Orion Health IPO? McCrae confirms talks with brokers
Orion Health CEO Ian McCrae has confirmed to NBR that his company is in talks with First NZ Capital and Deutsche Craigs over a possible IPO.
The CEO, cofounder and director has publicly mulled the possibility of listing for more than a year.
It's a decision for the board, he's previously told NBR — but given he holds 59% of the shares, Mr McCrae is obviously going to have a big say in the weeks and months ahead (the second largest holder is Pioneer Capital on 9.64%).
Orion, which makes software for healthcare providers, was in the news Friday after signing a deal with the Waitemata District Health Board. That was a good thing, but the real action for Orion is in the huge US market, where it has landed several US states as Obama Whitehouse initiatives see more spending and, more importantly, a drive for private healthcare providers to share records with each other at the state level (see NBR's backgrounder on Orion's North American push here).
Mr McCrae says the Obama healthcare reforms are now so bedded in there will be no going back.
But even if you take that as read, my it would be bad psychology for Orion to IPO as the Obama era winds down. The next US presidential election will be in November 2016, but the frenzy of speculation on who will succeed him will be in full force my mid-way through next year. I see pressure to get Orion listed ahead of that.
If Orion does list, investors will be licking their lips.
Already, a market cap of $500 million is being bandied about.
There's little hard financial data about Orion, but last year the Callaghan Innovation/NZTE-backed TIN100 estimated its FY2013 revenue had jumped 22% to $122 million.
Director Andrew Ferrier told NBR last year that the company was profitable most quarters.
When you consider that Orion is blazing a trail in terms of cloud-based healthcare management, where so far only a tiny number of healthcare providers have moved to fully integrated electronic records; and that it has more revenue than Xero but is profitable, it's easy to see a market cap north of half a billion.
It'll be easily the biggest event in a big year for tech IPOs.
But will it happen. Auckland-based Orion has already been able to grow to 700+ staff (or a Xero size) organically, through cash flow.
My feeling is that Mr McCrae would like to grow faster, but he also loves his baby, and holding it close. I get the sense he likes to be in control and, to a degree, being able to dictate the pace of growth.
But talking to Mr Ferrier last year, I noticed he suddenly stood a quarter inch taller when the words "NZX" and "IPO" were mentioned. My unscientific observation is that he and other directors are keen to list. And of course when he was CEO of Fonterra, one of his main missions was to push farmers toward a float (Mr Ferrier earned more than $40 million during his eight years as head of Fonterra, including an $8.2 million golden handshake. As well as sitting on the board of Orion, his investment company Canz Capital holds a small stake).
It's worth noting that Mr McCrae said he's constantly fielding buy-out offers. My strong sense is that he wants Orion to remain and NZ-based and NZ-controlled company. But there's also the possibility that the company's next capital raising step could be a major US private equity player taking a minority stake.