The Carlyle Group has purchased MultiPlan Inc., which calls itself the largest independent preferred provider organization, or PPO, in America.
MultiPlan is currently owned by Donald Rubin, its founder and sole owner until 2004, when General Atlantic Partners entered to purchase a minority stake. Both holders will be completely liquidated in the transaction, which is expected to close in the early second quarter. Terms weren’t disclosed, but Buyouts learned that the deal is structured as one third Carlyle equity and two thirds debt. The purchase price is reportedly around $1 billion.
The company has about 820 employees, with headquarters in New York City and major offices in Rockville, Md., Arlington, Texas, and Brookfield and Green Bay, Wisc. The deal is slated to close in the second quarter.
Already sizeable, MultiPlan grew into a national player in 2004 with the purchase of U.S. Health from BCS Emergis for $213 million, which gave it a stronger presence in southern and western states, outside its core focus in the Northeast. The two networks had roughly equal size at the time. MultiPlan currently offers access to more than 4,200 hospitals, 90,000 ancillary care facilities and 450,000 physician and specialist.
A spokeswoman for MultiPlan noted that consolidation among MultiPlan’s clients-insurance companies-created the environment where growth is required for PPOs. Deals among insurers include the acquisitions by UnitedHealth Group of Oxford Health Plans in 2004 and PacifiCare Health Systems in 2005 and Aetna’s buyout of HMS Healthcare in 2005.
“Insurance companies are buying other insurance companies, which makes for bigger clients, which makes for memberships that are more national. Our clients increasingly need a national presence,” said the spokeswoman with MultiPlan.
Enter Carlyle. Karen Bechtel, a Carlyle MD who worked on the deal, said it happened quickly, in only two and one half months. She said the company will use acquisitions to grow alongside organic growth.
Although the company already operates in 50 states, “We want to be the best in every location. We want to enhance and exploit that [market position] even further,” said Bechtel. The company’s national market share is over 20% she said and it is “quite a ways back” to second place. One competitor is Welsh, Carson, Anderson and Stowe’s portfolio company Concentra Health Services.
Bechtel said the management team was solid, which, as always is important. “When you’re in private equity, finding a talented management team is pretty critical,” she said.
Carlyle successfully navigated the purchase and sale of health maintenance organization Connecticare, which it bought in 2001 with Liberty Partners and sold in 2005 to HIP Health Plan of New York.
Other deals Carlyle has completed recently in healthcare include the third quarter buyout of LifeCare Holdings for $555 million, out of the $7.85 billion Carlyle Partners IV, vintage 2004. Other portfolio companies include InteliStaf Group Inc., MedPointe Inc. and Align Technology Inc.
The sale highlights a transition already underway for Multiplan’s founder Rubin, who is over 70-years-old and is heavily involved in philanthropic and other cultural pursuits. He recently opened the Rubin Museum in New York City which houses one of the largest collections of Himalayan art in the country. The art, largely from Tibet and some of it dating from the 14th century, also crowds the company’s offices.