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Health Grades Inc., which provides ratings of hospitals and other health care providers, has agreed to be acquired by an affiliate of the private equity firm Vestar Capital for about $294 million in cash, the companies said Wednesday.
Vestar has agreed to pay $8.20 per share of Health Grades, a 29 percent premium over Tuesday's $6.34 closing price and about 32 percent more than the stock's 30-day-average closing price.
Health Grades provides quality ratings as well as profiles and cost information on hospitals, physicians, nursing homes and prescription drugs.
The acquisition of Health Grades would add to Vestar's $7 billion in assets under management. The firm's private equity investments target U.S. and European companies valued at $250 million to $3 billion.
The board of Golden-based Health Grades has unanimously agreed to the transaction. The company said its executive officers, who own about 21 percent of Health Grades shares, have agreed to support the transaction and tender their shares to the affiliate of New York-based Vestar that will acquire Health Grades. After completing the tender offer, the affiliate will acquire all remaining publicly held shares of Health Grades.
Kerry Hicks, chairman and CEO of Health Grades, said the premium that Vestar is offering for his company's 35.9 million shares "represents a strong return for our stockholders."
The deal was announced before markets opened Wednesday. In pre-market trading, shares of Health Grades rose $1.80, or about 28.4 percent, to $8.14. They remained just below the offering price in morning trading.
Closing the transaction is subject to conditions that include regulatory approval.
Separately, Health Grades announced Wednesday that it posted a second-quarter profit of nearly $3.2 million, or 10 cents per common share, up from a profit of $1.7 million, or 6 cents per share, in the same quarter a year ago.
Revenue rose 25 percent to $15.6 million from $12.5 million. The growth was driven primarily by a 50 percent increase at the company's Internet business group, and a 10 percent gain at Health Grades' professional services business. Operating expenses rose 19 percent to $9.2 million from $7.7 million.
Health Grades also affirmed its expectations for full-year 2010 revenue growth of 20 percent.