Sharechat Logo

Hg to buy Orion Health's Rhapsody for $205M, take quarter stake in Population Health unit

Tuesday 3rd July 2018

Text too small?

Orion Health Group said UK-based private equity firm Hg will acquire its Rhapsody business for $205 million and take a quarter stake in its Population Health unit for $20 million, leaving the New Zealand company in 100 percent control of just its hospitals division.

The transactions were outlined in a statement to the NZX and follow a strategic review by Auckland-based Orion that started in April last year. Of the $205 million, Orion will immediately use some $28 million to acquire about 25 percent of Rhapsody and $12 million to reinvest in a controlling stake in its Population Health unit while providing a net $30 million of cash to fund ongoing operations. After the transactions, Hg will own about 75 percent of Rhapsody and Orion will own 25 percent, while Orion will hold 75 percent of Population Health and Hg 25 percent.

The balance of the proceeds will be used by healthcare software developer Orion to fund a share buyback and provide funding for the remaining Hospitals division, it said. McCrae Ltd, Orion's biggest shareholder at 49.75 percent and the investment vehicle of chief executive Ian McCrae, will participate in the buyback in respect of 20 percent of its shares.

McCrae will vote its shares in favour of the transaction. As well as shareholder approval, the deal needs clearance from the Overseas Investment Office. A shareholder vote of the Hg deal and the buyback is expected to be held by late September, it said. They will be furnished with an independent report from KordaMentha.

“This investment provides Orion Health with a tremendous opportunity to deliver on our vision for customers, our people and for the healthcare sector,” CEO McCrae said. "We received strong interest in Orion Health’s business throughout the strategic review process and the board and I believe that Hg is the right partner to accelerate the expansion of Rhapsody and support our vision for Population Health."

Hg would make the investment via its Mercury 2 Fund, Orion said.

Hg's proposal values Orion at an enterprise value of $255 million, it said, made up $205 million for Rhapsody and $50 million for Population Health. That implies a per-share price of $1.24 to $1.29. The buyback would be at $1.28 after fees. Orion shares soared 27 percent to $1.08 today.

Orion Health went public in late 2014, attracting a $915 million valuation in the initial public offering which sold at $5.70 apiece. The software company had been profitable but chose to forgo earnings in the short-term to build a globally significant business.            

In April this year, Orion said revenue missed its guidance as delayed contracts for pushing those sales into the next financial year. At the same time as the profit warning, it announced plans to save as much as $30 million a year from an operational restructure, having already trimmed $10 million of annual costs when it shrank its workforce to 1,050 from 1,200.

(BusinessDesk)

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

QMS pulls out A$35M from NZ unit in MediaWorks merger
Take care to avoid "unnecessary" cost in electrifying economy - Vivid
Is this the calm before a storm of credit card thrashing?
Shrinking meat and dairy product manufacturing weighs on growth outlook
Jon Macdonald to stay on as Trade Me boss through takeover tussle
Shareholders’ Association wants Finzsoft to come clean
A2 rings in more executive changes under new CEO Hrdlicka
NZ dollar dips as China-US trade tensions cast pall over global markets
No end in sight to global market turmoil
MARKET CLOSE: NZ shares rally on speculation of flat US rate track; Spark gains

IRG See IRG research reports