Orion Health will pay up to $144.6 million buying back shares from investors in the healthcare technology firm that struggled to achieve the big aspirations it had when it went public four years ago.
The firm will pay $1.224 a share, around the mid-point of its last estimated range to $1.20-to-$1.25. Shareholders can opt to hang on to some or all of their shares, with Orion Health offering to buy 20, 50 or 100 per cent of an investor's stake. Chief executive Ian McCrae will sell 20 per cent of his holding.
The buyback formed a component of Orion's wider transformation, in which it sold its profitable Rhapsody unit to UK private equity firm for $205 million, diluted its holding in the population health management division and retained full ownership of the hospitals unit.
"The board has considered Orion Health's available cash immediately following completion of the Hg transaction, taking into account transaction costs and working capital adjustments in relation to the Rhapsody sale, and the ongoing requirements of Orion Health's hospitals business," the company said in a statement.
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The buyback is a small premium to the $1.17 trading price but will crystallise losses for investors in the 2014 initial public offering who paid $5.70 a share. Craigs Investment Partners analyst Stephen Ridgewell last week recommended shareholders accept the offer, saying it would take a substantial improvement to turnaround Orion Health's remaining businesses.
The company had been profitable in private ownership but sought to accelerate global growth by raising funds from the public, while also changing to a subscription model from one-off perpetual licensing.
The Kiwi firm had hoped to profit from the previous US administration's Affordable Healthcare Act, known as Obamacare, which poured billions of federal government dollars into the wider US health sector. However, that flagship policy of Barack Obama's presidency was strongly opposed by the Republican Party and changes to the law forced many of Orion's customers to cancel orders when their own funding ran out.
Orion shareholders overwhelmingly backed the restructuring proposals at this year's annual meeting, although many vented their frustrations with the company's performance and chair Andrew Ferrier and McCrae shared their disappointment with its predicament.
Investors on the register on Nov. 30 can accept the buyback between Dec. 6 and Jan. 11.
McCrae will end up with between 44 per cent of the company he founded if no-one participates and 100 per cent if everyone sells. If he ends up with 90 per cent or more he will have to either enforce Takeovers Code mop-up provisions or give the remaining shareholders the ability to sell to him. McCrae has yet to say whether he'll de-list Orion from the NZX if more shareholders decide to stick with the company.