San Fran Shop Eyes Prepaid Health Benefits Co.

Target: Evolution Brands Inc.

Sponsor: Genstar Capital LLC

Seller: Evolution Brands

Genstar Capital LLC is in talks to buy Evolution Benefits Inc., a company that makes a prepaid benefits card called the “Benny,” which customers can use to pay for medical benefits, according to a regulatory filing with the Federal Trade Commission.

The San Francisco-based buyout shop will make the investment out of Genstar Capital Partners V LP, according to the filing. Genstar closed that fund in June 2007 with a total of $1.55 billion. The seller is listed in the filing as Evolution Benefits Inc.

Evolution Brands has more than 4 million Benny cards in circulation and provides card and software services to more than 340 administrative service organizations, according to its Web site. Customers can use the prepaid card for health care-related accounts, such as flexible spending accounts, health reimbursement accounts and health savings accounts. Robert Patricelli, the former chairman and CEO of Value Health, a specialty managed-care company, and a former executive with CIGNA Corp., founded Evolution Benefits in 2002.

According to the company, prepaid cards are more convenient for customers, since they eliminate the process of submitting forms and receipts and waiting for reimbursement. This can result in more employees enrolling in health savings accounts and tax savings for employers, according to the company’s Web site.

LBO firms have a somewhat active history of targeting prepaid card companies. In 2007, JLL Partners paid $455 million to buy ACE Cash Express, which provides prepaid debit cards as well as check-cashing and payday loan services. In 2008, Warburg Pincus was in talks to invest in Green Dot Corp., a Monrovia, Calif.-based company that offers prepaid MasterCard or Visa cards to people with limited or poor credit histories, as Buyouts reported at the time. It appears, however, that Warburg Pincus never consummated the deal.

Genstar Capital, which manages $3 billion, typically targets companies in the life sciences, health care services, industrial technology, software, and business services sectors.

Executives at Genstar Capital and Evolution Benefits were not immediately available for comment.