Orion private placements provide clue for IPO price

Recent issues of Orion Health Group shares to private investors provide clues to the issue price in its upcoming initial public offer, 

The Auckland developer of software systems for patient health management this week confirmed it would raise between $120 million to $150 million through floating on the NZX and ASX late next month.  A prospectus and investment statement are expected out next week and it's understood broker reports issued earlier this month had a wide ranging valuation on the company from between $550 million to $900 million.

The company has issued three lots of new shares this year, in June and August, with the shares priced on each occasion at $4 per share. That price multiplied by Orion Health’s current total shares of 140,033,954, values the company at $550 million.

In the most recent placement in August, a further 1.28 million shares were issued with just over a million going to the Orion Health Corporate Trustee through its long-term staff share incentive plan and 62,000 shares to recipients of the 2014 Orion Health CEO Share Awards for those who have made significant contributions to the company. A further 125,000 were allocated to Krestville Investments, which is owned by Australian private equity firm Grinch Investments.

In June two placements were made – one for 1.37 million shares and the other for five million. It was a mixed bag with one shareholder selling out, another coming on, and one reshuffling under which entity his shares were held. But many existing shareholders, including chairman Andrew Ferrier, took the opportunity to increase their holdings by incremental amounts.

Orion Health founder and chief executive Ian McCrae remains the company’s largest shareholder with a 58.4 percent stake, with Pioneer Capital on 9.5 percent, Canadian-based Geoffrey Cumming on 9.35 percent, and one of Milford Asset Management’s funds with 2.4 percent. Ferrier’s investment company Canz Capital now has a 1.1 percent holding.

An entity associated with McCrae, who founded the company in 1993, is planning to sell $5 million of shares through the offer.

There is expected to be strong demand for the long-heralded float though, although that will inevitably rest on the final price and the company’s growth prospects.  There has been a pullback in what investors are prepared to pay for tech stocks, recently floated on the NZX, and there’s a pipeline of prospects lining up for investors to choose from.

Orion Health’s revenue has grown to $153 million in the year ended March 31, 2014 and it has a revised target of hitting $1 billion revenue by 2020.

Its cloud-based products and solutions are used by clinicians in more than 30 counties, for patient data exchange and to improve co-ordination of their care. The company has three divisions: Intelligent Integration which allows different IT systems within hospitals to talk to each other; Smarter Hospitals which collects all the information on hospital patients into one portal and allows them to be looked after from administration to discharge; and Healthier Populations which can link all primary and secondary health providers in area, including statewide.

Future revenue is expected to predominantly come from the healthier populations group with a drive worldwide, and particularly in the US under Obamacare, to reduce spiralling health costs while improving patient care.  The new capital from the IPO will go towards a renewed push into the US and accelerating research and development.

(BusinessDesk)

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