Shares in Allscripts Healthcare Solutions are surging 33% as the healthcare IT vendor announced the sale of its CarePort Health business to WellSky in a $1.35 billion deal.
Allscripts (MDRX) said that the agreed $1.35 billion sale price represents a multiple of greater than 13 times CarePort’s revenue over the trailing 12 months, and approximately 21 times CarePort’s non-GAAP adjusted EBITDA over the trailing 12 months. Allscripts develops software and services for a variety of healthcare organizations like hospitals, outpatient physician offices, retail pharmacies and life-sciences companies.
The company expects net proceeds of the deal to be used for investment in its solutions, further deleveraging of the company’s balance sheet and for funding of “significant” share repurchases. The transaction is expected to close before the end of the year, subject to receipt of regulatory clearances and satisfaction of other customary closing conditions.
“WellSky is a great company that will provide both an ideal and permanent home for CarePort and its almost 200 team members,” said Allscripts President Rick Poulton. “This agreement is another all-around win for Allscripts as it unlocks significant value for our shareholders, enables us to increase our focus on our core business and brings our CarePort customers the benefit of continued investment under new and very strong ownership.”
CarePort, which assists hospitals and post-acute care providers to efficiently coordinate and transition patients through different care settings, makes up about 6% of Allscripts consolidated revenues. WellSky is a global health care technology company, which is jointly owned by two of the world’s largest private equity firms, TPG Capital and Leonard Green & Partners.
Allscript shares are up 14% so far this year, while Wall Street analysts are sidelined on the stock with a Hold consensus. The $9.55 average analyst price target indicates 13% downside potential over the coming year.
Meanwhile, Canaccord analyst Richard Close reiterated a Buy rating on the stock with a $13 price target (18% upside potential), saying that he is encouraged with management’s decision to further rationalize its product portfolio.
“This transaction builds on the sale of EPSi, the financial decision support offering, announced on July 30. In total, the EPSi and CarePort transactions have yielded $1.75B in pre-tax proceeds,” Close wrote in a note to investors. “Given the sizable amount of the sale proceeds, we would not be surprised to see the company increase its share repurchase authorization prior to the transaction being finalized.” (See Allscripts stock analysis on TipRanks)
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