NEW YORK (TheStreet) -- Shares of MedAssets (MDAS) were gaining 29.8% to $30.74 with heavy trading volume on Monday following the announcement that private equity firm Pamplona Capital Management will acquire the health care consulting firm for $2.7 billion in cash.
Pamplona will pay $31.35 a share in cash to acquire MedAssets. The price represents a 44.5% premium to the 30-day trading volume weighted average price of MedAssets' stock.
The deal is expected to close in the first quarter of 2016.
Following the acquisition, Pamplona will combine MedAssets' Revenue Cycle Management segment with Precyse, a health information management services company it owns. MedAssets and Precyse already have a strategic partnership and share a number of customers, according to Pamplona.
"Over the last year, our progress captured the attention of outside parties, and we received a number of unsolicited inquiries expressing interest in acquiring MedAssets," Chairman and CEO R. Halsey Wise said in a statement. "Our board of directors and executive leadership team conducted a thorough review of strategic alternatives and, after careful consideration, we determined an acquisition by Pamplona is the best course of action for our shareholders, customers and employees."
About 5.6 million shares of MedAssets were traded by 10:41 a.m. Monday, above the company's average trading volume of about 495,000 shares a day.
TheStreet Ratings team rates MEDASSETS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate MEDASSETS INC (MDAS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MDAS's revenue growth trails the industry average of 36.6%. Since the same quarter one year prior, revenues slightly increased by 8.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $46.64 million or 41.09% when compared to the same quarter last year. In addition, MEDASSETS INC has also vastly surpassed the industry average cash flow growth rate of -29.58%.
- After a year of stock price fluctuations, the net result is that MDAS's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Currently the debt-to-equity ratio of 1.85 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, MDAS has a quick ratio of 0.53, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Technology industry and the overall market, MEDASSETS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MDAS