M*Modal’s current annualized revenue run rate of $24 million (which includes amounts billed to MedQuist Holdings) is derived from its proprietary cloud-based software solutions that enable healthcare providers to easily convert speech into structured clinical information. This improves physician efficiency, enhances the integration of the physician narrative into electronic health records (EHR), and contributes to the analysis of clinical information for quality and reimbursement requirements.
Vern Davenport, MedQuist Holding’s newly appointed Chairman and Chief Executive Officer, noted, “This transaction combines MedQuist’s strengths of capturing the physician narrative, our large customer base, global presence and deep domain expertise in healthcare with the innovations of M*Modal’s currently available technologies and strong product roadmap. Their scalable cloud-based solutions, Speech Understanding platform, strong technology pipeline and a large team of speech and language scientists and engineers complement MedQuist’s clinical workflow solutions.”
Michael Finke, Chief Executive Officer of M*Modal, added, “Given the outstanding strategic fit between us, we are positioned to create a whole new level of clinical documentation workflow and analytics solutions that address some of the healthcare industry’s most pressing issues. This merger gives M*Modal the immediate resources and access to customers required to accelerate and extend our technology development efforts. ”
MedQuist and M*Modal provide advanced speech understanding technologies and services that seamlessly capture the physician narrative, according toThe purchase price, which is subject to customary working capital and cash adjustments, is comprised of $48.4 million in cash paid at closing, $28.8 million in installments paid in cash over the next three years and 4.1 million shares of MedQuist Holdings common stock currently valued at $52.8 million, based on $12.76 per share using the average closing price over the trailing 10 trading days ending immediately prior to the date of signing the definitive agreement. The Company will fund the cash component of the purchase price from available cash. Additionally, the Company expects to incur fees and expenses, including additional restructuring and integration costs associated with this transaction, of approximately $13 million. The Company also expects to accelerate the amortization of approximately $12 million of certain prepaid licensing fees.
The Company obtained consents from the majority of both its senior and subordinated lenders to exclude this acquisition from the appropriate acquisition-related covenants. The Company’s subordinated lenders have agreed to certain additional modifications; principally, reducing the amounts due under existing make-whole provisions, if such debt is exchanged prior to maturity, increasing allowable leverage limits, uncapping the future use of common shares allowed to be used for acquisition and increasing annual amounts available for dividends and stock repurchases up to $25 million, plus available excess cash, as defined.
The Company intends to provide more detailed integration, organizational and branding plans at closing and any updates necessary to its previously issued performance goals for 2011 when it reports second quarter results in mid-August.
