Telstra spends $20 million for 2% of Orion Health in IPO bookbuild

(An earlier version of this story incorrectly stated Telstra Health bought 350,000 Orion Health Group shares. Telstra bought 3.5 million - Editor)

Telstra Health, a unit of Australia's largest telecommunications business Telstra Corp, bought 2 percent of Orion Health Group in the healthcare management software developer's bookbuild last week in the lead up to its listing later this month.

The Melbourne-based telecommunications business spent $20 million buying 3.5 million shares at $5.70 a piece in last week's bookbuild, which valued the company at $915 million, Auckland-based Orion said in a statement. Orion is selling 21.1 million new shares to raise $120 million in new capital, while chief executive and founder Ian McCrae will sell a further $5 million, or 880,000 shares, into the float. Existing shareholders are estimated to keep around 86.3 percent of Orion after the float, with McCrae holding around 50 percent.

Orion will use the new funds to double the existing 40 research and development teams to accelerate its existing solutions and to undertake blue sky research on its big data analytics and predictive modelling software. The money will also go to improve implementation and delivery capability, and provide additional financial liquidity.

"Telstra Health clearly understands the looming health data revolution driven by the huge expansion in health related data generated by mobile devices and applications," McCrae said. "This is an exciting time for both businesses, and in addition to their investment, we look forward to working together on eHealth initiatives for the Asia Pacific region.”

Telstra launched its health unit in 2013, before separating it out as a standalone business this October. The push into Australia's A$120 billion health sector is part of the company's plan to widen its offerings beyond its bread-and-butter telecommunications and generate new income. The Telstra business links patients with medical records, doctors and health services and use its network to transfer data and provide tele or video conferencing, particularly to the elderly or those in remote area.

“To create a truly connected health care system means working with providers, government and funders as well as some of the world’s best and most innovative solutions," said Telstra Health Managing Director, Shane Solomon. "Orion Health is a world leader in this sector and we are excited to work with them."

Orion didn't provide earnings forecast in its prospectus because of the "lumpy" nature of the group's revenues for fear of misleading investors. Orion had an annualised growth rate of 26 percent over the past 10 years, according to its offer documents. It posted a loss of $14.8 million in the six months ended Sept. 30, 2014 on sales of $80.5 million.

Telstra Health joins 20 institutional investors who bought into the company during its initial public offer.

Deutsche Craigs and First NZ Capital were joint lead managers in the offer, which doesn't have a public pool. The broker offer opened on Monday, and runs until Nov. 21. It will debut in a dual-listing on the NZX and ASX on Nov. 26.

(BusinessDesk)