McCrae (66) said Healwell would get Orion Health’s two globally established products: Amadeus, a platform for providers to share healthcare records and Virtuoso, a “digital front door” for patients.
But in a twist, he would retain ownership of two “R&D businesses” that currently operate inside Orion. Two are early-stage and will be revealed in the new year. The third, which has been operating for around a decade, is Orion Health Hospitals, a patient record system. (Healwell said the sale price was “after accounting for the divestiture of Orion Health’s non-strategic assets.)
“All the hospitals in the South Island run our Hospitals software. There have been no dramas, unlike Auckland.” (Auckland City Hospital’s $95m TrakCare IT system has been criticised by the NZ Nurses Organisation and staff.)
Orion Health, headquartered in Mt Eden, currently has about 520 staff.
Of those, around “70 or 80″ will join the three R&D companies, McCrae said, with the balance joining Healwell. Most would stay in Auckland. He anticipated the team would grow.
McCrae said he had preferred Healwell over other suitors in part because of its commitment to Orion staff. Others had said, “We’d love to make an offer. Which 100 staff will you let go?”
McCrae stepped down after 30 years as Orion Health’s chief executive in July 2022, shortly after his brain surgery. He poached his son-in-law Brad Porter from Fisher & Paykel Healthcare to take the reins. Porter is still Orion Health chief executive today and will join Healwell’s executive team when the deal wraps up, McCrae says.
“I never thought Orion would be a family business,” McCrae says. Two of his five children also work for the company: Orion director and special projects head Lucy Porter, who will head one of the R&D firms post-deal, and product director Laura McCrae, who will join Healwell.
‘Auckland is our home’
“Orion Health’s headquarters will definitely remain in Auckland and it was the strength and experience of our R&D teams here in New Zealand that attracted Healwell in the first place,” Brad Porter told the Herald.
“We already have a substantial presence in Toronto – over 80 people. Ontario Health is a our biggest customer, where we serve the population of 15 million with our Digital Front Door. This acquisition will enable us to take the work we are doing to a whole new level – but Auckland is our home.”
AI smarts
Porter said in the deal announcement: “This is a transformational moment in Orion Health’s history, strengthening its position as a world leader in population health management and combining it with the powerful AI capabilities of Healwell. Joining the Healwell family will make Orion Health stronger than ever, creating significant momentum.”
The transition is set to close on April 1, 2025, subject to approvals, including a green light from the Overseas Investment Office. A spokeswoman for the OIO said an application had yet to be lodged.
From $1b market cap to $149m delisting
Orion Health listed on the NZX in late 2014 as it rode high with big contract wins in the US, enabled by a big chunk of Obama administration stimulus spending being earmarked for programmes to digitise patient record systems and link them between various healthcare providers.
The day it listed, on November 26, 2014, the hype seemed justified — Orion’s share price hit $6.27. That valued the company at $1 billion and McCrae’s personal stake at about $530m.
But within months the stock halved, making Orion the worst performer on the local exchange in 2015.
The company faced a perfect storm. The cost and complexity of moving its software to the cloud hit just as the Obama money dried up, and years of healthcare system uncertainty under the Trump presidency began. Some of Orion’s biggest American customers had stopped spending or went bust, McCrae told an angry audience at his firm’s 2018 shareholder meeting that followed a $34m loss on revenue around $150m.
There was a restructure that saw 20% of the then 1250 Orion Health staff culled, and McCrae put millions of his own money into propping up the firm as he led a $32.9m raise.
But the red ink continued, and the stock continued to crater.
In 2019, shareholders cut their losses by voting for a $149m/$1.22 per share deal that saw McCrae take the firm private again.
Orion Health has not published financials since delisting, but McCrae said that a freer reign for long-term strategy had seen the firm had return to profitability. The Technology Investment Network (TIN) 2024 list of NZ’s largest tech exporters estimated Orion Health’s revenue in the year to March at $183.2m.
In a market filing, Healwell said it expected Orion Health – minus the units divested with the deal – “is expected to generate over C$100m [$122m] in revenues mostly from subscription license and services and over C$20m [$25m] in ebitda in calendar 2025.”
Latest in a string of offshore tech deals
The pandemic stimulus-driven low interest rates fuelled a venture capital and private equity frenzy, with a clutch of New Zealand tech companies sold offshore, including retail software firm Vend’s $455m sale to Canada’s Lightspeed; geo-modelling software firm Seequent’s $1.45b sale to Nasdaq-listed Bentley Systems; Grinding Gear Games’ $100m-plus sale to China’s Tencent; veterinary practice management software maker ezyVet’s $216m sale to Nasdaq-listed Idexx Laboratories; salon appointment software maker Timely’s $100m-plus sale to the Silver Lake-backed EverCommerce; NZX-listed Pushpay’s $1.53b sale to a private equity consortium lead by a US firm; mobile game developer Ninja Kiwi’s $203m sale to a Scandinavian buyer; e-commerce player Cin7’s $133m sale to US private equity firm Rubicon; breast cancer screening software firm Volpara’s $322m sale to a Korean rival; US private equity giant KKR taking majority control of Dunedin’s Education Perfect in a mid-2021 transaction that valued the Kiwi firm at $455m; Hawaiki Cable’s circa $500m sale to Singapore’s BW Group; and the $2.2b sale of Wētā Digital’s technology division to US-based Unity Software (a deal that would later unravel as Unity hit financial strife).
More recent deals have seen US private equity firm Boston Ventures take majority control of Auckland education software firm Kami in a deal that valued the firm at $289m and tradie management app Tradify selling to UK roll-up outfit The Access Group in a $100m-plus deal, among other transactions.
Local tech industry boosters like Movac’s Mark Vivian say the deals are a good thing. They generate funds that are then recycled into the local ecosystem to fund the next wave of start-ups.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
