Income cycle administration agency R1 RCM to go personal in $8.9B acquisition

Take heed to the article
3 min

This audio is auto-generated. Please tell us when you’ve got suggestions.

Dive Temporary:

• Non-public fairness companies TowerBrook Capital Companions and Clayton, Dubilier and Rice entered right into a definitive agreement to acquire R1 RCM for about $8.9 billion and take the corporate personal, the income cycle administration agency mentioned Thursday. 
• TowerBrook presently controls round 36% of the corporate’s shares, in keeping with a press launch. Underneath the deal, which is able to take R1 personal, TowerBrook and CD&R will purchase the remainder of the corporate’s excellent inventory for $14.30 per share.
• The acquisition comes months after one other personal fairness agency, New Mountain Capital, provided to purchase out different traders for $13.75 a share — a value some analysts thought undervalued R1. 

Dive Perception: 

The deal, anticipated to shut by the tip of the yr, was unanimously authorized by a particular committee shaped by R1 in March to think about strategic options. 

The acquisition comes after R1, which supplies billing and Finance Technology to suppliers, has faced a stifled stock price in comparison with its efficiency in 2021 and early 2022 — main some analysts to suggest IT was ripe for a take-private deal. 

When New Mountain proposed its provide in February, the agency mentioned IT was open to working with TowerBrook and nonprofit hospital operator Ascension Health, collectively the company’s largest shareholder, on a deal, in keeping with a observe from TD Cowen analysts.

TowerBrook remained , and the agency had “at all times been within the driver’s seat to accumulate RCM,” since IT was the most important shareholder with essentially the most board seats, analysts Charles Rhyee, Lucas Romanski and Adam Efrem wrote. 

The $14.30 per share buy value represents a premium of about 29% to the corporate’s closing value on Feb. 23, the final full day of buying and selling earlier than New Mountain disclosed its takeover bid, in keeping with a Thursday press launch.

R1 will report second-quarter earnings subsequent week. Within the first quarter, the income cycle administration agency reported revenue of $603.9 million, an almost 11% improve from the identical interval final yr.

However IT recorded a web lack of $35.1 million, in comparison with an revenue of $1.6 million throughout the three months ended March 31, 2023. The corporate additionally confronted practically $10 million in impacts from the Change Healthcare cyberattack earlier this yr, which slowed claims processing and funds to suppliers.