ResMed's Sale of MatrixCare Shows Willingness to Recycle Capital From Rationalizing Underperforming Units, Jarden Says

ResMed's (ASX:RMD) deal to sell its MatrixCare and HealthCare First businesses is "a good example" of the company's willingness to recycle capital from rationalizing underperforming units, Jarden said in a Wednesday note. The company built its out-of-hospital software portfolio through various strategic acquisitions, but its residential care software division has seen softer growth in recent quarters due to low growth and margins, the equity research firm said. The sale of the businesses to Frazier Healthcare Partners carries a price tag of $490 million, which is well below the $876 million ResMed paid for both MatrixCare and HealthCare First, "pointing to a large loss on sale that is yet to be quantified" by the company, Jarden said. Meanwhile, ResMed will implement an enhanced and accretive buyback, and Jarden expects further upside to earnings per share from a potential increase to the repurchase program. Following the sale of MatrixCare and HealthCare First, ResMed anticipates its remaining software as a service portfolio reaccelerating back to high single-digit top-line growth. Jarden maintained an overweight rating on ResMed while reducing its price target to AU$40.20.