Allscripts upgraded at Deutsche Bank on recent divestment

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The shares of Allscripts Healthcare (MDRX +2.0%), a provider of IT services to the healthcare industry, are trading higher on Friday after Deutsche Bank upgraded the stock noting the company’s decision to sell the net assets of its Hospitals and Large Physician Practices business segment. The price target raised to $26 from $20 per share implies a premium of ~24% to the last close.

Per the terms, a subsidiary of Canadian IT company, Constellation Software (OTCPK:CNSWF), is set to acquire the segment for $700M in cash, including up to $30M contingent payments. The transaction is expected to close in Q2 2022.

Noting that the company mainly focused on selling electronic medical record (EMR) systems in the past, the analyst George Hill argues that the deal “marks a turning point in the history of Allscripts (NASDAQ:MDRX).”

Comparing the transaction to the recent Oracle (NYSE:ORCL) – Cerner (NASDAQ:CERN) deal, the analyst attributes the lower valuation implied in its purchase price to the recent slowdown in the industry growth and the company’s market share losses amid industry consolidation.

“Investors have had a largely negative view of the Allscripts EMR business for the better part of a decade, and we suspect many were relieved to see the transaction announcement,” Hill concluded, noting that the company shares gained ~4.2% following the announcement.