MDP Explores Magellan Divestiture –

Madison Dearborn Partners, a private equity investment firm with offices in Chicago and London, agreed last month to buy National Mentor from Magellan Health Services Inc. National Mentor is the human services division of Magellan.

Madison Dearborn will pick up the last of Magellan’s non-core divestitures at a price of $121 million, which will be financed with $15 million in interest-bearing promissory notes and debt from FleetBoston Financial.

“We are very excited about working with Mentor, and its management team,” said Tim Sullivan, a managing director at Madison Dearborn in a statement. “Mentor’s positions within the human services marketplace, together with increasing demand for such services, makes the company an attractive investment for Madison Dearborn.”

The deal is expected to close in Magellan’s third fiscal quarter. UBS Warburg is advising Magellan in the transaction.

Mentor will be Madison Dearborn’s ninth investment in a health-related company. Previous and current investment in the industry include Cerner Corp., Dialysis Centers of America Inc., Digineer, Genesis Health Ventures, Health Management Associates, Path Lab Holdings Inc., Spectrum Healthcare Services Inc. and Team Health Holdings LLC.

Madison Dearborn typically invests between $30 million and $400 million in each transaction, targeting businesses in communications, basic industries, consumer products, health care and financial services. The firm is currently investing Madison Dearborn Capital Partners III LP, which raised $2.22 billion in 1999. The firm’s fourth fund is expected to close this quarter on more than $3.5 billion.