Blackstone Group LP has emerged as the frontrunner in an auction for Allscripts Healthcare Solutions Inc., but the companies remain far apart on price and a deal is highly uncertain, people familiar with the matter said.
Blackstone has prevailed over rival private equity suitors Carlyle Group LP and TPG Capital Management LP in the battle for Allscripts, a healthcare technology company with a market value of about $2 billion, three sources said this past week.
But Blackstone is skeptical about a deal, given the high premium sought by Allscripts and challenges facing the company, the sources said.
In late trading Friday, shares of Allscripts were down 11 percent at $11 on the Nasdaq. The shares closed at $10.88 on Sept. 27, the day before news of a potential sale emerged.
Sources told Reuters earlier in November that Blackstone, Carlyle and TPG had made second-round bids for Allscripts.
The sources who identified Blackstone as the frontrunner in the auction asked not to be identified because the matter is not public. Allscripts, TPG, Blackstone and Carlyle declined to comment.
Allscripts said on Nov. 8 that it was evaluating strategic alternatives, following potential buyout interest, and that it had enlisted Citigroup Inc to assist with the process.
But the auction process proved challenging, with interested parties concerned about Allscripts' declining earnings and market-share losses to larger rivals, such as Cerner Corp., people familiar with the matter have said.
Allscripts has struggled to boost new business following its acquisition of Eclipsys Corp. in 2010. The company had hoped to expand into software and equipment for hospitals and healthcare systems with the purchase of Eclipsys but ended up losing business to Cerner and closely held Epic Systems Corp.
New York-based Blackstone is an experienced investor in the sector. In April 2011 it bought healthcare IT provider Emdeon Inc for $3 billion.
MANAGEMENT, BOARD TURMOIL
The auction of Allscripts came several months after activist shareholder HealthCor Management installed three of its nominees to th e Al lscripts board, following a bitter fight with company management led by Chief Executive Glen Tullman.
HealthCor, which owned 7.5 percent of Allscripts as of June 30, sued the company in May s eeking a p roxy fight after Tullman refused its demand th at he re sign. Al lscripts se ttled the fight in June by agreeing to add HealthCor's candidates to the board.
JMP Securities analyst Tim McDonough wrote in a note on Nov. 27 that Allscripts' share price reflected around a 50 percent chance that the company would be acquired.
He said that w hile the company could attract offers between $15 and $18 per share based on previous deals in the sector, management turnover had h ampered it s ab ility to pursue a sale.
In April, the company announced the termination of Philip Pead as chairman of the board, which prompted the resignation of three directors and Chief Financial Officer Bill Davis.
Failure to successfully integrate Eclipsys has also resulted in the departure of Chief Technology Officer John Gomez, Chief Operating Officer Eileen McPartland and president of sales Jeff Surges.
Tullman, who has been CEO since 1997, recently embarked on a series of product updates, including of t he company's f lagship Sunrise clinician web portal, wh ich offers real-time access to inpatient electronic health record software and other information such as patient charts and lab results.
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