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Cerner, the listed Missouri-based healthcare IT company, has been the subject of takeout rumors but does not presently see a reason to sell, according to CFO Marc Naughton.
When asked about speculation that Cerner could be taken out by major healthcare IT players like McKesson or GE, Naughton said Cerner’s IT revenues match those of the larger players, and it does not feel the need to sell in order to achieve its growth potential.
On 22 May, the Kansas City Star reported that Cerner had seen its shares rise to a record high on speculation that it could be targeted by GE or McKesson. At Cerner’s shareholder meeting on 25 May, CEO Neal Patterson, responding to a question, said he did not know if GE was looking at the company, but he would be averse to a takeout by the conglomerate.
Two analysts said that Cerner represents an attractive target, but did not have the impression that the company is positioning for a sale.
The first analyst said he does not see GE as the most likely acquirer of Cerner, as it is widely known that GE kicked the tires on several healthcare IT companies prior to buying IDX Systems in 2005. The analyst said he would not expect GE to give up on IDX to pursue Cerner.
Both analysts agreed that Cerner is not a great fit for McKesson; the first analyst said the two companies view the market very differently from McKesson. The second analyst agreed that McKesson would not be a good fit, but said it is because Cerner’s specialty is the clinical side, where McKesson already has success and solid growth potential.
The analysts also agreed that enterprise software companies looking to get into healthcare would find Cerner an attractive target. The first analyst pointed out that Oracle has been talking about entering the healthcare space and it could be a natural fit as Cerner utilizes Oracle’s database. He also mentioned that Cerner was the only healthcare company on a list of potential acquisition targets that Oracle disclosed to the US Department of Justice as part of a lawsuit related to its USD 7.7bn hostile bid for PeopleSoft in 2003. The analyst mentioned IBM and SAP as two other potential enterprise software suitors.
Meanwhile, the second analyst cited Philips and Siemens as conglomerates, like GE, that have a healthcare presence and could look at Cerner. He mentioned Oracle and SAP as well, cautioning that he does not expect Cerner to be forced into a takeout. The analyst said the company has defended itself from acquisition through exceptional performance, and the shareholders have given a strong valuation to the stock. When asked about the company allowing its shareholder rights plan to lapse in November, the analyst said the situation might be an issue for less mature companies, but Cerner’s execution in the market and subsequent share price and valuation acts as its own shareholder rights plan.
Cerner has a USD 4.49bn market cap.
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