BREAKING NEWS: Utah-based R1 RCM Receives Updated All-Cash "Take Private" Offer of ~$5.58 Billion from New Mountain Capital in a Proposed "Go It Alone" Deal
As one of the largest "Revenue-Cycle-Management" players in the healthcare industry, Murray, Utah-based R1 RCM has been in acquisition talks with various private equity and investment entities since January 2022.
However, in the latest twist to this ongoing saga, New York City-based New Mountain Capital has notified R1 RCM that it no longer plans to partner with other entities (i.e., TCP-ASC, et.al.), but rather intends to acquire R1 RCM in a "take private" acquisition by itself and do so at $13.25/share down from $13.75/share.
This offer was extended the same day New Mountain announced it had closed a new $15.4 billion investment fund. [NOTE: As of 08 May 2024, New Mountain owned ~136 million shares of R1 RCM, roughly 32.3% of the firm's ~421 million shares outstanding.]
At the beginning of this Independence Day shortened week, Murray, Utah-based R1 RCM (NASDAQ:RCM) received an updated acquisition notice from New York City-based New Mountain Capital that it is moving forward by itself to acquire the Utah firm at a reduced price of $13.25/share, a price that values R1 RCM at ~$5.58 billion.
According to New Mountain's 01 July 2024 letters to R1 RCM (as filed by New Mountain with the U.S. Securities and Exchange Commission via Form 13-D), New Mountain wrote that it
- Is moving forward, by itself, to acquire R1 RCM, rather than in partnership with TCP-ASC;
- Is doing so at an all-cash, reduced share price of $13.25 per share, down from $13.75/share; and it
- Asked R1 RCM to "... respond in writing with its decision regarding the foregoing request for a waiver by countersigning and returning this letter (which shall only constitute approval of such request) by no later than 5:00 p.m. ET on July 3, 2024."
This updated/modified acquisition offer from New Mountain happened the same day that it announced it had closed a new investment fund of $15.4 billion, meaning the private equity group could fund the acquisition by itself, should it choose to do so.
With R1 RCM's ~421 million common shares outstanding, this updated acquisition offer from New Mountain values the firm at ~$5.58 billion, which New Mountain noted, is 30.3% higher than the closing share price of R1 RCM's stock when New Mountain first requested "... a waiver of certain provisions of our Investor Rights Agreement (with R1 RCM) ..." on 25 January 2024.
Given that New Mountain already owns ~32.3% of R1 RCM's shares, New Mountain would pay less than ~$3.78 billion to acquire the R1 RCM shares it does not own today.
Notwithstanding its standalone "take private" plans for R1 RCM, New Mountain did state in its updated offer that it was willing to move forward with the acquisition with other institutional investors, including TCP-ASC, among others.
As per Yahoo Finance, "TCP-ASC is an investment entity co-owned by Ascension Health Alliance and funds affiliated with TowerBrook Capital Partners, which (in combination) own nearly a 36% stake in R1 RCM."
{AUTHOR'S NOTE: As of date and time this article was published (05 July 2024 at ~10:30am ET), it appears that R1 RCM has not publicly acknowledged, or responded to, the updated offer from New Mountain.}
R1 RCM: A Brief Overview
For readers not familiar with R1 RCM, the firm was established roughly 21 years ago in 2003 as Accretive Health, a company that provided "end-to-end revenue cycle management" products and services to hospital networks and healthcare providers.
In simplest terms, such RCM products/services allow healthcare organizations to optimize their revenue-generating efforts and maximize net income, specifically by
- Automating financial activities that are currently handled manually,
- Eliminating mistakes in the process,
- Identifying and capturing missing revenue,
- Helping providers more effectively and efficiently use personnel,
- Improving employee satisfaction, and
- Boosting patient retention and revenue.
As noted in Slide No. 6 from its 27 June 2024 investor presentation, R1 RCM currently
- Works with 93 of the top 100 healthcare provider organizations,
- Helping them automate over 200 million tasks/year, with its
- Proprietary SaaS-based technologies, and with
- R1 RCM's over 30,000 employees.
Since New Mountain extended its updated/modified acquisition offer, R1 RCM's share price have dropped as low as $10.66/share in intraday trading.
However, in early morning trading today, R1 RCM's price/share was trading in a 10 cent/share range of $11.03—$11.13.
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"... New Mountain Capital is no longer interested in pursuing a joint proposal with TCP-ASC."
Form 13-D filed with the SEC on 02 July 2024: https://www.sec.gov/Archives/edgar/data/1910851/000119312524173492/d857163dsc13da.htm
"TCP-ASC is an investment entity co-owned by Ascension Health Alliance and funds affiliated with TowerBrook Capital Partners, which owns nearly a 36% stake in R1 RCM." as per https://finance.yahoo.com/news/mountain-offers-acquire-healthcare-services-103522367.html
R1 RCM has been in "take private" discussions with various entities since January 2022.
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