Investment firm reviews Nightingale and QHR bids

motley-foolLoblaw’s announcement that it has entered an agreement to acquire all of QHR’s outstanding common shares for approximately $170 million comes on the heels of Telus’ purchase in July of Nightingale. Both QHR and Nightingale are the leaders in the EMR market in Canada, owning about a 33% share of the market. QHR is the leading EMR platform in Canada used by various medical professionals, representing approximately 20% of the market.

QHR describes its technologies and services as enabling secure medical records management for clinical environments, empowering health providers with tools for virtual care, including secure video and messaging, as well as tools for clinic management, including scheduling, billing, and patient management.

Loblaw indicated that its purchase of QHR would complement the company’s Shoppers Drug Mart division, but it will operate as a distinct business within the division. This transaction also signals a shift from the healthcare equipment business into the digital space of the industry. The company currently employs over 5,000 healthcare professionals, servicing over 17 million customers every week at all of its brands.

Telus was also considered a potential bidder in this process, but it likely conceded due to its existing business relationship with Loblaw. Loblaw has a contract with Telus to provide the IT and communications infrastructure to a significant number of its pharmacies. Telus may still indirectly benefit from this transaction by assisting with integrating the QHR platform with Loblaw’s existing systems.

In July Telus announced it had entered an agreement to purchase Nightingale for $14 million. This would include its proprietary EMR software solutions and related assets. At the time of the transaction, Nightingale was the third-largest EMR provided, behind Telus and QHR, with a network of 4,000 physicians using its services in Canada, mainly in Ontario and the Atlantic provinces.

Telus is already heavily involved in the healthcare technology sector, branded as Telus Health. The company’s health business already provides a wide range of services including IT and communications infrastructure in the healthcare industry. This would also expand its presence beyond western Canada, adding to its network 4,000 physicians in Ontario and the Atlantic provinces.

Investors attempting to value these two transactions should consider the growth of the EMR market.

In Q2 2016 QHR posted a 21% growth in revenues year over year; its stock has appreciated more than 100% over this same period. Nightingale has seen less lucrative growth over the last year, possibly leading to its sale. Combined, they both provide software solutions to approximately 12,000 healthcare providers and their patients. This is an opportunity for Loblaw and Telus to expand their business in one of the fastest-growing sectors in the country.

Source: The Motley Fool Canada (fool.ca) is a Halifax-based organization that offers stock market and investing advice geared specifically for the Canadian market.

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