its main competitors and widen its customer base. This will in turn expand the company’s top-line. Merge is a healthcare software and services company focused on integrating radiology workflow to improve productivity, profitability and patient care by fusing business and clinical workflow, and intelligently managing and distributing diagnostic images and information throughout the healthcare enterprise.

 

Merge was paralyzed by several issues in the past like a dwindling cash balance, management turnover, accounting miscues and litigations. The real turnaround started from the second quarter of 2008 when the company received a much needed cash infusion of $20 million from Merrick RIS, LLC in May 2008.

Currently, we have an Underperform recommendation for Merge.