MedAssets, Inc. (MDAS) recently closed its previously announced acquisition of SG-2, LLC (Sg2) – a provider of healthcare business intelligence, market analytics and clinical consulting services. Funded with existing credit facility, MedAssets purchased Sg2 for approximately $142 million.
However, shares of MedAssets slid nearly 2.9% following the completion of the acquisition to close at $20.94 in the last trading session. In fact, ever since MedAssets signed a definitive agreement to acquire Sg2 on Aug 13 this year, its shares declined approximately 3.1% till yesterday.
Based in Skokie, IL, Sg2 utilizes software-as-a-service (SaaS)-based analytics tools and an intelligence platform to help over 1,400 hospitals and healthcare organizations make informed strategic decisions to optimize business growth.
With the acquisition of Sg2, MedAssets intends to integrate the former’s strategic analytics and clinical business intelligence services with its proprietary cost, clinical, operational, claims reimbursement and episode-of-care datasets and tools to offer increased value for healthcare organizations.
The inclusion of Sg2 should enhance MedAssets’ performance improvement capabilities and provide opportunities for future growth and business expansion. These objectives can be achieved through improved channel access, footprint expansion, broader data utilization, and complementary business intelligence and consulting practices.
MedAssets expects the Sg2 business to prove slightly accretive in 2015 on a stand-alone basis, and the company may increase its investment to drive additional long-term growth opportunities.
Sg2's net revenues for full-year 2014 are expected to be approximately $40 million (excluding any potential write down of deferred revenues resulting from purchase accounting adjustments), of which about 75% should be derived from SaaS analytics tools generating highly-recurring subscription fees.
Currently, MedAssets carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical services sector include Air Methods Corp. (AIRM), ICON Public Limited Company (ICLR) and Envision Healthcare Holdings, Inc. (EVHC). Both Air Methods and ICON sport a Zacks Rank #1 (Strong Buy), while Envision Healthcare Holdings carries a Zacks Rank #2 (Buy).
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