Emageon Settles With Dissidents
The company is making room on its board for three nominees from Oliver Press Partners, and analysts anticipate a deal could follow.
June 24, 2008
Emageon Inc., a healthcare-focused IT provider, has reached an agreement with Oliver Press Partners, quelling what had been a hotly contested proxy battle with the dissident shareholder.
The Nasdaq-listed company, as part of the settlement, has agreed to invite two representatives of Oliver Press Partners onto its board, as well as a third “independent” director, who will be chosen by the activist investor. Two of the three new board members will also be appointed to the company’s committee in charge of pursuing strategic alternatives, signaling that a deal for Emageon could be forthcoming.
The agreement breathes new life into Emageon’s efforts to seek a sale. According to analysts at FBR Capital Markets, the company had engaged in talks with 18 potential suitors earlier this year, but instead “opted to focus on product, operational, and management changes.” The FBR analysts, in the note, also cite that the Oliver Press appointments improve “the prospects for a serious pursuit of strategic alternatives.”
At the same time, the digital imaging sector in which Emageon operates has been struggling recently. The company, in the first quarter, posted a year-over-year decline of 30% in revenues, registering just $19.3 million for the first three months of the year, while its net loss grew to $4.6 million. Charles Jett, Emageon’s CEO, at the time blamed “a more constrained capital spending” environment for the shortfall.
Analysts at Raymond James believe the weakness in the market could serve as an additional motivator to pursue a sale. The analysts, in a research note, maintained: “Given the lackluster sentiment toward imaging names, and what in our minds is the slow development of a product replacement cycle, we would not disagree that at a premium price the sale of Emageon could represent the best direction for current shareholders.”
Augustus Oliver, a principal of Oliver Press Partners, and Bennet Ulrich, director of research at the firm, will assume two of the seats on the company’s board, which is being temporarily increased from eight to 10 directors. Following Emageon’s annual meeting, Jett will resign from the board, although he will maintain his role as chief executive. Douglas French will also abandon his directorship following the annual meeting.
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