Genstar, Nautic Top Off AXIA

Target: My ePHIT

Price: Undisclosed

Buyers: Genstar Capital; Nautic Partners

Financial Advisor: None

Legal Counsel: Buyers: Edwards Angell Palmer &

Dodge LLP

Accountant: Buyers: KPMG

The secret to healthy living, quite simply, is to not get sick at all. That’s a philosophy shared by preventive healthcare company AXIA Health Management and its two majority owners; Genstar Capital and Nautic Partners. The two private equity firms teamed up with healthcare vet Ben Lytle to form Tempe, Arizona-based AXIA in late 2004 and have recently crowned the platform with its fifth add-on acquisition.

“From the beginning, our idea for AXIA had five components,” Genstar Managing Director Rob Weltman told Buyouts. These include exercise, lifestyle management, emotional health management and evaluation, all of which were covered by AXIA’s previous four add-ons.

The fifth component—a Web-based front-end that essentially stitches the aforementioned sections together—is what Genstar and Nautic found in My ePHIT, the online prevention and wellness company that serves as AXIA’s most recent tack-on. Terms of the transaction were not disclosed, but Weltman did note that, including the acquisition of My ePHIT, AXIA is slated to generate north of $100 million in revenue this year.

With 15 million authorized users across the U.S., My ePHIT is an online program aimed at helping its users get involved in activities that promote physical fitness, good eating habits and behavioral management. To do so, it offers a Web-based community of doctors, psychologists, dieticians and trainers that sets the personal fitness goals of its clients and coaches them throughout the process.

My ePHIT’s target customers are employers and health plans “that want to provide more than the traditional take-care-of-you-when-you’re-sick healthcare model,” Weltman said.

“Increasingly, ‘wellness’ and ‘prevention’ are becoming buzz words in the HR community,” he added. “Companies are beginning to realize that with a little extra investment, they can lower their medical healthcare costs, lower absenteeism and increase productivity at their companies.”

The equity commitment in AXIA is split 50%/50% between Nautic and Genstar, Weltman said. For Genstar, the AXIA platform sits in Genstar Capital Partners IV LP, a $475 million fund raised in 2004. Fund IV has about two-thirds of dry powder left to be deployed. Nautic, meanwhile, is currently investing from its vintage-2001 Nautic Partners V LP, which closed on just north of $1 billion.

AXIA’s four other divisions include HealthCare Dimensions, a provider of fitness-oriented prevention programs; American WholeHealth Networks, which specializes in integrative medicine and services; Harris HealthTrends, a provider of personalized health management services; and, a web-based smoking cessation program.

Asked if Genstar and Nautic would cease making add-ons for AXIA, Weltman responded, “With these five companies, we have filled all the boxes. From a strategic point of view we don’t have to [pursue more acquisitions], but we will continue to be opportunistic as far as our approach to growing the company is concerned.”

While the AXIA platform is unique among private equity deals in the health and wellness sector, there have been a number of plays in the industry over the past year, particularly in the fitness segment.

Just last quarter Angelo, Gordon & Co.>Angelo, Gordon & Co. completed the $45 million acquisition of Crunch Fitness from Bally Total Fitness, while at about this time last year, Forstmann Little & Co. made its last-ever platform acquisition in the space—the $1.6 billion buyout of 24 Hour Fitness Worldwide Inc. MidOcean Partners and North Castle Partners are also believers in staying fit, as they count LA Fitness PLC and Octane Fitness Holdings Inc. in their portfolios, respectively. —A.N.