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Matria Healthcare, the listed Georgia-based company, could make an attractive takeover target and has seen strategic interest, industry bankers told dealReporter. Matria provides wellness and disease management programs to employers, private and government sponsored health plans, pharmaceutical companies and individuals. A first industry banker said that with a stable business platform and strong customer base, Matria could attract interest from potential suitors. Other than its specialty services, Matria has an extensive database of employee customers including their health, drug and treatment history going back years, which could be of interest to retailers as they use it to offer cost efficient treatment methods to a huge pool of existing clients, added the banker.
“Matria is an excellent opportunity for an acquirer expanding into the specialty wellness and disease management sector, which is a relatively new concept getting some penetration for large retail pharmacies,” he said.
While agreeing that Matria makes an attractive takeover target, a second industry banker said that he had represented a party that had approached the company about a potential deal earlier this year only to be turned away. The banker, however, acknowledged the company’s fiduciary duty to properly consider any attractive offers.
Rich Cockrell, VP of investor relations at Matria, said that company does not comment on prospective M&A plans.
Matria announced it would release its earning guidance with new strategic initiatives on January 17. In its statement, the company said ”the mid-January release date will allow time for further maturation of several regional health plan and long-term care insurance opportunities, as well as additional opportunities to strategically position the Company’s industry leading technology and informatics capabilities.”
However the first banker contended that pharmacies such as CVS and Walgreen, and supermarkets with in-store pharmacies such as Walmart, and Pathmark could see companies in Matria’s space as attractive acquisition targets.
Competitors in the space are generally trading with a takeover premium priced in, unlike Matria, he said, adding that industry leader Healthways is less likely to be acquired because it is too fully priced.
“Strong future growth is already getting priced in [to Healthways share price],” the banker said.
Additionally, Matria has come to a point where it is struggling to achieve organic growth, and recent acquisitions have not translated well into earnings, the banker said.
“The company is currently standing at the cross-roads,” he said.
“Matria hasn’t had any positive news for a while and strategically, the time to buy it is probably now, before it makes another acquisition or enters into a strategic alliance with someone with a much larger distribution platform or access to clients.”
A fair price in the event of the sale would be about a 35 – 40% premium to its current trading price, as the stock has recently been depressed, the banker said.
“[Matria] are very opportunistic now, I am sure they will look at good offers,” he said, adding that the CEO of the company may be open to a sale given his age, and in preference of “spending another five years catching up with Healthways.”
Management would probably also be open to various strategies to lift its share price, including acquisitions and strategic alliances, he added.
A shareholder of Matria Healthcare commented that the company trades at a discount to peers such as Healthways, which is trading at about 11X forward EBITDA in comparison to Matria’s 8X, demonstrating a significant valuation gap. Asked whether the company could look to make acquisitions for growth, the shareholder responded that it is more likely the company is acquired.
“I think any large HMO or insurance companies will be interested as they are looking to get into disease management,” he said.
Retailers such as CVS and Walgreen would be interested in vertical integration opportunities to relieve pressure on margins by just selling generic drugs, he said.
A second shareholder agreed, saying that HMO’s looking to drive down healthcare costs will see Matria as an attractive target.
Asked what he would see as a fair sale price, the second shareholder said a fair value for the company would be in the mid USD 30s. Also, CEO Petit is a large holder of company stock and would sell at the right price, the shareholder suggested.
Matria Healthcare is currently trading around USD 23 a share.
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