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MedGrup (OTC
BB: CODX)- Buyout Announced |
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MedGrup, a stock which has
been wallowing in the mud at about $1.50 for the last three months, made
a blockbuster announcement today which pushed the stock up over 50% in
the early going.
We have been covering MedGrup
since October of 2000. Long term followers of this newsletter know there
was time when we felt the stock could eventually see $6, but both the company
and the market stumbled in 2001, derailing our hopes for a mammoth win
in the short term.
The company has doubled in size every
year for the past four years, and has reported consistent profits. They
are the largest outsourcing service solely for medical chart coding in
existence. More and more hospital chains are turning to outsourced services
to code their charts due to their impartial nature. Billions in fines have
been levied on hospital chains are a result of fraudulent "upcoding" practices.
Financial results in 2001 were hampered
by the delayed roll out of several major contracts which the company had
staffed up for as a result of the Attack on America.
Our last major feature on the company
prior to our year end wrap up was on October
17th. Based on today's news, a statement we made in that report become
quite prophetic:
| The company should easily
exceed $10 million in 2002 and be very profitable. At today's market price
the company is only trading at a $13 million valuation. It is just a matter
of time before somebody decides they want this stock. It is undervalued,
and investors with a long term outlook should eventually be rewarded from
these levels. |
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PNHS
Tenders Offer for all MedGrup Shares |
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In a news release which came out
prior the open of the market this morning, MedGrup revealed that
Provider
HealthNet Services Inc. (PHNS) and MedGrup have signed a merger
agreement for the acquisition by PHNS of all shares of MedGrup
stock not owned by two of MedGrup's officers and principal shareholders,
William and Margaret Cronin, at a cash price of
$2.2465 per share,
subject to possible adjustment based on MedGrup's financial performance
and capitalization prior to closing.
If this deal goes through, it means
that all shareholders of MedGrup will eventually receive $2.2465
per share in cash for their stock, a 55% premium to yesterday's
closing price.
PHNS is a private, outsourced medical
financial services company which currently does $110 million in annual
sales and has a $1 billion contract backlog according to the press release.
Also disclosed in the press release
was confirmation of our belief in the company. As it turns it, the surviving
entity will become a division of PHNS and be run by the current management
of MedGrup.
It will probably take 90 to 120 days
for this deal to be completed, and there is no guarantee it ever will be.
The company must issue a Proxy Statement, get a shareholder vote, and get
SEC Approval. There are other conditions which must be met, and these things
take time. If the deal goes through and you are holding the shares in your
brokerage account, at some point in the future the shares will simply be
replaced with cash. If you are holding certificates you will probably have
to send them into the Transfer Agent.
In the meantime, we view this is
a moderate win for our members holding the stock, especially those that
bought in the $1.25 to $1.50 range. However, after the last two years of
market conditions, moderate wins loom large. It is disappointing that this
stock will never be the huge winner we thought it could become.
Here is the complete text of the
press release for your review:
Tuesday March 26, 8:27 pm Eastern
Time
Press Release
SOURCE: MedGrup Corporation
MedGrup and PHNS to Merge to Create
Largest Medical Coding Company
MONUMENT, Colo., March 26 /PRNewswire-FirstCall/
-- MedGrup Corporation (OTC Bulletin Board: CODX - news) and Provider HealthNet
Services Inc. (PHNS) announced today that MedGrup and PHNS have signed
a merger agreement for the acquisition by PHNS of all shares of MedGrup
stock not owned by two of MedGrup's officers and principal shareholders,
William and Margaret Cronin, at a cash price of $2.2465 per share, subject
to possible adjustment based on MedGrup's financial performance and capitalization
prior to closing. In addition, William and Margaret Cronin have agreed,
subject to certain conditions, to sell all of their MedGrup stock (approximately
56.8% of the outstanding MedGrup stock) to PHNS for $1.2537 per share in
cash and $0.8358 per share in PHNS stock, plus a contingent earn-out based
on future performance. If the transactions are completed, the medical coding
businesses of MedGrup and PHNS will be combined into an approximately $17
million revenue PHNS coding subsidiary that will be managed by the management
team from MedGrup.
The agreement between the Cronins
and PHNS is structured as an option that may be exercised by PHNS during
a ten-day period after the vote of MedGrup's shareholders, and must be
exercised by PHNS following satisfaction of certain conditions, including
approval of the merger by holders of a majority of the outstanding MedGrup
stock and a majority of the outstanding MedGrup stock excluding the Cronins'
MedGrup stock. Consummation of the merger also is subject to completion
of due diligence investigations, receipt by MedGrup of a final fairness
opinion from a financial advisor retained by MedGrup, various Securities
and Exchange Commission filing requirements, and other conditions.
William Cronin, President and CEO
of MedGrup, stated, ``We believe the proposed PHNS transaction represents
the best opportunity for the shareholders of MedGrup at this time. Our
efforts to grow the Company and return value to the shareholders have been
limited by our relative lack of corporate infrastructure. PHNS has resources
far in excess of those of MedGrup, which will benefit the combined operations.
We have reviewed other strategic alternatives, including keeping the Company
independent, and we believe that the price per share to be paid to our
public shareholders in the proposed merger is a very fair indication of
the value of our stock. We believe that this proposed transaction would
be in the best interests of the MedGrup shareholders.''
Charles M. Young, Chairman and CEO
of PHNS, added, ``We believe that MedGrup and PHNS are the industry leaders
in providing high quality, off-site, Internet-based medical coding outsourcing
services. This combination of the MedGrup and PHNS coding operations will
provide our hospital customers with enhanced coding services and resources.''
About MedGrup. MedGrup Corporation,
the industry pioneer of off-site coding services, is engaged in the highly
specialized business of coding inpatient, outpatient, and emergency room
medical charts. MedGrup's services include both backlog and concurrent
coding services. The Company offers healthcare providers a customized high
quality outsourcing alternative to in-house coding of medical records,
often resulting in increased revenue for its client hospitals. MedGrup
also provides consulting services to healthcare providers in the business
office and medical records departments.
About PHNS. PHNS is a privately held
company based in Dallas, Texas that provides information technology, medical
records, transcription, coding, accounts receivable management and other
business process outsourcing services to the healthcare industry. Its revolutionary
approach to shared management of healthcare information and services is
designed to meet the rapidly changing and increasingly complex needs of
hospitals and multi-facility healthcare systems. PHNS services are designed
to streamline operational efficiencies, reduce costs and improve the quality
of healthcare delivery. Organized in late 1999, PHNS employs over 700 experienced
healthcare information technology, medical records, transcription, coding
and accounts receivable management specialists that provide outsourcing
services to 22 hospitals in 7 states. PHNS has an annualized revenue run
rate of over $110 million per year and approximately $1 billion in contractual
backlog. PHNS is exclusively devoted to providing outsourcing services
to the healthcare industry, primarily to healthcare providers.
Nothing in the Release should be
construed as a solicitation of votes or consents in support of any transaction.
Any solicitation will be made only by means of a duly authorized proxy
statement, delivered after necessary regulatory approval.
Certain statements contained herein
and subsequent oral statements, which are not historical, constitute ``forward
looking statements'' within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements are identified by words
such as ``intends,'' ``anticipates,'' ``believes,'' ``expects'' and ``hopes''
and include, without limitation, statements regarding the Company's plan
of business operations and completion of certain transactions. Factors
that could cause actual results to differ materially include, among those
set forth in the Company's Annual Report on Form 10-K, the following: general
economic conditions, competition and decisions of third parties over which
the Company has no control. Most of these factors are outside the control
of the Company. Investors are cautioned not to put undue reliance on forward-looking
statements. Except as otherwise required by applicable securities statutes
or regulations, the Company disclaims any intent or obligation to update
publicly these forward looking statements, whether as a result of new information,
future events or otherwise.
For further information contact:
William D. Cronin, President and CEO of MedGrup Corporation, +1-719-481-1500;
or Charles M. Young, Chairman and CEO of Provider HealthNet Services Inc.,
+1-972-701-8042.
SOURCE: MedGrup Corporation
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