Health Care Deal News: Spotlight on Managed Care
GTCR, LLC is selling APS Healthcare to Universal American Corp. (NYSE: UAM) for approximately $277.5 million. Based in White Plains, New York, APS is a provider of specialty health care solutions, including disease management and care coordination, clinical quality review and behavioral health services. Under terms of the deal, UAM will pay $147.5 million to retire APS debt; issue $80.0 million in shares of UAM stock; and commit to up to $50.0 million in performance-based contingent payments. This acquisition, valued at 0.9x revenue, combines APS’s specialization in Medicaid with UAM’s expertise in Medicare Advantage plans, allowing the company to better service dual eligibles. APS’s 400 customers include Medicaid agencies, state and local governments, health plans, employers and labor trust groups. BofA Merrill Lynch is underwriting a $150.0 million term loan and $50.0 million revolving credit facility, which will help pay off APS indebtedness. Goldman Sachs and Credit Suisse provided UAM and APS, respectively, with financial advice on this deal.
Even though Pittsburgh’s Highmark has been occupied with buying hospitals and physician groups in Pittsburgh, it is not too busy to buy another health plan. It has acquired Blue Cross Blue Shield of Delaware, a franchisee of the national Blues Association that serves 400,000 members. Under terms of the arrangement, Highmark will pay $500,000 annually for 10 years to develop health care work force programs,; and $500,000 annually for 10 years to Delaware charities. This implies a purchase price of about $10.0 million, or just $25.00 per member. This merger allows one of the smallest and financially vulnerable Blues plans to join with a larger entity capable of sustaining the smaller one. Delaware’s Insurance Commissioner approved this deal December 30, 2011.
Aetna (NYSE: AET) is poised to make acquisitions that are larger than the nearly $1.4 billion in deployable capital that the company has available this year. Their strategic plan includes the areas of Medicare, Medicaid, building out their technology and engaging consumers. In particular, CEO Mark Bertonini has said that the health insurer will seek to acquire consumer-data companies to expand its market. Specifically, these companies will help AET find new customers who buy individual policies. Currently, such customers account for only 2% of its health care membership. If the overall goal is to become more of a retail company, AET may have to follow the lead of JC Penney (NYSE: JCP) and other retailers who have discovered over the past three years that they must offer discounts to attract and keep customers. Unless AET is targeting the top “1%,” it may find it hard going to lure in customers for individual policies, whose bleak job prospects (if they have any job at all) leave them with little discretionary cash. But you never know. Like the roadside stand that sells a glass of lemonade for $5,000.00, all you need is one customer... Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today