Citi analysts reiterated a Neutral rating and $16 price target on R1 RCM (NASDAQ:RCM) in a note Monday but cautioned that the stock could fall around 15% if a deal to acquire the company falls through.
In a filing this morning, Towerbrook/Ascension (TCP-ASC) provided an update on its discussions with New Mountain about a potential acquisition of RCM.
Citi explained the joint venture stated that the parties have not come to any agreement yet, but conversations are ongoing. "More interestingly, the filing noted that 'a transaction other than a Joint Transaction would be difficult if not impossible to execute,'" wrote the firm.
However, this differs from Citi's initial intuition that New Mountain's bid would spur additional private equity firms to join the fray.
"While we think that at some price New Mountain/TCP-ASC would become sellers, we think the more likely scenario now is a joint transaction with New Mountain/TCP-ASC," said analysts at the investment bank.
A price of $13.75 is where Citi sees the starting point, with the ultimate bid higher in the $16 range. However, "if the deal falls through, we think RCM could trade down to the $11.50 – $12 range," they wrote.