Orion Health has reached a conditional agreement with private equity technology investor Hg to invest in Orion’s Rhapsody and Population Health businesses.
The transaction, which will see Hg take a majority stake in Rhapsody and also invest in Population Health, implies a $255 million enterprise value of Orion Health, the company told shareholders today.
Following completion of the transaction, Orion Health will undertake a share buyback offer at an estimated price range of $1.24-$1.29 a share, with the final offer price depending on Orion’s available cash immediately following completion.
“This investment provides Orion Health with a tremendous opportunity to deliver on our vision for customers, our people and for the healthcare sector,” said Ian McCrae, founder and CEO of Orion Health.
“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.”
Shareholders will have the option to accept the buyback offer in respect of all or a specified proportion of their Orion Health shares. The directors have unanimously recommended the transaction.
In April 2017, Orion announced a strategic review, including the evaluation of any partnerships or minority investments to allow the company to achieve its potential.
"The conclusion of this lengthy and comprehensive review has recognised that the Group’s three businesses would each benefit from different funding, investment backing and partnerships and that it was in the best interests of the Group and its shareholders to consider options individual to each business," Orion said.
Hg will acquire Rhapsody for $205 million funded by debt and equity arranged by Hg. Orion will then use around $28 million of the proceeds to acquire an ongoing 24.9 per cent shareholding in the Rhapsody business.
Hg will also acquire a 24.9 per cent stake in Population Health by investing around $20 million in that business.
Orion Health will invest around $12 million of the Rhapsody transaction proceeds in Population Health based on an agreed enterprise value of $50 million together with $30 million of net cash to fund ongoing operations.
Orion Health will continue to own all of of its Hospitals business.
The balance of the net proceeds will be used to fund the share buyback offer; pay transaction costs; and fund the Hospitals business and any future capital requirements of Population Health.
The bottom of the estimated buy back price range represents a premium of 46 per cent to the closing price per Orion Health share of $0.85 on 2 July and 55 per cent to the volume weighted average trading price over the last 20 trading days, the company said.
The transaction is subject to a number of conditions, including approval by Orion Health’s shareholders.
The independent directors have commissioned an independent report from KordaMentha covering the transaction and the buyback offer which will be provided to shareholders with a notice of meeting.
Shareholders will have the option to elect 100 per cent, 50 per cent, 20 per cent and zero per cent participation in the share buyback offer.
Orion Health built the first Rhapsody integration engine in the late-1990s. It quickly became one of the most recognised interoperability platforms for healthcare organisations.
“Hg has been researching the theme of interoperability and population health management in healthcare IT over many years,” said David Issott, partner, Hg
“We believe this is a key global growth theme backed by substantial market funding and resources.
"Rhapsody provides fantastic products and services for this market and we look forward to partnering with the team at Rhapsody to maximise its potential across the globe. We are also excited to work with Ian and the team to realise the full potential of the Population Health business."
Philippe Houssiau, an experienced global technology executive, will step in to lead the Rhapsody business and will join the new board of Population Health from closing.
Disclosure: Rob O'Neill owns shares in Orion Health.