Merge Healthcare Inc. (MRGE), a medical- software provider that put itself up for sale, is betting U.S. government incentives to digitize health records will draw buyers to the industry’s biggest bargain.
Merge Healthcare said last week that it is exploring a possible sale after losing more than half its market value in the past year as it moved to a subscription-based pricing model from one that allowed it to book more revenue up front. The $314 million company traded yesterday at 1.24 times analysts’ projected 2012 revenue, the lowest price-sales ratio among U.S. application-software providers involved in health-care equipment and services, according to data compiled by Bloomberg.
Robert W. Baird & Co. said the company could attract buyers with its technology that allows doctors to store and share medical images, helping health-care providers qualify for as much as $14.6 billion in federal grants for converting to electronic records. While Merge Healthcare has more debt relative to its market value than 91 percent of peers, Thornburg Investment Management Inc. said a private-equity firm also may be interested because it can refinance the company’s borrowings.
Merge Healthcare has “a depressed valuation,” Eric Coldwell, a Chicago-based analyst with Baird, said in a telephone interview. U.S. health care is “going through a major transition from paper and manual processes to digital technology. A long-term focused observer might look at them and say that this could provide an unusual buying opportunity.”
Founded in 1987, Merge Healthcare provides software and services that let doctors and health professionals digitize and share medical images such as X-rays, mammograms and CT scans.
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