Orion Health founder, chief executive and 50% shareholder Ian McCrae has finally let go of his baby, or at least loosened his grip.
July saw the announcement of a deal whereby UK private equity outfit HG Capital would take a majority stake in one of Orion Health’s three divisions (its Rhapsody software unit, which helps different health IT technology systems talk to each other). HG also took a minority stake in Orion’s Population Health division, which makes software for managing patient records.
The complex $255m deal, with net proceeds of $165m was still awaiting regulatory approval as the Rich List went to press. If it does get the green light, it will see Mr McCrae’s stake in Orion fall to 29.75%.
Shortly ahead of the deal, Mr McCrae said his company’s recent woes had been caused, in large part, by Health Information Exchanges in its core US market, funded by Obama-era stimulus and “Obamacare” spending, going out of business or delaying contracts as they were hit by changes or uncertainty under the Trump administration.
In May, the cash-crunched Orion revealed It lost $40m during its 2018 financial year on revenue of $170m, well shy of its originally forecast $220m.
While it is in the process of selling Rhapsody, its golden goose, Mr McCrae says that business was mature, while its two remaining business units can be whipped into profitable shape and have room to grow. However, there is now no timeline on when the company could be back in the black (a goal to breakeven in 2018 having been abandoned).
Orion shares, which had been trading under $1 for a sustained period ahead of the deal announcement, perked up to a level close to the level of HG Capital’s valuation (smaller investors were expected to be given the opportunity to sell for between $1.24 and $1.29). However, they remain well below the intra-day high of $6.00 hit soon after the healthcare company’s 2014 IPO; the heady days when its valuation was heading toward the $1 billion mark (July 2018 trading valued it at around $235m).
During the National-led government, Mr McCrae was one of three tech industry leaders (along with Frances Valintine and Ian Taylor) who sent then-education minister Hekia Parata a strongly worded letter, saying a major review carried out by her office had failed to address fundamental issues over technology in education, which the trio saw contributing to the tech skills shortage.
However, under the coalition, the Aucklander has been quiet on the skills shortage front. In part, he has been distracted by complications at his own company. A round of belt-tightening has seen Orion staff numbers cut from 1250 in February 2017 to a May 2018 total of 1050. Unfortunately for Mr McCrae, his company currently has a skills surplus.