MRGE Remains An Attractive Opportunity In Front Of Expected Private Equity Bids

Merge Healthcare (NASDAQ:MRGE) is back in the news with Reuters reporting that the company’s plan to explore strategic alternatives has attracted at least five private equity firms according to industry sources. Based on the Reuters report, Bravo LLC, GTCR LLC, Welsh Carson Anderson & Stowe, Francisco Partners and Avista Capital Partners were named as buy out firms that have spoken to MRGE about an acquisition and are expected to submit offers this month. Recall that in early September, MRGE announced that it hired Allen & Company to help the company explore a range of strategic alternatives including a possible sale of the business. Later in September, DealReporter noted that its sources said MRGE was expected to receive bids from private equity firms in the range of $5-$6 per share. Our initial report on MRGE detailed the company’s story, and we noted that shares of MRGE could trade in the $8-$9 range on fundamentals alone based on next year’s earnings prospects. (See our prior reports on MRGE here and here.) Given the recent meltdown of many emerging healthcare stocks against the new Bear market backdrop, including Merge Healthcare, investors now have a chance to own MRGE at attractive prices from a fundamental standpoint, with the added benefit of a potential acquisition that could result in an early exit and a significant return. Expect MRGE shares to trade higher on the Reuters news and into the potential bids from private equity firms eager to own this turn-around story before it gets too expensive.