Veronis Suhler Eyes First Deals for Fund III –

In what could prove to be its first transaction since closing its third fund earlier this year, VS&A Communications Partners, the private equity arm of investment bank Veronis, Suhler & Associates, this month agreed to acquire HCIA Inc., a Nasdaq-listed health-care information-service company, for $135 million in cash.

Under the terms of the deal, which likely will close early in the fourth quarter, VS&A will pay HCIA shareholders $11 per share for each of the approximately 11.851 million shares outstanding, plus an additional $5 million for options to acquire an additional 1.9 million shares, said Jeffrey Stevenson, VS&A president and managing general partner.

The group this month also agreed to acquire Hanley-Wood, a Washington, D.C.-based business-to-business publishing company in a deal reportedly valued at $250 million, although VS&A Managing Director and Principal Marco Sodi declined to comment on the transaction value or provide information on the deal.

Baltimore-based HCIA is the first health-care information company VS&A has acquired, Stevenson said, adding it will serve as a platform company for other health-care, pharmaceutical, and managed-care company acquisitions.

“The Internet and pharmaceutical spaces are underserved with quality content providers,” said George Pillari, chairman and chief executive of HCIA. “There is a decent field of candidates, but those [sectors] would be the ones we lean toward.”

HCIA, with approximately 500 employees and $65 million in 1998 sales, collects data from hospitals, managed-care and insurance companies, federal and state governments, physicians and patients. It distributes this information to its 7,000 customers that include hospitals, insurance companies and pharmaceutical companies.

HCIA’s share price had dropped to approximately $3.75 per share this spring from $9 per share last September, driving management to seek alternative avenues to increase shareholder value, Pillari said. In May, the company hired Deutsche Banc Alex. Brown to evaluate alternatives that resulted in this agreement with VS&A, Pillari said. At press time the stock was trading at $10.16.

The agreement to acquire Hanley-Wood comes three months after Michael Hanley, chairman of the board of Hanley-Wood, announced his decision to retire and seek a buyer for the company. The company had retained Morgan Stanley Dean Witter to manage the sale.

With access to more capital, the company will be looking for acquisitions in and outside its core business of residential construction. Hanley-Wood employs 380 people and publishes 26 different titles.

VS&A Communications Partners III closed on $1 billion earlier this year to focus on investments in the media, new media, publishing, broadcasting and communications industries (BUYOUTS Feb. 22, p. 14).