MERGER: Web Start-Up to Purchase Information Provider
TriZetto Group, an Internet start-up firm that provides software to doctors, announced yesterday it would buy IMS Health Inc., a company that compiles prescription drug data, the New York Times reports. The "complex transaction," valued at more than $8 billion, leaves IMS executives and shareholders in control of the new company, but it will be called TriZetto. The move "left Wall Street analysts and investors of both companies perplexed," and shares of TriZetto dropped $24.56. Satish Tyagi, a managing director at SG Cowen, who follows IMS stock, explained that shareholders of each company "were uncertain about the benefits of the deal -- and also about each other." Tyagi said, "If you're a shareholder of IMS, you're saying, 'Wait a minute. Who are these guys?'" And as for TriZetto investors, he added, "Those guys don't really care for these old-economy stocks." Despite the complexity of the proposed merger, both companies "boasted about the deal yesterday, saying it would create a new company that was the dominant leader in the fast-growing business of providing information services to health care companies." The new companies would have 9,500 employees and projected revenues of $1.4 billion. IMS Chair Robert Weissman said that the companies are "most excited about creating a new business ... by combining the information that IMS has on drug prescriptions with data that TriZetto has on a patient's health care history and the cost of care." But Tyagi warned that the proposed acquisition is nevertheless puzzling, saying, "TriZetto is unseasoned" because it has "only reported one or two quarters as a public company" (Petersen, 3/30).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.