Allscripts selling its stake in Netsmart
Electronic health record vendor Allscripts is selling its stake in Netsmart Technologies to GI Partners, a private-equity firm, which will become the majority owner of the company when the transaction closes later this year.
In 2016, both Allscripts and GI Partners acquired stakes in Netsmart, a behavioral health technology vendor, that together were worth $950 million. Netsmart has more than 600,000 users in more than 25,000 organizations.
"This acquisition is a development that could further advance Netsmart's push for better, more accessible treatment," consultant Rita Numerof said.
In 2018, Netsmart acquired Change Healthcare, a former McKesson business focused on home care and hospice digital tools.
"This acquisition now cements Netsmart as a leading provider of solutions in the home care and hospice markets," Allscripts President Rick Poulton said in the company's August earnings call, during which he first hinted at the sale.
The Netsmart sale—expected to bring Allscripts $525 million post-tax—will help decrease Allscripts' debt, Poulton said in the company's Q2 earnings call. After the deal closes, Allscripts' net debt will fall to $500 million, according to the company.
Netsmart's non-GAAP revenue in the third quarter of 2018 was up 13% over the third quarter of 2017, hitting $96 million. But Netsmart booked "considerably" less business in the quarter than it did the year before, Poulton said in Allscripts' Q3 earnings call, bringing down Allscripts' overall results. Allscripts' revenue in the quarter was $522 million, up 16%.
The company is currently undergoing a "rebalancing" effort, which includes laying off some of its employees, it said in December. That effort is part of the "normal course of business," according to the company, which did not elaborate on what the rebalancing entails. But the Netsmart sale could offer some clues. The sale "may reflect a move by Allscripts to realign their business as new competitors such as Amazon and Google enter the EHR market," Numerof said.
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