VANCOUVER – Telus and Emergis announced today that they have entered into a support agreement pursuant where Telus has agreed to make an offer to acquire all the outstanding common shares of Emergis for $8.25 cash per common share.
The offer represents a premium of 17% over Emergis’ average closing price on the Toronto Stock Exchange over the past 30 days, 19% over yesterday’s close and values Emergis’ equity at approximately $763 million on a fully diluted basis, according to the joint press release issued by the companies.
Emergis has a strong presence in both health claims processing and pharmacy management systems in Canada, with industry leading applications and services. Emergis’ electronic health record systems for the exchange, integration, sharing, and retrieval of electronic health information, are considered best-of-breed. It was a Bell Canada Enterprises division until 2005, when it was spun off.
The board of directors of Emergis (other than Pierre Ducros, a director of both Telus and Emergis who was required to abstain for independence reasons) has unanimously determined that the offer is fair and is recommending that its shareholders accept it.
Emergis’ financial advisors have provided opinions to the board of Emergis that the consideration payable under the offer is fair from a financial point of view to its shareholders.
As part of the transaction, Emergis’ directors, officers, and certain shareholders – Crescendo Partners II L.P., and Libermont Inc., a company controlled by Chairman (and former BCE CEO) Jean Monty – have entered into lock-up agreements with Telus pursuant to which they have agreed to, among other things, tender all of their Emergis shares. The locked-up shares represent approximately 22% of the outstanding Emergis shares on a fully-diluted basis.
Telus has invested in strengthening its healthcare and financial services capabilities in the last several years, building teams with deep industry expertise and delivering innovative solutions. “The strength of Telus’ national sales and marketing capabilities will drive growth in Emergis’ solutions, particularly in light of the complementary nature of the parties’ businesses and customer bases,” says the press release.
“Despite significant investments, the healthcare industry is in the midst of challenges that are of historical proportions. If we are going to answer the escalating demand for healthcare excellence and affordability, Canada must invest strategically in healthcare information management systems,” said Darren Entwistle, Telus president and CEO. “At Telus, our goal is to become the leader in healthcare transformation in Canada.”
Emergis’ complementary expertise, applications and customer base will strengthen Telus’ existing industry solutions. These assets, combined with Telus’ world-class network, extensive IT infrastructure management capabilities, and credibility with business customers across the country, should accelerate growth in this sector, adds the release.
“The healthcare system is strained by rising costs and ever greater demand due to age-related chronic conditions, expensive new treatments, and higher consumer expectations. Emergis’ electronic health records and health information systems, combined with Telus’ cross-Canada network and hosting capabilities, provide a platform for healthcare transformation in Canada,” it continues.
“The private sector has a vital role to play in helping Canadian healthcare providers and payors continue to modernize,” says Joe Natale, president of Telus Business Solutions. “Telus and Emergis will provide an advanced set of health information management systems to automate and integrate health records and health claims. Together we intend to promote the development of the electronic health record and create a stronger information backbone that helps healthcare providers work together more effectively for the benefit of patients, providers and payors. We welcome the addition of the key management and deep talent of the Emergis team to the Telus organization.”
Emergis’ services in the finance industry, which include mortgage processing, point-of-sale transaction processing, and cash management offer customers the economies of scale to meet increasing customer service expectations and cost pressures, say the companies. “This enhances Telus’ focus and the customer experience for financial services firms across Canada.”
“Our team is very excited about joining the innovative Telus team. Combining our proven capabilities with Telus’ customer base, strong brand, and financial resources positions the Emergis team to lead the development of solutions in the electronic health claims, electronic health records, pharmacy management systems, consulting, security and financial business process outsourcing in Canada” said François Côté, CEO of Emergis. “This is a great opportunity for our people and for the customers of both organizations.”
“The board unanimously recommends that shareholders accept this offer. I am proud of Emergis’ strengths and I would like to thank the board members, executives, and employees who have built this company,” said Monty, chairman of the board of Emergis. "In the last three years, Emergis has re-energized and refocused its business under the guidance of a substantially new board of directors. With its experienced management team headed by François Côté, the company is now well on its way to capture the leadership of important elements of the Canadian health IT sector. Over the past three years our share price has doubled and this transaction will place Emergis in the hands of a shareholder dedicated to accelerating its growth and capitalizing fully on its capabilities.”
The support agreement provides for, among other things, a right to match any superior offer, customary board support and non-solicitation covenants, and the payment to Telus of a non-completion fee of $15 million.
The offer is not conditional on a due diligence condition and will be open for acceptance for a period of not less than 35 days from mailing and is conditional upon, among other things, valid acceptances of the offer by Emergis shareholders owning not less than 66 2/3% of the outstanding Emergis shares (calculated on a fully-diluted basis). In addition, the Offer will be subject to certain customary conditions, relevant regulatory approvals and the absence of any material adverse effect with respect to Emergis. Telus may waive the conditions of the Offer in certain circumstances. If its Offer is successful, Telus has agreed to take steps available to it under relevant securities laws to acquire any remaining outstanding Emergis shares.
Telus expects the transaction to close in the first quarter of 2008. The offer is not conditional on financing. Telus expects to fund the acquisition initially using availability under its existing or new corporate credit facilities.
