U.S. healthcare IT firm Allscripts said Wednesday it was to buy rival Eclipsys in a $1.3 billion all-share deal, creating a leader in electronic healthcare records.

Ahead of the deal, Allscripts majority owner, British software company Misys, will cut its 55 percent stake in Allscripts to about 10 percent and return more than $1 billion to investors, leaving its shares up 18 percent at 1208 GMT.

Eclipsys investors will receive 1.2 Allscripts shares for each of their shares, representing a 19 percent premium on the closing price Tuesday, the companies said in a statement.

The enlarged group's client base will include over 180,000 doctors, 1,500 hospitals and nearly 10,000 nursing homes, and be better positioned to access $30 billion in federal funds for the adoption of electronic healthcare records, the companies said.

We are at the beginning of what we believe will be the fastest transformation of any industry in U.S. history, said Allscripts Chief Executive Glen Tullman, who will head the merged company. Eclipsys Chief Executive Phil Pead will become chairman of the combined group.

Combining Chicago-based Allscripts' position in doctor surgeries with Atlanta-based Eclipsys's hospital IT solutions would create a company uniquely positioned to capitalize on the move to electronic records, Tullman said.

The Obama administration is incentivising doctors and hospitals to move to electronic records, with subsidies available from 2011. Only 12 percent of doctors use the technology at the moment, and Misys Chief Executive Mike Lawrie said the market was growing at 15 percent a year.

Allscripts upped its bookings expectations for the fourth quarter to about $117 million from $105-112 million previously, and said it expected results for the year to end-May to be at the high end of its guidance.

STIMULUS BOOST

Misys, which merged its healthcare business with Allscripts Healthcare Solutions in October 2008, putting about $700 million of cash and assets in the Nasdaq-listed company, said it would focus on its banking software business.

The merger has been extraordinarily successful, Lawrie said in a call with reporters.

We have had strong growth and some luck with the U.S. stimulus package for healthcare records. The time is absolutely perfect to pull this together.

Lawrie said the market had undervalued Misys and that it traded at a discount to peers due to its more complicated structure. The company competes with Thomson Reuters, Sungard Data Systems and Temenos in financial software.

Misys shares hit a 6-1/2 year high as analysts welcomed the effective break-up of the group. Misys is doing absolutely the right thing in selling its stake in a highly overvalued business, said Roger Phillips at Evolution.

Although the management look opportunistic, having touted the long-term aspects of U.S. healthcare IT for 18 months, they have created major shareholder value with this deal.

Misys will sell about 68 million Allscripts shares via a placing and through buybacks by Allscripts, raising over $1.3 billion. It will return money to its shareholders via a tender offer later in the year, after transaction fees and paying back about 75 million pounds ($108 million) of debt.

Lawrie said Misys would retain a stake of up to 10 percent in Allscripts, while focusing on its treasury and capital markets and banking businesses.

Misys shareholders will receive an unprecedented return of capital ... plus clear visibility of shareholder value in our financial business and very significant EPS (earnings per share) accretion, he said.

On top of that Misys shareholders will retain exposure to the growing U.S. healthcare market through the retained stake.

(Editing by Dan Lalor, Sharon Lindores)

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