1Life Healthcare, Inc. (ONEM) inked an agreement to acquire Iora Health in an all-stock deal for $2.1 billion.
Shares of the company were down 1.7% to close at $35 on June 7.
Iora Health is a built-for-purpose, technology-powered primary care leader that delivers member-based care to people above 65 years of age who are enrolled in Medicare Advantage and other at-risk reimbursement models.
As per the terms of the deal, Iora Health shareholders will get 56.1 million shares of One Medical common stock. Upon completion, Iora Health shareholders will own approximately 26.75% of the combined entity.
With the addition of Iora Health, the combined entity will have the opportunity to deliver better healthcare at reduced costs across 28 markets. The deal will also help to tap the potential market opportunity worth $870 billion across commercial and Medicare segments. (See ONEM stock analysis on TipRanks)
The deal will lead to substantial value creation with expected annual revenue synergies of over $350 million and annual net cost synergies of $30 million by 2025. In addition, it will lead to savings in capital expenditures worth $30 million through 2025.
ONEM CEO Amir Dan Rubin said, “Together we will expand our addressable market to serve more members in more geographies with digital and in-person care across every stage of life, with further capabilities to deliver care within full-risk models. Together with Iora Health, we can deliver better health, better care, and lower costs for children, adults, and seniors.”
The acquisition is expected to close by the end of third or fourth quarter this year, subject to certain regulatory approvals.
Post the acquisition announcement, Piper Sandler analyst Sean Wieland increased the price target from $48 to $55.50 (58.3% upside potential) and maintained a Buy rating.
Wieland is optimistic about the deal synergies, which will expand the company’s presence in 28 countries and increase the potential annual revenue opportunity to $870 billion.
Overall, the stock has a Strong Buy consensus rating based on 11 Buys and 1 Hold. ONEM average analyst price target of $51.14 implies 45.8% upside potential from current levels. Shares of ONEM have jumped 10.9% over the past year.
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