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Change Healthcare Prices IPO At $13, Below Expected Range

Change Healthcare, a provider of revenue cycle management and analytics products to the healthcare industry, priced its shares, one of the final steps to going public.

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The Nashville-based company aims to raise over $557.7 million in an initial public offering of 42,857,142 shares of its common stock at a price of $13, which the company announced via a press release on Wednesday evening. This comes in below an expected range of $16-$19 per share reported by other outlets prior to the announcement.

Concurrent to the common stock IPO, the company will also offer “5,000,000 of its 6.00% tangible equity units […] with a stated amount of $50.” This would yield an additional $250 million for the company’s primary offering.

Basically, this is a convertible security with an early execution option. The securities will settle “for between 3.2051 and 3.8461 shares of the Company’s common stock per purchase contract, subject to adjustment, based upon the applicable market value of the common stock, as described in the prospectus relating to the Unit offering.” (Here’s that prospectus from which we pulled the prior quote.)

Riding along the equity purchase agreement is a senior amortizing note with a principal value of $8.2378, which will grow with an annual interest rate. The prospectus cites an annual rate of 5.5 percent, but the press release suggests it’s 6 percent. The TEUs will settle on June 30, 2022 if not earlier settled by the holder.

Barclays, Goldman Sachs, and J.P. Morgan are serving as principal underwriters of the offering. A cadre of other institutional investors are participating in the book-running and management of the transaction. The offering agreement grants lead and subordinate underwriters the right to purchase an additional 6,428,571 shares of common stock at the IPO price, and an additional 750,000 TEUs. This could net Change Healthcare an additional $83.57 million and $37.5 million, respectively.

Change Healthcare shares will trade on the Nasdaq under the symbol CHNG; its tangible equity units will trade under CHNGU.

The company has a long and rather complicated corporate history. It’s the result of a number of private equity-led business combinations.

Change Healthcare stated that the proceeds from the offering will be used to pay down existing debt, totaling over $5 billion.

Illustration: Li-Anne Dias

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