After having talked to Rotech IR several times in the last two weeks, having listened to a replay of the CC with analysts, studying various financials, and reading through this thread, I am still looking for a compelling reason why this merger is a good deal for ROTC shareholders.
The positives I have heard thus far are:
1) The growth rate for ROTC as an entity within IHS would be increased due to access to IHS customers and patients.
2) Since IHS is a larger company, access to capital would be improved.
3) Diversification: the effects of the Medicare reimbursement cuts would be more easily absorbed as part of a larger entity.
Regarding 1): In return for that higher growth, ROTC shareholders must take on the slower growing businesses that make up IHS, including the additional leverage, and lower profit margin.
Regarding 2): Given the debt level of IHS, I doubt this argument.
Regarding 3): Agreed, but it seems this is a short term issue. In the long term, all companies (including IHS) are going to continue to be squeezed by reduced reimbursements for services.
What am I missing? Why would WS punish IHS over this? Is it because they don't like the deal from the IHS viewpoint (am I underestimating the effect of the reimbursement cuts?), or perhaps do they believe that IHS is becoming over-extended in their business as well as their financials?
JohnSK
(long ROTC) |
