- Health IT giant Allscripts has entered into a definitive agreement to sell its CarePort Health patient care coordination business to WellSky, a health software company, for $1.35 billion.
- The sale price represents a multiple greater than 13 times CarePort's revenue of about $100 million and 21 times its adjusted earnings before interest, taxes, depreciation and amortization of about $60 million over the trailing 12 months — significantly above Wall Street's valuation of the business, analysts noted.
- The transaction is expected to close before the year's end. Allscripts said it plans to use proceeds from the deal to invest in its product line, continue deleveraging its balance sheet and support share repurchases. Allscripts stock skyrocketed about 50% aftermarket Tuesday on the news.
Allscripts, like many other health IT vendors, has had a mixed 2020 as headwinds slamming hospital systems and other clients have largely kept them from investing in and using software services. It's also undergoing a major restructuring effort: The 34-year-old vendor hired an advisory firm in March to help make selling, general and administrative expenses more efficient following a $182 million loss last year.
CarePort, which is a part of Allscripts' data, analytics and care coordination segment, represents about 6% of Allscripts' revenues. The segment operates a coordination software platform helping hospitals and post-acute care providers transition patients through different care settings.
The $1.35 billion deal valuation represents a "significant premium to historical EHR-adjacent M&A," SVB Leerink analyst Stephanie Davis wrote in a Wednesday morning note on the deal, noting the average health tech deal multiple is five times revenue.
"In our view, the transaction serves as a testament to MDRX's ability to unlock shareholder value by monetizing its assets at much higher multiples than it can command as a consolidated entity, suggesting further upside if MDRX can continue to capitalize on the [healthcare IT] space's elevated valuations," Davis said.
Without CarePort, Allscript's data, analytics and care coordination segment — which houses the company's high-growth, non-EHR assets — still represents about $240 million in annualized revenue. It includes Allscripts' payer and life sciences business Veradigm, personalized medicine arm 2bPrecise and ambulatory clearinghouse Payerpath.
Allscripts is probably motivated to look for additional monetization opportunities in the segment, Davis said.
Analysts estimate Allscripts will take in about $6 per share in post-tax proceeds from the deal, leaving it with about $980 million in cash on hand for debt paydown, share buybacks and investments. The Chicago-based IT vendor has about $1 billion in total debt outstanding and $40 million outstanding in its existing repurchase program.
In July, Allscripts also said it was selling hospital financial decision support business EPSi for $365 million and would use the proceeds to pare down debt.
Kansas-based WellSky is jointly owned by two major private equity firms, TPG Capital and Leonard Green & Partners. Upon close, CarePort customers and almost 200 employees will transition to WellSky.