Shansby Invests in Mayo Clinic Spinoff

The Shansby Group, a San Francisco-based buyout firm, made a minority investment in an interactive health education Internet portal launched by the Mayo Clinic. Shansby was the exclusive outside investor in the deal, which is expected to formally close by the end of the year.

“We are not a fund that has gone out and done just any Internet deal,” said founding partner Gary Shansby. “The Mayo Clinic brand name is incredibly strong and the value of these types of enterprises is quite high.”

Other than saying it was “on the higher end of deals the firm has done,” neither Shansby nor the clinic would disclose details of the financing.

The Rochester, Minn.-based Mayo Clinic already operates a Web-based information service. Michael Wood, chief executive of the Mayo Foundation, said spinning off a for-profit business was the most effective way of developing a more sophisticated Internet service.

“This will give us the best ability to recruit and retain the highest quality management,” he said. “Our physicians will be actively involved to help produce the highest quality content.”

Wood added that all income generated from the Internet spin off will be directed toward education and research for the clinic. It is unlikely that the clinic will recruit additional investors to fund the spin off.

Shansby said he anticipates the yet-unnamed site to be profitable by 2002. Exit strategies for the spin-off include an initial public offering, acquisition or a repurchase by the clinic.

“The trustees of the foundation all understand what this can mean,” Shansby said. “An IPO is a strong possibility for the equity type of reward we will want.”

In a related story, News Corp. committed to invest $100 million in equity and $700 million in promotional services for a 10.8% stake in Healtheon/WebMD, the publicly traded health information and transaction network founded by Jim Clark.