A Medical Device Daily
Philips Electronics (Amsterdam, the Netherlands), said on Thursday it is selling its stake in lawsuit-plagued medical transcription provider MedQuist (Mt. Laurel, New Jersey) in its latest bid to refocus on its core businesses.
Philips, MedQuist's majority shareholder, reported that it has reached an agreement to sell its roughly 69.5% ownership interest in MedQuist to CBaySystems Holding (Annapolis, Maryland), a holding company with a portfolio of investments in medical transcription, healthcare technology and healthcare financial services, for $11 per share, or a total of about $285 million.
The sale of Philips' stake in MedQuist is expected to close in 3Q08, and is conditional upon applicable regulatory approvals, approval by CBaySystems shareholders at a general meeting of shareholders, and the fulfillment of specific closing conditions.
Philips paid $1.2 billion for a stake of about 60% in MedQuist in 2000, and later increased its holding to 70%. However, MedQuist was delisted in 2004 after U.S. authorities launched an investigation into whether it had violated laws in connection with the provision of medical transcription services. It has since paid damages to settle several lawsuits against it.
In connection with this transaction, Philips will receive a combination of cash and a promissory note equaling in the aggregate to about $7.50 per share (minus any per-share cash dividend paid by MedQuist prior to closing). The remaining per-share consideration of about $3.50 will be paid to Philips in the form of a seven-year bond convertible into common shares of CBaySystems.
On the closing of the sale of Philips' stake, the governance agreement between Philips and MedQuist, which, among other things, requires three independent members on the current MedQuist board of directors, will terminate in accordance with its terms.
The agreement between Philips and CBaySystems provides for the resignation of the Philips directors on the MedQuist board and their replacement by CBaySystems designees in connection with the closing.
Philips said last July it was reviewing its options for its MedQuist stake after deciding it was a non-core holding and took an 135 million impairment charge on its stake.
In November, it said it wanted to proceed with a sale and took a fourth-quarter charge of 1320 million ($502.43 million) to take account of the decline in the book value of the asset due to the fall in the dollar since it bought MedQuist in 2000.
It said in a statement it was selling the stake for $11 per share, which it said was a 47% premium over the most recent trading price of MedQuist's stock.
For its part, Medquist appeared to be excited about the sale.
"Now that the sale evaluation process is concluded," said Howard Hoffmann, president/CEO of MedQuist, "we can focus all of our energy and talent on growing top-line revenue and bottom-line performance through the continued development and delivery of innovative, high-quality and cost-effective technology and services solutions for our customers."