R1 RCM to be acquired in $8.9 billion cash deal

MURRAY, Utah - R1 RCM Inc . (NASDAQ: NASDAQ:RCM), a provider of technology-driven solutions for healthcare providers, has agreed to be acquired by investment funds affiliated with TowerBrook Capital Partners and Clayton, Dubilier & Rice (CD&R) in an all-cash transaction valued at approximately $8.9 billion.

TowerBrook, which currently owns about 36% of R1's common stock, along with CD&R, will purchase the remaining shares for $14.30 each. This price represents a 29% premium over R1's closing stock price on February 23, 2024, before New Mountain Capital's initial acquisition proposal was disclosed.

The definitive agreement, approved by R1's independent director committee, will lead to R1 becoming a private company, with its shares delisted from Nasdaq. The transaction is expected to close by the end of the year, pending stockholder and regulatory approvals, and will be funded through debt financing and equity from TowerBrook and CD&R.

R1's CEO, Lee Rivas, expressed that the acquisition reflects confidence in R1's team and services, considering it the best path forward for the company and its shareholders. Ian Sacks of TowerBrook highlighted the firm's commitment to R1's growth as a leader in healthcare provider revenue management and intelligent automation. CD&R's partner, Ravi Sachdev, noted the opportunity to build on R1's platform to enhance efficiency and reduce costs in healthcare.

The transaction will not affect the release of R1's financial results for the second quarter ended June 30, 2024, scheduled for August 7, 2024, although there will be no live conference call. Advisors for the deal include Qatalyst Partners and Barclays for the special committee, and Kirkland & Ellis LLP for R1. TowerBrook and CD&R are advised by Centerview Partners LLC, with legal counsel from Wachtell, Lipton, Rosen & Katz, and Debevoise & Plimpton LLP, respectively.

This news is based on a press release statement from R1 RCM Inc. and does not include any speculative content about the potential impact of the acquisition on the industry or broader market trends.

In other recent news, R1 RCM Inc. has been in the spotlight due to several significant developments. The healthcare technology firm has set a July 31 deadline for final takeover bids amid an ongoing review of strategic alternatives. This was initiated by the company's Special Committee following a filing by New Mountain Capital, L.L.C. with the Securities and Exchange Commission.

In the midst of this, R1 RCM has been in takeover discussions with TowerBrook and Ascension. Analysts from RBC Capital, TD Cowen, and Citi Research have maintained a positive stance on the company, hinting at a likely acquisition.

Despite a cyberattack and a customer bankruptcy causing a $9.5 million dent in earnings, R1 RCM reported Q1 revenues of $604 million and an adjusted EBITDA of $152 million. The company's updated outlook for 2024 anticipates revenue between $2.6 billion to $2.64 billion, and adjusted EBITDA between $625 million to $650 million.

R1 RCM is also undergoing a tech transformation, integrating automation and AI to enhance its platform and improve profit margins. However, KeyBanc Capital Markets downgraded the company to "Sector Weight" due to concerns related to the cyberattack. These are recent developments that investors should consider.

InvestingPro Insights

The acquisition of R1 RCM Inc. by TowerBrook Capital Partners and Clayton, Dubilier & Rice comes at a time when R1's market dynamics are especially noteworthy. With a market capitalization of $5.43 billion, R1's financial health and growth prospects are under scrutiny by investors and analysts alike. The company's recent performance data, as captured by InvestingPro, provides a clearer picture of its valuation and potential.

One of the key metrics, the Price/Earnings (P/E) ratio, stands at -162, reflecting market expectations of future earnings growth. This is supported by the fact that analysts anticipate R1 to become profitable within the year, as per InvestingPro Tips.

The company's revenue growth remains robust, with a 17.61% increase over the last twelve months as of Q1 2024, and a quarterly growth rate of 10.69% in Q1 2024. This suggests a positive trajectory in R1's core business operations.

Despite not being profitable over the last twelve months, R1's gross profit margin has been steady at 20.75%, indicating a solid control over cost of goods sold relative to sales. Moreover, the company's EBITDA growth rate of 33.57% over the same period is a testament to its improving operational efficiency. These metrics are critical for potential investors to consider, especially in light of the upcoming acquisition.

For those interested in deeper analysis, InvestingPro offers additional insights, with a total of 5 InvestingPro Tips available for R1 RCM Inc., which can be found at InvestingPro RCM. These tips provide a comprehensive look at the company's financial health and future prospects, which is particularly valuable in the context of its pending transition to a privately-held entity.

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