Revenue cycle management vendor R1 RCM receives $5.8B buyout offer from shareholder New Mountain Capital

Revenue cycle management technology giant R1 RCM has received an offer from private equity firm New Mountain Capital to buy out the roughly two-thirds of shares it doesn’t already own and take the company private, according to a regulatory filing made public Monday.

The firm and its affiliates currently control 32.4% of R1 RCM’s shares and are seeking to acquire the remainder for a proposed cash purchase price of $13.75 per share. The offer would total just under $5.8 billion and prices the stock at a 24% premium over Friday’s closing price.

New Mountain Capital floated the offer in late January, according to a Securities and Exchange Commission filing and requested a response from R1 RCM by the end of the month.

The tech company didn’t make any commitments but asked New Mountain Capital to open “good faith discussions” with its other major shareholder TCP-ASC—an investment vehicle that’s jointly owned by investment management firm TowerBrook Capital Partners and the large Catholic health system Ascension.

New Mountain Capital and TCP-ASC have held “multiple in-person meetings and discussions” on a potential deal “throughout the past several weeks,” per the filing. These conversations have covered valuation and relative capital contribution, transaction sources and uses and pro forma capital structure, potential governance constructs and any new opportunities for R1 RCM should it be made private.

“While there is not final agreement on terms as of this date, these discussions remain ongoing and there is active dialogue to enable alignment,” according to the filing signed by New Mountain Capital and affiliate heads.

The disclosure drove R1 RCM’s stock up by about 32% compared to Friday’s close. Daniel Grosslight, an analyst at Citi, wrote in a note that the offer could potentially attract other bidders. "Given trading levels remain depressed in the public markets, we do think R1 will likely consummate a transaction," he wrote.

R1 RCM offers front-, middle- and back-office tools and services to help healthcare providers secure revenues. It has more than 1,000 clients across the country and has contracted over $55 billion in net patient revenue for hospitals as well as over $9 billion for physician practices, according to its website.

A preview of its fourth-quarter 2023 financial results showed limited year-over-year growth that left investors wanting. The company is scheduled to report its actual 2023 financial results Tuesday and will likely be questioned on the buyout offer by analysts during the accompanying investor call.