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retiredcf on Dec 17, 2024 9:06am
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EQUITY RESEARCH
December 16, 2024 Flash Research
WELL HEALTH TECHNOLOGIES CORP.
HEALWELL To Acquire Orion Health For $165MM
Our Conclusion
WELL Health’s partner and investee HEALWELL AI announced a sizable
agreement to acquire 100% of the shares of Orion Health, a New Zealand-
based healthcare technology company for total consideration of $165MM,
including a $20.5MM earnout. Orion is expected to generate $100M in
revenue and $20M in EBITDA in calendar 2025, equating to 1.45x forward
sales or 7.25x forward EBITDA, excluding the value of the earnout.
Key Highlights
About Orion Health: Orion is a New Zealand-based provider of healthcare
data management solutions to a global customer base. Orion’s software
solutions currently support 70+ public and private sector customers,
managing the data over more than 150 million patients globally. Its two core
solutions are Amadeus Digital Care Record (DCR) and Virtuoso Digital Front
Door (DFD). Amadeus consolidates patient data across care settings, while
Virtuoso offers an integrated patient and population engagement platform.
Orion has several public sector customers, including the province of Alberta,
which has been using Orion’s DCR solution in partnership with Alberta
Netcare for 20+ years, and the province of Ontario which is currently
implementing both Orion’s DFD and DCR solutions. The acquisition of the
DCR and DFR platforms will provide HEALWELL with a global platform of
150 million patients, unlocking new channels for the distribution of its AI
products and services. Patient data contained in the platforms will expand
HEALWEL’s footprint for its AI-driven early disease detection solution that
relies on patient data to improve accuracy and performance. Orion Health is
expected to generate $100MM in revenue at a 20% EBITDA margin in
calendar 2025. The addition of Orion Health will move HEALWELL into an
EBITDA positive position for calendar 2025.
Transaction Details: HEALWELL will acquire 100% of the shares of Orion
Health for total consideration of $165MM, comprised of $144MM upfront and
an additional $20.5MM earnout payable over three years. The upfront
consideration will be made up of $36MM in cash, a $50MM private
placement of convertible debentures and subscription receipts (10MM shares
and warrants for 5MM shares) and $57.4MM in HEALWELL subordinate
voting shares issued at a deemed price of $1.61 per share. On a fully diluted
basis, the acquisition will increase shares outstanding by ~24%, before
factoring in any equity that may be issued with the earnout. Shares are being
issued at a 13% discount to the 20-day VWAP and a 30% discount to the last
close of $2.32. The acquisition is expected to close on or before April 1, 2025
WELL’s Ownership Diluted, But Voting Control Maintained: WELL has a
path to voting control with HEALWELL by way of a call-option on 30.8MM
10:1 multi-voting shares. We expect the option to be exercised in 2025, after
which WELL will consolidate HEALWELL’s results. Following the Orion
acquisition, we estimate WELL’s fully diluted equity ownership will go from
36% to 29% and fully diluted voting control will go from ~70% to ~62%