Allscripts-Misys Healthcare Solutions announced on Tuesday it plans to sell its Medication Services business.
In a separate announcement, the company's board of directors has approved a $150 million - about 15 million shares - stock repurchase program.
Allscripts' Medication Services business (or prepackaged medications segment) provides point-of-care medication management and medical supply services and solutions for physicians and other healthcare providers.
"The proposed sale of our Medication Services business increases our focus on our core healthcare information technology businesses at a time when we expect electronic health records and electronic prescribing, along with our interoperability and connectivity efforts, to receive a substantial boost from the federal economic stimulus package," said Allscripts CEO Glen Tullman. "We want the total focus of the business to be on taking advantage of this opportunity to accelerate growth. The transaction would also provide the Medication Services business with an opportunity to invest and grow with the total focus of the new company."
Regarding the stock repurchasing program, Tullman said: "Given our large base of healthcare providers, the strength of our solutions and our financial performance, we believe Allscripts is a very good value in this market. We plan to use our strong balance sheet and cash flow to initiate a share repurchase program that will benefit all of our shareholders and will capitalize on the underlying value of Allscripts and our position as the clear leader in the healthcare information technology industry."
Allscripts also announced Tuesday that it had entered into an amendment and restatement of its credit facility with JP Morgan Chase Bank, N.A., which increases commitments under the facility by $50 million to $125 million and adds Fifth Third Bank as syndication agent and co-lead arranger. The credit facility may be expanded by an additional $25 million to $150 million.
"Our ability to attract new capital during one of the toughest lending markets in recent history is a strong endorsement of Allscripts' financial strength and stability," said Bill Davis, Allscripts' chief financial officer.
In an analysis issued Wednesday, Piper Jaffrey's Sean Wieland said access to capital would be critical for healthcare information technology companies to execute on the EMR adoption wave expected from the government's economic stimulus package.
"Therefore we believe the adoption of the credit facility is especially wise," Wieland said.
Wieland said a share-buyback may not be the best use of capital. He suggested the company would do better to invest in sales, implementation and support resources.
