OK, Maybe Merge IS For Sale?

You'll remember the flurry of posts a few months ago about Merge maybe being for sale, prompted by apparent inquiries of potential suitors. We were assured at the time that this was simply all financial due diligence and no sale was pending.

Perhaps that wasn't quite the case. Reuters reports, via Chicago Business, that five possible buyers are quite interested in this non-sale:

Merge Healthcare Inc., a Chicago-based provider of medical-imaging software that is exploring a sale, has attracted interest from at least five private-equity firms, Reuters reports, citing people familiar with the matter.

Chicago-based companies Thoma Bravo LLC and GTCR LLC are among the buyout firms that have met with the company's management and are considering submitting offers this month, the sources told Reuters.

The other companies are Francisco Partners of San Francisco, and Welsh Carson Anderson & Stowe and Avista Capital Partners, both of New York, according to Reuters.

Merge's chairman, Michael Ferro, is also the company's largest shareholder, controlling a more than 31 percent stake through various ventures, including Merrick RIS Inc.

In September, Merge said the company had appointed New York-based investment bank Allen & Co. LLC to evaluate strategic alternatives, including a possible sale.

But Merrick RIS will also earn a fee if the company is sold.

If the sale price is more than $1 billion, Merrick RIS will receive a 2 percent “success fee,” according to filings with the Securities and Exchange Commission. If the sale price is less than $1 billion, the success fee drops to 1 percent.

In February, Merge increased Merrick's fee if the deal exceeds $1 billion, the SEC filings show. Previously, Merrick would have earned a flat 1 percent, regardless of the size of the deal.

Mr. Ferro is also chairman and CEO of Chicago-based investment firm Merrick Ventures LLC, which is affiliated with Merrick RIS. In December, Mr. Ferro led a group of investors to buy Sun-Times Media Holdings LLC, which includes the flagship Chicago Sun-Times.

Last week, Merge reported a third-quarter net loss per diluted share of 4 cents, four times the loss it posted in the third quarter of 2011. Net sales totaled $60.4 million for the three months ended Sept. 30, up 0.5 percent, from $60.1 million during the same period in 2011.

Merge Healthcare, Thoma Bravo, GTCR and Avista declined to comment, while representatives of Welsh Carson Anderson & Stowe and Francisco Partners did not immediately respond to a request for comment.

Merge's stock price closed at $3.07 today, down 54.6 percent, from a year-high on Feb. 28 of $6.76 a share.

$20 Million for Merrick if the price tops $1 Billion, eh? Not a bad payout.

It would be poetic justice of a sort if Thoma Bravo ends up with Merge. Bravo had signed an agreement with AMICAS in 2009 (see Here and Here), only to have the offer dislodged by Merge. The AMICAS stock went for $6/share, at that time, although I'm not financially savvy enough to figure out what percentage of Merge that now involves, so I'm not sure if Thoma would end up with a bargain or not.

I can say that Merge has been a far better master of AMICAS than I anticipated, and I'm actually worried about how things might fare under a new owner.

IF Merge is sold, though, I have two requests to the new powers-that-be:

1. Keep as much of the team intact as possible, and hire back any of the folks from the prior incarnation of AMICAS that will deign to join up.
2. PLEASE change the name of the PACS back to AMICAS. That would make me really, really happy. With all due respect to Merge, "Merge PACS" just doesn't sound right...

(Hat-tip to Spidey...)