MedAssets announces agreement to purchase The Broadlane Group for $850M

MedAssets, Inc. (NASDAQ: MDAS) today announced that it has entered into a definitive purchase agreement to acquire The Broadlane Group. Based in Dallas, Texas, The Broadlane Group is a leading provider of supply chain management, strategic sourcing of supplies and services, capital equipment lifecycle management, medical device or PPI cost management, centralized procurement, clinical and lean process consulting, and clinical workforce optimization.

“The collective strengths of The Broadlane Group and MedAssets will provide expanded supply chain capabilities, and further enhance the financial improvement opportunities, both near and long-term, for our healthcare provider clients.”

Together, MedAssets and The Broadlane Group would have reported non-GAAP combined net revenue of $508.9 million and non-GAAP combined adjusted EBITDA of $161.8 million for the year ended December 31, 2009 (reconciliations of these non-GAAP measures to their nearest GAAP measures are provided below). The Broadlane Group serves more than 1,100 acute care hospitals and 50,000 non-acute care facilities across the United States, and MedAssets serves more than 3,300 hospitals (inclusive of 1,700 in its Spend Management segment) and 40,000 non-acute healthcare providers. The combined companies' client footprint will be calculated at closing.

"The Broadlane Group and MedAssets are an outstanding strategic fit, and this combination offers numerous benefits for our clients and stakeholders. We are bringing together some of the best contract pricing in the industry, with highly complementary technology and clinical consulting expertise from both companies," said John Bardis, chairman, president and chief executive officer of MedAssets. "Our core strategy is to enable broader clinical and operating effectiveness throughout our nation's health system, and this transaction will further enhance our ability to help hospitals and other healthcare providers drive their operating and supply costs lower, while improving patient care.

"The collective strengths and business models of our two companies will also enhance MedAssets' financial profile, with highly visible, recurring revenue as well as cash flow and profit expansion opportunities," Bardis added.

Patrick Ryan, chairman and chief executive officer of The Broadlane Group, is expected to join the MedAssets board of directors and also assume the role of President of the Company's Spend Management segment upon completion of the transaction. "This transaction offers an exceptional opportunity to bring together two very strong enterprises and deliver end-to-end cost management capabilities. As a combined entity, we offer a strategic opportunity for our clients to drive operating expenses down while improving quality of care," said Mr. Ryan. "The collective strengths of The Broadlane Group and MedAssets will provide expanded supply chain capabilities, and further enhance the financial improvement opportunities, both near and long-term, for our healthcare provider clients."

The combination of MedAssets and The Broadlane Group will present significant, strategic benefits for clients and suppliers, as well as MedAssets' shareholders, given the following:

• An industry leader with the ability to affect total hospital costs through a comprehensive suite of supply chain management capabilities, including group purchasing, strategic sourcing, medical device or PPI cost management, centralized procurement, supply chain outsourcing, supply chain analytics and data services, lean process consulting expertise, and a clinical workforce or labor management solution;
• A market-leading group purchasing, or GPO, portfolio affording providers a combination of high compliance pricing and flexible contracting strategies for commodity products and purchased services;
• Industry-leading SaaS-based revenue cycle technology combined with revenue cycle consulting and extended business office services that drive increased net revenue capture and cash flow improvement for healthcare providers with low upfront cost and a return on investment in months, not years;
• A combined company that will have approximately 85% recurring revenue with high client retention and minimal client concentration;
• The opportunity to leverage the national sales force and client service teams to introduce and expand utilization of the combined companies' broad and comprehensive capabilities to new and existing clients; and
• Strategic support and performance insight to insure the companies' healthcare provider clients remain viable in the anticipation of healthcare reform and related financial/operational challenges.

Transaction Details

Under the terms of the agreement, MedAssets will purchase The Broadlane Group for approximately $850 million in cash, with $725 million to be paid at closing and $125 million to be paid in January 2012. To fund the transaction, MedAssets has obtained financing commitments from J.P. Morgan and Barclays Capital.

As part of this transaction, MedAssets expects to achieve at least $20 million of expense-based synergies in 2011. When combined with the growth of both businesses, the Company expects this transaction to be approximately $0.05 to $0.10 accretive to non-GAAP diluted cash earnings per share (EPS) in 2011, excluding acquisition-related amortization, acquisition-related expenses, acquisition-related revenue discounts and share-based compensation.

The transaction is subject only to customary closing conditions and regulatory approvals, including expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for which the filing will be submitted as soon as practicable. The transaction is expected to be completed within 60 to 90 days.

J.P. Morgan and Barclays Capital are acting as MedAssets' financial advisors in this transaction, and Willkie Farr & Gallagher LLP is acting as MedAssets' legal counsel. Deutsche Bank is acting as The Broadlane Group's lead financial advisor in the transaction. Jefferies & Company is also serving as a financial advisor to The Broadlane Group, and Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as the company's legal counsel.