Dive Brief:
- Private equity firms TowerBrook Capital Partners and Clayton, Dubilier and Rice entered into a definitive agreement to acquire R1 RCM for about $8.9 billion and take the company private, the revenue cycle management firm said Thursday.
- TowerBrook currently controls around 36% of the company’s shares, according to a press release. Under the deal, which will take R1 private, TowerBrook and CD&R will buy the rest of the company’s outstanding stock for $14.30 per share.
- The acquisition comes months after another private equity firm, New Mountain Capital, offered to buy out other investors for $13.75 a share — a price some analysts thought undervalued R1.
Dive Insight:
The deal, expected to close by the end of the year, was unanimously approved by a special committee formed by R1 in March to consider strategic alternatives.
The acquisition comes after R1, which provides billing and finance technology to providers, has faced a stifled stock price compared to its performance in 2021 and early 2022 — leading some analysts to suggest it was ripe for a take-private deal.
When New Mountain proposed its offer in February, the firm said it was open to working with TowerBrook and nonprofit hospital operator Ascension Health, together the company’s largest shareholder, on a deal, according to a note from TD Cowen analysts.
TowerBrook remained interested, and the firm had “always been in the driver’s seat to acquire RCM,” since it was the largest shareholder with the most board seats, analysts Charles Rhyee, Lucas Romanski and Adam Efrem wrote.
The $14.30 per share purchase price represents a premium of about 29% to the company’s closing price on Feb. 23, the last full day of trading before New Mountain disclosed its takeover bid, according to a Thursday press release.
R1 will report second-quarter earnings next week. In the first quarter, the revenue cycle management firm reported revenue of $603.9 million, a nearly 11% increase from the same period last year.
But it recorded a net loss of $35.1 million, compared to an income of $1.6 million during the three months ended March 31, 2023. The company also faced nearly $10 million in impacts from the Change Healthcare cyberattack earlier this year, which slowed claims processing and payments to providers.
