Supply chain and revenue cycle management software firm MedAssets Inc. will acquire rival The Broadlane Group for $850 million in cash.
The acquisition will expand the market footprint and portfolio of Atlanta-based MedAssets. The company sells a range of revenue cycle management software for provider organizations. Its Spend Management division sells supply chain management applications and operates a group purchasing organization. MedAssets serves 3,300 hospitals, including 1,700 on the supply chain side, many of which also are revenue cycle management clients. The company also serves 40,000 non-acute care providers.
Dallas-based Broadlane also sells supply chain management software and operates a GPO. The company serves more than 1,100 hospitals and 50,000 non-acute care facilities. Broadlane has "optimal" contract pricing under a program where if an organization commits to buying a certain number of items and complies, "the pricing is amazing," says a MedAssets spokesperson.
Both companies sell a range of data analytics software to better understand and manage supply chain operations, such as ensuring an organization actually is paying the correct contracted prices. Broadlane will fill some product gaps in MedAssets portfolio, such as an executive-level supply management dashboard and labor management software. Together, the companies will deliver end-to-end cost management capabilities, says Patrick Ryan, chair and CEO of Broadlane. Ryan will become president of the combined company's Spend Management division.
Under terms of the definitive acquisition agreement, MedAssets will pay $725 million for Broadlane at closing and another $125 million in January 2012. MedAssets has obtained financing commitments from J.P. Morgan and Barclays Capital. Together, the companies had non-GAAP net revenue of $508.9 million--$167.9 million from Broadlane--and non-GAAP adjusted earnings of $161.8 million in 2009.
MedAssets expects at least $20 million in expense-based synergies, or cost savings from elimination of redundancies, in 2011. The company expects the acquisition to add five cents to 10 cents in non-GAAP diluted earnings per share in 2011 excluding acquisition related costs. The deal is expected to close during 2010.
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