AMICAS Sale Goes Round and Round

Ms. PACS: Did you hear the news today: AMICAS has entered into a definitive agreement with an affiliate of Thoma Bravo LLC to be acquired for $217 million in cash.

This is good news for AMICAS' board since the company shelled out $39 million for Emageon Inc. this year. Time to recoup some of the green. But what does it mean for the PACS industry?

Not sure yet, but Stephen Kahane, AMICAS' chairman and chief executive, says it's great, but for whom? Kahane said the buyout will give AMICAS the "additional capital and operational expertise" that it badly needs to grow. The cash injection should help, especially after AMICAS shares hit a seven-year low late last year, reported WSJ.com. Actually, AMICAS stocks have grown steadily in 2009 thanks to rising sales and expectations. Again, what does it mean for the ailing PACS industry? Perhaps, what goes up must come down, and go up again?

Not so fast. Just 40 minutes ago, a New York law firm, Stull, Stull & Brody, opened an investigation on behalf of AMICAS shareholders over the price to be paid to AMICAS shareholders. And, they are also questioning whether AMICAS' board of directors breached its fiduciary duties to the shareholders by agreeing to sell the company at an unfair price. According to the firm: "Whereas AMICAS’ shareholders would receive $5.35 per share in cash under the terms of the proposed transaction, at least one analyst has set a price target of $6.00 per AMICAS share, representing a substantial potential discount to Thoma Bravo, LLC."

So is this something AMICAS' board should be concerned with? Only if they don't have leech powder to burn these guys off their ankles. This is just "Attorney advertising," looking for people to join a class action suit on behalf of the stockholders. It is no more than a bunch of leeches looking for a host. Every time a pending sale is made almost without exception they come out of the woodwork. Scratch your leg and another one comes up - this time its Levi & Korsinsky - making the same claim, pretty unoriginal.

PACSman: AMICAS was sold to Thoma Bravo, LLC, a private equity firm who wants to put money into a sure thing and bring the company private and out of the public eye. That, in my opinion is great news. AMICAS is also now subject a class action suits from at least two firms in the past 12 hours claiming that the stock was undervalued and someone was playing games with the stock price. That, in my opinion, is old news…Yogi Berra was right- “It’s déjà vu all over again!”

Every company who has offered stock has to deal with these legal vultures trying to make a buck for themselves. This is the latest deal:
The current investigation concerns the price to be paid to Amicas’ shareholders and the process by which Amicas’ Board of Directors is addressing the transaction, including whether the Company’s Board of Directors breached its fiduciary duties to the Company’s shareholders by agreeing to sell the Company at an unfair price.

AMICAS had to deal with this very same thing back in April, 2009 when it acquired Emageon:
The action…..alleged, among other things, that the members of the Emageon Board of Directors violated their fiduciary duties by failing to maximize value for Emageon's shareholders when negotiating and entering into the Agreement and Plan of Merger dated as of February 23, 2009 among Emageon, AMICAS and a subsidiary of AMICAS. The complaint alleged that AMICAS aided and abetted those purported breaches.


In one statement they purportedly "breached its fiduciary duties to the Company’s shareholders by agreeing to sell the Company at an unfair price" while in the other "they violated their fiduciary duties by failing to maximize value for Emageon's shareholders. Other than the words used, as Led Zeppelin once sang, the song remains the same…"

So who wins? Did the stockholders get what they wanted? No. Did the vultures get what they wanted? Yes - at least for them..

Here is part of the release from Health Imaging magazine:
On March 27, Emageon said that it and the other named defendants in a putative class action lawsuit filed by its shareholders on March 13, in connection with the proposed acquisition of Emageon by Amicas, have entered into a memorandum of understanding with counsel for the plaintiff.
Under the terms of the memorandum, the parties have agreed to settle the lawsuit, subject to court approval, at which time the lawsuit will be dismissed with prejudice. Emageon and the other defendants maintain that the lawsuit is "completely without merit." Nevertheless, to avoid costly litigation and eliminate the risk of any delay to the closing of the tender offer and subsequent merger, the defendants have agreed to the settlement contemplated in the memorandum, according to Emageon.
Source: http://www.healthimaging.com/index.php?option=com_articles&view=article&id=17000:emageon-acquired-by-amicas-settles-shareholder-suit

Now this is the part I don’t like: Nevertheless, to avoid costly litigation and eliminate the risk of any delay to the closing of the tender offer and subsequent merger, the defendants have agreed to the settlement contemplated in the memorandum, according to Emageon. Score: Vultures- 1, Stockholders- 0, AMICAS- ?

Take a look at how AMICAS stock has done over the past five years. Five years ago, on December 27, 2004 AMICAS stock traded at $4.45. It got as high as $5.54 on August 29, 2005 and never broke $5.00 a share after the week of February 6, 2006. From February 2006 to December 2009 is almost four years, for those who are mathematically challenged.

From May, 2006 to September, 2008 AMICAS stock hovered in the high $2’s to mid $3’s, with the stock taking a significant hit in the 3rd quarter of ’08, closing at $1.89 share on December 28, 2008. Again, for those who are mathematically challenged that was just 12 months ago or one whole year, whichever you prefer.

Due to some incredibly wise investments made by AMICAS corporate management as well as solid sales made by the AMICAS sales force in an incredibly challenging economy AMICAS stock closed on 12/24/09 at $4.42/share, a 177% increase in the stock price over the course of past 12 months. Thoma Bravo offered $5.35/share for the stock, a 21% premium over the closing share on the day the deal closed.

The vultures say that “The offer price is only a small premium over the $4.84 price the Company's shares traded at as recently as December 8, 2009 and below a $6.00 per share price target set by at least one analyst.” Now break down the word analyst into two words- one four and one three letter - and you’ll have a better understanding of what exactly is going on here. These “anal-ysts” are truly clueless about this market. Why not just claim that AMICAS was worth the $34.44 it traded at nine years ago on 11/24/2000 even though less than three years prior to then (on 9/8/1997) their stock only traded at $2.22? Gee, back in 1989 I weighed 125 lbs…Today I weigh…um…a bit more. Does that make me worth twice as much since I am almost twice the person I was then? No. Again, these people are completely clueless.

This is the exact same anal-yst mentality that has allowed Merge’s stock to get pumped up from $0.41/share on 11/25/2008 to a high of $4.67 of 7/7/2009. Again for those who are calendarly challenged that is over a ten-fold increase in stock price IN JUST EIGHT MONTHS. Merge has “settled back” into the low threes which is where they probably will stay until- God help us all- someone steps up and buys them as well. Of course the vultures will then say that Merge stock was undervalued too since Merge traded at $28.72 as recently as 11/28/2005, just four short years ago. Of course there was this little accounting irregularity they have dealt with since then but…why are we dwelling on minor details like that (laugh)?

The bottom line is Bravo saw a good thing and bought AMICAS, to which I say, well, bravo!! They offered a fair price, which AMICAS management smartly took. It’s good for AMICAS, and it’s good for the marketplace.

And the vultures? They always have and always will come out of the woodwork, especially since they stand to make money through something the do best - intimidation. As they have in the past AMICAS will no doubt pay, the vultures will fatten their wallets, pump up their chests and give those foolish enough to sign up for the class action suit $.03, $.06 or whatever a share, if that, and pocket the rest. I chose to ignore them and frankly you probably should too.

Celebrate that a private equity firm would chose to invest in AMICAS and keep them as they are. This is a far better alternative than the company being bought by a major PACS vendor who no doubt would totally screw up a good thing as so many before have experienced (cough - DI - cough).

Lastly, a personal note to the vultures. If you are going to show that you have the coglioni (as we Italians like to say), to sue on behalf of others, at least get the name of the company whom you are suing right. It’s AMICAS, Inc.- upper case A through S, little Inc., not – “Amicas, Inc. (“Amicas” or the “Company”) (Nasdaq: AMCS).”.

Now sing a little Zeppelin along with me:

I had a dream. Crazy dream.
Anything I wanted to know, any place I needed to go

Hear my song. People won't you listen now? Sing along.
You don't know what you're missing now.
Any little song that you know
Everything that's small has to grow.
And it has to grow!

California sunlight, sweet Calcutta rain
Honolulu starbright - the song remains the same.

Sing out Hare Hare, dance the Hoochie Koo.
City lights are oh so bright, as we go sliding... sliding... sliding through.