R1 RCM Inc. (NASDAQ: RCM), a leading provider of technology-enabled revenue cycle management services to healthcare providers, announced that it has entered into an agreement with TCP-ASC ACHI Series LLLP, an investment vehicle jointly owned by Ascension Health Alliance (“Ascension”) and investment funds affiliated with TowerBrook Capital Partners L.P. (“TowerBrook”), for the conversion of all of the 8.00% Series A Convertible Preferred Stock (the “Preferred Stock”) held by the joint investment vehicle to common stock. The Preferred Stock, issued in February 2016, was entitled to 8.0% annual payment-in-kind (“PIK”) dividends until February 2023, followed by perpetual 8.0% annual cash dividends, and was not redeemable by R1. As part of the conversion agreement, the joint investment vehicle will receive approximately 139.3 million shares of common stock and a one-time $105 million cash payment. R1 intends to fund the cash payment with cash from its balance sheet.

Pro forma for the conversion of the Preferred Stock, Ascension and TowerBrook, through the joint investment vehicle, will collectively own approximately 54%¹ of R1’s outstanding shares of common stock.

¹Excludes the dilutive effect of the warrants Ascension and TowerBrook hold through the joint investment vehicle (representing the right to purchase 60 million shares of common stock at $3.50 per share), warrants held by Intermountain Healthcare (representing the right to purchase 1.5 million shares at $6.00 per share), and any employee stock options and awards.

²Reflects share amounts Ascension and TowerBrook, through the joint investment vehicle, would have been entitled to pursuant to the existing terms of the Preferred Stock.

The transaction is expected to close later this month, and all the shares of common stock to be issued as part of the transaction will be subject to a one-year lock up scheduled to expire in 2022. Ascension and TowerBrook will retain their seats on R1’s Board of Directors.

Joe Flanagan, President and Chief Executive Officer of R1 said, “We believe this transaction is highly beneficial for R1 and our shareholders. Simplification of the capital structure affords us enhanced flexibility and alignment to pursue the many growth avenues available to us. Ascension and TowerBrook continue to be exceptional partners and I look forward to advancing R1’s long-term strategy to innovate and grow as the leading provider of revenue cycle technology and solutions to healthcare organizations.”

Anthony J. Speranzo, President and Chief Executive Officer of Ascension Capital, said, “We look forward to remaining proud partners and customers of R1 for many years to come. Since our investment and the creation of our long-term strategic partnership, R1 has delivered premier end-to-end revenue cycle solutions across our organization. We are committed to continuing our work together, strengthening our ability to provide compassionate and personalized care to all.”

Ian Sacks, Managing Director of TowerBrook and President of Ascension TowerBrook Healthcare Opportunities, said, “Our thesis that R1 could significantly grow its business while driving best-in-class outcomes for its customers has been shown to be resoundingly true. We look forward to continuing as long-term shareholders and working with Joe and the R1 family to support its significant anticipated growth and innovation.”

Centerview Partners LLC served as financial advisor and Kirkland & Ellis served as legal advisor to R1. Debevoise & Plimpton LLP is acting as legal counsel and Barclays and Duff & Phelps, LLC are acting as financial advisors to the special committee. Deutsche Bank AG served as financial advisor and Wachtell, Lipton, Rosen & Katz and Covington & Burling LLP served as legal advisors to Ascension and TowerBrook.

The Institutional Limited Partners Association (ILPA) today announced the founding signatories of its newly launched Diversity in Action Initiative. The Initiative serves as a means for GPs and LPs to publicly acknowledge their commitment to take concrete steps to advance diversity, equity and inclusion, both within their organization and the industry more broadly. Diversity in Action signatories undertake four essential DEI actions and at least two additional actions, from an optional set of nine. The Diversity in Action framework includes a broad range of actions spanning talent management, investment management and industry engagement.

“As the private equity industry strives to make even more significant progress on DEI, a limiting factor has been the challenge associated with knowing how your peers are approaching the issue,” said Steve Nelson ILPA’s chief executive officer. “The Diversity in Action Initiative offers, for the first time, a platform not only to showcase the incredible work underway but also to surface ideas and resources that may inspire others to do more on DEI; the value of that information is really hard to overestimate.”

Diversity in Action is a living initiative, and ILPA will continue to welcome new signatories on a rolling basis. Starting in March of next year, ILPA will publish quarterly updates listing all Diversity in Action signatories and including a thematic analysis of the range of specific actions that signatories have in place, including emerging best practices.

“Our aim is to celebrate and elevate the specific measures taken by a wide range of organizations to make the private equity industry more diverse and inclusive,” added Jennifer Choi, Managing Director of Industry Affairs at ILPA. “This network of committed organizations will grow over time, as more LPs and GPs put in place specific processes and programs around DEI. We’ll look to the Initiative’s signatories to provide a window into the areas where the industry is strong on DEI as well as those where improvement is still needed. We look forward to demonstrating a robust pattern of improvement across the industry while also identifying ways we can collectively move forward.”

Consolis, a European leader in precast construction solutions, today announced that it had received a binding offer for its Rail division from TowerBrook Capital Partners L.P. (“TowerBrook”), an international investment management firm co-headquartered in London and New York. The Rail business consists of a portfolio of brands that are leaders in their local markets, designing and manufacturing sleepers and other precast concrete products for railways for close to 100 years.

This project is subject to social dialogue with employees’ representatives, customary antitrust and regulatory approvals. Consolis will continue to operate the Rail business until completion of the transaction, which is expected in the course of H1 2021.

Mikael Stöhr, Chief Executive Officer of Consolis, said: “I believe this transaction would be a ‘win-win-win’ for our customers, co-workers and partners. The underlying industrial logic is to focus resources and talent to create substantial value for all stakeholders. Consolis will strengthen its focus on building solutions across Europe, along our side solutions for drainage and utilities, while the Rail division will be able to develop even further on its own merits.”

Benoît Cattin-Martel, who currently leads Consolis Rail business and is to be the CEO of this business under new ownership, said: “We believe we have the right teams and set of manufacturing facilities across 10 European countries to become the best-in-class concrete sleepers’ provider in our current geographies and beyond. As a pure player, we shall capture significant organic growth opportunities, as well as being ready for future acquisitions. We will keep on pushing innovation to serve our customers.”

TowerBrook Capital Partners today announces that it has closed the sale of Independent Clinical Services (“ICS”) to Onex Corporation (“Onex”).

ICS provides specialised staffing, workforce management solutions and managed services to the healthcare, social-care and life sciences sectors internationally. Active across four continents, the company plays a vital role in private and public healthcare systems, providing solutions to address the structural imbalances between workforce supply and demand, and delivering preventative care and community services that support hospitals and other healthcare providers, as well as the clinical activities of life sciences companies.

TowerBrook will re-invest a portion of its proceeds from the sale of ICS back into the company and looks forward to partnering with Onex and the ICS management team to support the company in its future growth and development.

A group of leading private equity investors have joined forces to create the first international network of Initiative Climat International (iCI). In establishing a UK iCI network, these investors collectively commit to actively engage with private equity-backed companies globally to reduce carbon emissions intensity and secure sustainable investment performance by recognising and incorporating the materiality of climate risk. One of the key principles of the iCI is mutual collaboration, as members commit to effectively analyse, manage and mitigate climate-related financial risk and emissions in their portfolios, in line with the recommendations of the FSB’s Taskforce for Climate-related Financial Disclosure (TCFD).

iCI was originally launched as the iC20 (Initiative Climat 2020) in 2015 by a group of French private equity firms to contribute to achieving the objectives of the Paris Agreement – to limit global warming to well-below 2 oC, and to pursue efforts to limit the temperature increase even further to 1.5 oC. iCI recognizes that climate change poses a significant and real threat to the global economy and society as well as ecosystems; and that the consequences of climate change will generate both risks and opportunities for the companies in which they invest.

Signatories to the iCI join a global community of investors who seek to better understand and manage the risks associated with climate change. Members commit to sharing knowledge, tools, experience and best practice among peers to help build and manage both climate-aligned and climate-resilient portfolios.

iCI is a Supporting Partner of The Investor Agenda. iCI is officially endorsed by the Principles for Responsible Investment and is hosted on the PRI online Collaboration Platform. iCI is open to all private equity firms and investors to join.

Fiona Reynolds, CEO of the PRI said: “The PRI welcomes the announcement that a group of leading private equity investors have joined the Initiative Climat International, and in doing so are stepping up to the climate challenge. We are pleased to support this initiative and encourage private equity firms to join this committed group of investors as they seek to better manage climate-related risks.”

Click to view the press release.

After strong growth in 2019 which brought the Talan Group to 2,500 employees and €258 million in sales, and an equally promising outlook for 2020, Talan has now reached a new milestone with an investment from TowerBrook.

This partnership with a leading global private equity firm – with strong experience in supporting companies with high growth potential and longstanding commitment to social and environmental stewardship – will enable Talan to become a leading European platform focused on accelerating the digital transformation of its clients, and to realise its ambition to reach €1 billion revenues by 2024.

At a time when companies are facing economic turmoil, accelerated digitalisation and new business perspectives, Talan has positioned itself as a major player supporting the digital transformation of these organisations. The social and environmental challenges which will undeniably reshape tomorrow’s world are also deeply integrated in Talan’s offer.

According to Mehdi Houas, Chair of Talan: “TowerBrook’s investment in Talan underlines the relationship of trust between our teams, the common commitment to address the social and environmental issues and our shared ambition to establish Talan as a leading player of the digital transformation globally. Talan, which remains majority-owned by its management team, welcomes this new partner who will support the business and help Talan accelerate its growth. I would like to take this opportunity to thank our historical partner, Capza, who has supported us for many years.”

According to Karim Saddi, Managing Director and Co-President of TowerBrook: “Talan’s experience, the quality of its management team and strong positioning in its core markets were the main factors influencing our investment decision. In addition, the ambition and entrepreneurial spirit promoted by the management team will be the key drivers of success in making Talan a leading player of the digital transformation on an global scale. We are proud to support the group and its employees in this important phase of their development.”

According to Maxence Radix, Partner at Capza: “We are pleased to have supported Talan for four years and helped the company achieve its significant growth. We are confident that TowerBrook will be a strong partner to help Talan in its next phase of growth, especially internationally.”

At closing, Capza will have entirely exited its investment in Talan and the group will remain majority-owned by its management team.

After a one-year process and a strict audit, AustroCel Hallein GmbH is awarded the B Corporation certificate by the non-profit organisation B Lab. The seal of approval certifies in particular commitment to sustainability, responsible use of resources, socially responsible management and innovative strength. As a manufacturer of pulp and bioenergy, AustroCel Hallein is thus joining its owner TowerBrook in the network of around 3,300 companies worldwide that meet the highest standards of ecological action and transparency.

“We are very proud of the B Corp certificate, as it is a testament of our commitment to sustainability, environmental protection and innovation. We will continue on this promising path of ‘Green AustroCel’ and bring together sustainability and economic success”, explains Jörg Harbring, CEO of AustroCel Hallein.

The internationally respected B Corp certificate measures the overall social and environmental performance of a company. AustroCel Hallein achieved high scores particularly in the areas of environmental protection and sustainability. On the one hand as a producer of cleaner bioenergy in the Hallein and Salzburg region, and on the other hand as a pulp producer with a focus on the responsible use of resources, waste avoidance and energy efficiency. The implementation of the new bioethanol plant and the secure, quality jobs were also included in the evaluation.

“The thorough, holistic analysis and evaluation goes far beyond the scope of many other seals of approval, which is what makes the B Corp certificate so special. As an international supplier of highquality textile pulp, proven sustainability is very important to us. Our customers in the textile industry will benefit from this, as will consumers, who increasingly want to know whether their clothing has been produced responsibly”, says Christian Spark, Head of Purchasing and Logistics in AustroCel Hallein and project manager for certification.

After the successful certification as a B Corporation, AustroCel Hallein will continue to promote sustainable business: The “zero-waste operation” objective is being intensively pursued and the bioethanol plant currently under construction will come into use at the end of 2020. The plant will produce up to 30 million litres of bioethanol annually. This biofuel is considered particularly environmentally friendly because it is not produced from feed or food, but from pulp production residues. The end product is added to petrol and replaces about one percent of the annual petrol consumption in Austria. Such replacement of fossil fuel makes a saving of around 50,000 tonnes of CO2 each year.

CarTrawler, the leading B2B provider of car rental and mobility solutions to the global travel industry, has today announced a controlling equity investment in excess of €100m from TowerBrook Capital Partners L.P. (“TowerBrook”), an international investment management firm. This investment will help drive CarTrawler’s next stage of growth, as the Company strengthens its balance sheet during this period of unprecedented disruption to the global travel market and prepares to benefit from the easing of travel restrictions.

CarTrawler’s established market position, international footprint and sophisticated data capabilities allow it to play an important role for airlines and other travel partners, as well as car rental firms, in enhancing their customers’ experience and driving revenues. While the travel sector faces a period of acute pressure due to COVID-19, CarTrawler’s broad offer and range of business partners position it well to benefit when demand recovers.

Cormac Barry, CEO of CarTrawler, said: “This investment will allow CarTrawler to come out of this period of unprecedented disruption with a stronger platform for growth. CarTrawler is a world-class travel technology player, with an exceptional workforce, tremendous intellectual property and strong relationships with our partners and suppliers. CarTrawler is integral to the car rental and mobility industry, creating a mutually beneficial network effect that drives significant value for all and this is why partners such as American Express, Alaska Airlines, easyJet, Hotels.com, KLM, TravelStart and Emirates choose to maintain long-term partnerships with CarTrawler. Like many companies in the travel sector, we have experienced material trading impacts as a result of the Covid-19 but the crisis will pass, and this deal will allow us to further enhance our proposition to our partners and our suppliers. TowerBrook is an ideal partner for CarTrawler as our objectives are closely aligned and their deep operational experience and strong network will enable CarTrawler to not only return to previous growth levels but further expand and scale our business”

Gordon Holmes, Managing Director and Chief Investment Officer of TowerBrook, said: “We welcome the opportunity to support a business that employs hundreds of people and provides a valuable service to the travel industry. The lockdown measures implemented in response to COVID-19 have presented enormous challenges, even for well managed and attractively positioned companies like CarTrawler. However, the Company’s value proposition is, if anything, even more relevant post-COVID 19 than before. CarTrawler’s management, breadth of relationships and positioning provide an excellent platform to serve its customers and achieve its long-term growth ambitions as the travel market recovers.”

PJT Partners acted as financial advisor to CarTrawler. Kirkland & Ellis, McCann FitzGerald, Liberty Corporate Finance, PwC and EY provided additional advice to the Company and Management. Matheson and Sidley Austin provided legal advice to TowerBrook, and Morgan Stanley acted as their financial advisers. Alvarez & Marsal and Boston Consulting Group provided additional guidance.

We are proud to announce that two of TowerBrook’s portfolio companies have been ranked in the top 3% of this year’s Frenchweb.fr ranking of French Tech companies, the FW500.

Groupe OVH secured first place overall with Infopro Digital taking 11^th place.  The report can be read in full here.  We are delighted that the growth potential for these businesses, their management teams and employees has been recognised in this way.

Reproduced from What I Learned This Week by kind permission of 13D Global Strategy & Research

What is the next big thing?  Over four decades, 13D has identified the next big thing well ahead of others.  The next one that’s coming, in our opinion, is the upending of shareholder primacy.

In 2006, we drafted an outline for a new book to be titled, Compassion is Good for Business.  We understood then that America’s singular, short-term focus on the bottom line was good for the economy short-term, but devastating long-term.  13D was founded at a time when the pendulum was at the opposite end of the cycle – entrenched managements weren’t acting in the interests of the shareholder and we did our part with 175 of our recommendations being taken over between 1983 and 1986.  But now, its 35 years later and times and generational priorities are changing.  The evidence of these changing priorities are omnipresent with a global populist movement, rising wealth divide and a new generation coming to political and economic power that believes the current system is rigged against them.

This observation transcends partisan politics.  It is a theme that is going to affect the investment climate in the coming decade regardless of the party that controls Washington.  Investors should pay close attention to these developments.

Milton Friedman’s 50-year-old notion that the only responsibility of business is to maximize profits is starting to be rejected in favor of a model that cares equally about all stakeholders—employees, management, community, environment and shareholders alike.  As we have documented in these pages, a growing share of the global population —led by women, the beneficiaries of one of the largest wealth transfers in history, and millennials—increasingly want to work for, buy from and invest in companies that have mission, impact and sustainability at the core of their business models.

Looking farther ahead, it is possible that the corporate world could evolve into values-based and principles-based long-term thinking based on creating shared value.  This would revitalize the middle class, ensuring the creation of broad-based prosperity.  This will also entail a shift in what form of corporate leadership is most highly valued in society.

Scores of companies now tout their diversity and sustainability practices.  “ESG” (environmental, social, governance) principles are frequently applied to corporations and investments.  But customers and investors are increasingly not convinced.  They want companies that do more than talk about the impact they are having; they want companies that walk the talk.

Enter the antidote to greenwashing—the benefit or B Corp.  Unlike traditional corporate governance that requires maximization of profit above all else, B Corp governance expands the fiduciary duty of directors to balance the interests of all stakeholders, not just shareholders, when making decisions.  Profitability is defined by long-term goals aimed at benefiting the three Ps of sustainability: people, planet and profits.

While B Corp status is no guarantee of financial success, early signs are promising.  As Michele Gidden, a partner at the UK-based impact investment fund, Bridges Fund Management, recently noted about UK B Corps: “The idea is that over time, the B Corp stamp of approval will help companies attract new customers/ employees/ PR/ investors—while also creating a community whose members can learn from each other.. .the UK arm of the B Corp organization reported earlier this year that UK B Corps which had been certified for at least two years were growing at an average rate of 14% p/a.  Roughly one in three of these companies said they had reached new audiences since certification, and almost half said their B Corp status had helped them attract new staff.”

Not surprisingly, certified B Corps, on average, have much higher rates of employee ownership, health and wellness initiatives, gender-pay equity and paid primary-caregiver leave compared to other businesses.  As Jay Coen Gilbert, co-founder of the B Corp movement, observed recently for Forbes: “Benefit corporations are able to execute on a long-term plan, not react to short-term market pressures. . .That is something every CEO, every long-term investor, and everyone with a 401 (k) should want to see more of in other publicly-traded companies.”

Critically, B Corps are reevaluated every three years by the certifying organization B Lab to ensure they maintain the standards of the program, which looks at the impact on communities, workers, customers and the environment.  Every aspect of a business is analyzed, from supply chain to facilities to ingredients.  Not unlike Moody’s or S&P ratings, but for the impact of a business on society.

B Corps are no longer a niche.  Launched in 2006, there are now over 2,750 certified B Corporations across 150 industries in 64 countries, including the likes of Patagonia, Allbirds, Athleta, Warby Parker and Triodos Bank. Companies and capital markets are paying attention.  Among the recent developments outlined last week by Gilbert for Forbes, consider the following:

• In February, TowerBrook Capital became the first mainstream private equity firm to certify as a B Corp. A month later, Swiss private bank Lombard Odier became a Certified B Corp. Lombard Odier believes sustainability is nothing less than an economic revolution, representing “the most fundamental shift in the history of humanity” and “perhaps the single biggest investment opportunity in history” as well.
  
• In May, Avon agreed to an all-stock sale to Brazil-based beauty brand Natura valued at $2 billion. The combined cosmetic entity will be the fourth-largest pure-play beauty group in the world, boasting 6.3 million representatives, 3,200 stores and about 200 million consumers. As Gilbert points out:
  Missing from almost all of the reports of the purchase was a deeper story on emerging business trends: by voting to approve an all-stock sale to Natura (B3-NATU3), Avon’s directors became the first directors ofan existing U.S.-listed, publicly traded company (NYSE-A VP) to vote to upend shareholder primacy by adopting a corporate governance structure that’s purpose is to create long-term value for all stakeholders, not just shareholders.
  Five years earlier, Natura became the world’s largest B Corp in the world by promoting transparency and sustainable business practices across the board. At about the same time, it also became one of the first companies in the world to share an Environmental Profit & Loss to account for the natural capital it uses throughout its business value chains and their societal impacts.Conducting and sharing an EP&L gives both Natura and its investors better ability to manage and plan for the long-term transition to a lowcarbon economy—a significant advantage looking forward as consumers, investors and central banks increasingly stress the urgency of dealing with the planet’s climate emergency. Not coincidentally, since adopting the B-Corp model, Natura’s share price has doubled from roughly R$27 to R$56.
• In June, global giant Unilever acquired Olly Nutrition, joining Seventh Generation, Ben & Jerry’s, Sir Kensington’s, Pukka Herbs, Mãe Terra and Sundial as the seventh B Corp in Unilever’s portfolio.
• Two weeks ago, Saitex, the Vietnam-based sustainable denim manufacturer became the only apparel manufacturer in Asia to achieve B Corp status.  The company produces an average of 18,000 pairs of jeans every day—feeding the denim demand of American brands like Everlane, J. Crew, Edwin USA, Target, and Eileen Fisher, among others.  Saitex claims its manufacturing process recycles 98% of the water used during production, reducing water consumption for each pair of jeans from 80 liters to one.  Its LEED-certified, zero-waste factory in Ho Chi Minh City is powered by renewable energy, including solar and biomass.Following the success of the Vietnam factory, Saitex is planning on opening more facilities in the U.S.  Many view Saitex as the turning point for the B Corp—a sign that manufacturers are thinking about the same levels of accountability as the consumer-facing brands selling their products.

Back in 1978, the original supply siders—Jack Kemp, Jude Wanniski, Art Laffer, Robert Mundell and Bob Bartley—kept quoting Victor Hugo: “Armies cannot stop an idea whose time has come. No army can stop an idea whose time has come. Nothing is as powerful as an idea whose time has come. There is one thing stronger than all the armies in the world, and that is an idea whose time has come.”