Reuters reported Friday that Apax partners, owners of One Call Care Management and Genex, is “preparing to bid close to $2 billion for peer Helios, people familiar with the matter said, in what would be one of the workers’ compensation sector’s biggest mergers.”
The story indicated private equity firms Hellman & Friedman and TPG Capital are also looking at Helios. Word is there is quite a bit of interest in the big PBM.
Leaving aside the Reuters reporters’ confusion about ACA and workers’ comp, what’s notable is the timing – the bid will be in later this month – and the valuation – a very hefty price indeed.
Helios, the product of a merger between Progressive Medical and PMSI, is the largest workers’ comp PBM. The company also has ancillary businesses in MSAs and DME/HHC; in total revenues are likely above a billion dollars. That makes for perhaps a two-times revenues valuation. Of course, that might not be “high” at all; valuations are based not on top line but on earnings, and Helios is a very well run firm in a profitable space.
Given PMSI was bought by H.I.G. Capital some years back for about $40 million, then purchased for probably 8-10 times that figure a couple years ago and merged with Progressive, that’s a truly remarkable accomplishment. Kudos to Executive Chair Eileen Auen and co-CEOS Tommy Young and Emry Sisson – and their very talented and focused staff.
Before anyone jumps to any conclusions, let’s recall that Apax is reportedly “preparing” a bid – and other investment firms are also very much in the running. This is a very attractive asset, so do not be surprised if the process takes a bit longer than expected, and a different firm comes out on top.
What does this mean for you?
perhaps more industry consolidation. perhaps not.