After Allscripts Healthcare Solutions Inc. (NASDAQ: MDRX), announced that it would be selling off one of its businesses, its shares jumped on Wednesday.
In times like this, when cash is king, selling off a portion of the business or finding a way to raise capital can be crucial to continuing operations. Or perhaps, the price just may be too good to pass up.
In this case, Allscripts has agreed to sell off its CarePort Health business to WellSky, a global health and community care technology company. This deal comes with a price tag of $1.35 billion, representing a multiple of more than 13 times CarePort’s revenue in the trailing 12 months. Also, this deal represents a multiple of 21 times CarePorts adjusted earnings before interest, taxes, depreciation and amortization during the same time.
Note that CarePort represents roughly 6% of Allscripts consolidated revenues. Also, the Allscripts market cap was $1.38 billion before this deal was announced.
Upon transaction close, the CarePort client base and associates will transition to WellSky. The two companies will operate independently until that date.
Allscripts’ management noted that this agreement is another all-around win for Allscripts as it unlocks significant value for the shareholders. The deal also enables the firm to increase its focus on the core business.
The deal is expected to close before the end of 2020, and it is subject to customary closing conditions and regulatory approval.
Excluding Wednesday’s move, Allscripts stock had underperformed the broad markets with a retreat of about 15% year to date. In the past 52 weeks, the share price was down closer to 20%.
Allscripts stock traded up about 29% on Wednesday, at $10.69 in a 52-week range of $4.56 to $11.82. The consensus price target is $10.53.