Shares of HMS Holdings soared 8% on Monday after the company agreed to be bought up by Gainwell Technologies in a cash deal worth $3.4 billion. The tech-based healthcare company expects the transaction to close in the first half of 2021.
HMS Holdings (HMSY) announced that Gainwell will pay $37 in cash per share, reflecting a premium of 52% to the company’s closing price of $24.37 on Oct. 2, the day before the reports of a possible transaction surfaced.
The purchase price reflects a “17% premium over the 30-day volume-weighted average price per share of HMS’ common stock through the close of trading on December 18, 2020, the last trading day before the announcement of the transaction. “
HMS CEO Bill Lucia said, “HMS has built a market-leading healthcare technology and analytics enterprise, and we believe this transaction delivers compelling and certain value to our shareholders while enhancing our ability to provide clients with world-class, data-driven analytics solutions.” (See HMSY stock analysis on TipRanks)
Following the deal announcement, Robert W. Baird analyst Matthew Gillmor downgraded HMS stock to Hold from Buy. Gillmor also lowered the price target to $37 (1.4% upside potential) from $40 to reflect the deal value. Leerink Partners, William Blair and Guggenheim also cut their ratings on the stock to Hold from Buy.
Overall, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 3 Buys and 6 Holds. The average price target stands at $35.50 and implies downside potential of about 2.7% to current levels. Shares have gained about 23.3% year-to-date.