Cerner (CERN) —among the largest publicly traded health care information technology companies—could emerge as an appealing takeout target to major IT companies looking to bulk up in health care. While much, as always, depends on what its most logical acquirer would be willing to pay, the big question at the moment is whether now is the time for it to pull the trigger.
To date the only active buyer on the health care front when it comes to large mega cap companies is IBM (IBM) , though its one missing link is access to hospitals, explained Mohan Naidu of Oppenheimer on Tuesday.
While Cerner would fill that gap, Naidu cautioned that the likelihood of a potential deal comes down to both timing and how much IBM would be willing to pay. The health care IT firm's scarcity value would likely require a pretty hefty premium, he said.
Morningstar Inc. analyst Vishnu Lekraj added on Tuesday that Cerner is viewed as a "crowned jewel" in the health care IT space, describing its software assets as top tier in the industry and a "big prize" to gain: "To a company that's lacking in servicing health care it would be a prime target," he said.
But as another industry source noted, despite making a great target for a lot of potential strategics—whether that's IBM or someone the likes of Alphabet (GOOGL) —it seems like a deal in the health care IT sector would be mistimed, as the market is perceived to be at a top.
"I think everyone's been burnt in health care," this person said, noting the recent moves taken by McKesson (MCK) to leave the health care IT space.
Headquartered in Kansas City, Mo., Cerner is considered to be the largest standalone health care IT company in the world, with software and services in the electronic health record, revenue cycle and population health arenas. The company has a presence in more than 20,000 facilities across 40 countries.
Cerner and its privately held rival, Epic Systems Corp., are the two companies that still have significant potential to take market share, noted Naidu.
Notably, Cerner's CEO, co-founder and Chairman Neal Patterson disclosed with the Securities and Exchange Commission in January that he is undergoing treatment for cancer. While the executive assured shareholders, clients and colleagues at the time that his diagnosis is curable and he intends to remain involved in the business, Neal was not present at the company's annual meeting earlier this year.
"If there was ever an opportunity or a case where there is a change of ownership, it might be now, presuming Cerner might not be what Patterson wants to focus on," Naidu noted.