Advisory Board shares spike on news of likely takeover by UnitedHealth and Vista

Optum likely to run healthcare arm if buy-out goes through, leveraging The Advisory Board's provider relationships and Crimson dataset.
By Susan Morse
10:42 AM
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Advisory Board takeover

As the New York Stock Exchange opened Friday, shares of The Advisory Board Company were up over 4 percent on the news that UnitedHealth and Vista are near a deal to buying and splitting up the company.

Bloomberg broke the news of the potential deal on Thursday.

Vista would reportedly take over the educational arm and UnitedHealth Group would acquire its healthcare division. Optum, the health services platform for UnitedHealth, would likely run the Advisory Board's healthcare consulting, technology and research services.

"It's been in the rumor mill for several weeks as Optum wants to leverage the Advisory Board's provider relationships and Crimson dataset," said Paul Keckley, an independent consultant. "Not a surprise, but the deal is not over 'til it's over."

The Advisory Board bought Crimson in Austin, Texas a number of years ago, giving them a dataset that allows for the evaluation of the performance of doctors, both administratively and financially, and has a lot of predictive tools in it.

Optum has the momentum, a good balance sheet, and would be a good fit, Keckley said.

Optum said it could not comment.

The Advisory Board said it did not intend to comment further until its board of directors concluded its strategic review process.

"Our company's exploration of strategic alternatives announced in February is ongoing, but we do not comment on market rumors or speculation," said Robert Borchert, vice president, Investor Relations at the Advisory Board: "As we announced in February, The Advisory Board Company does not expect to make further comment unless and until a specific transaction or alternative is approved or our company's Board of Directors  otherwise concludes its review of strategic alternatives."

For months, the Advisory Board has been under pressure to find a home.

Earlier this year, the Advisory Board announced it was exploring strategic options including the sale of at least a part of the company.

It fended off a takeover by Elliott Management Corp., instead of coming to an agreement with Paul Singer, head of the hedge fund management company. In January, Elliott Management bought 8.3 percent shares in The Advisory Board for $130 million.

In February, the Advisory Board laid off about 200 people due to a weak fourth quarter.

While some blamed the poor financials on the election of Donald Trump shaking up the stability of the healthcare industry, Keckley said he believes it was due more to other factors such as the nature of consulting, which does not see the multiple businesses that technology and analytic companies get, and the expansion into education which required investment.

The Advisory Board Company uses a combination of research, technology, and consulting to improve the performance of healthcare organizations and educational institutions, according to the company.

Twitter: @SusanJMorse