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Philips in $1.1B U.S. deal
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May 23, 2000: 3:09 p.m. ET
Dutch firm offers $51 per share cash for 60% of MedQuist stock
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NEW YORK (CNNfn) - Philips Electronics of the Netherlands made a $1.1 billion takeover bid for U.S. medical electronics firm MedQuist, offering $51 per share cash for approximately 60 percent of MedQuist's stock.
Marlton, N.J.-based MedQuist provides outsourced medical transcription services, turning dictation into medical reports, although the purchase is aimed at turning the company into a more broad-based provider of medical document services over broadband networks.
The offer came after the market closed in New York Monday, but  in afternoon trading Tuesday, MedQuist (MEDQ: Research, Estimates) shares rose 4-1/16 to 43-3/16, below the $51 offer price. Analyst Dave Francis of J.C. Bradford, said the shares were trading at the proper range. Investors, he said, are assuming an earnings multiple of 25 times $1.36, the earnings estimate for 2000.
"Remember the deal is only for 60 percent of the company," Bradford said. "The value of the stock they hold today is 43-1/2. That's why it's not at 51."
Shares are trading near the price target, indicating investor confidence in the deal. "It's a good transaction for investors," he said. "They get partial liquidation on part of the stock but get to hold on to it to participate as the business goes forward."
In 1999 MedQuist earned $65.4 million on revenue of $330 million, up from $11.3 million on revenue of $272 million the prior year.
Philips said the acquisition would bolster its speech-technology business and give it an important role in hospitals' information chain. In afternoon trading, Philips (PHG: Research, Estimates) shares climbed 15/16 to 40-1/8.
MedQuist shares will continue to be listed on Nasdaq once the transaction is completed. 
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