R1 RCM, a company that provides revenue cycle and billing services to hospitals, will be acquired for $8.9 billion and taken private.
Investment funds tied to TowerBrook Capital Partners and Clayton, Dubilier & Rice will pay $14.30 per share in cash for the company, the health tech company said in a press release Thursday.
TowerBrook already has a 36% stake in the company, according to the press release.
In late February, private equity firm New Mountain Capital, R1's largest shareholder, made a buyout proposal that valued the company at nearly $6 billion.
TowerBrook and CD&R's proposed purchase price is a 29% premium to the company’s closing price before New Mountain's interest became public, the company said in a press release.
The deal has already been approved by a special R1 board of directors committee formed back in March to explore strategic alternatives, the company said.
The deal is expected to close by the end of the year. Once it's completed, R1 will become a private company and its shares will no longer trade on the Nasdaq.
The transaction is expected to be financed with a combination of committed debt financing and equity from investment funds affiliated with TowerBrook and CD&R.
Shares of R1 RCM rose 9.2% to $14.06 in premarket trading.
The Utah-based company provides technology solutions for billing and revenue collection to hospitals, physician groups and other healthcare organizations.
R1 RCM offers front-, middle- and back-office tools and services to help healthcare providers secure revenues. It works with more than 3,700 hospitals and 30,000 doctors. R1 has contracted over $67 billion in net patient revenue for hospitals as well as over $9.5 billion for physician practices, according to its website.
In 2023, the company brought in revenue of $2.3 billion, up 24.8% compared to 2022, and reported $3.3 million in net income. It reported adjusted EBITDA of $614.3 million, up 45% from 2022.
In the first quarter of 2024, R1's revenue reached $604 million, up 11% year over year.
“TowerBrook has been an outstanding long-term investor and partner to R1 and shares our vision of being the automation platform of choice for the provider industry,” said Lee Rivas, R1’s CEO, in a statement. “Our agreement reflects TowerBrook’s and CD&R’s confidence in our team and the unmatched scale, technology and value we provide. We believe the transaction represents the best path forward for R1 at an attractive valuation to our stockholders that reflects the company’s position as a leading provider of technology-driven solutions for its customers.”
TowerBrook and CD&R will continue to invest in R1's core operations to "drive customer performance and value while also continuing to build R1 as a leader in intelligent automation and in the use of GAI in revenue management," Ian Sacks, managing director at TowerBrook, said.