CAI earns more than 3x return on dental insurer

Canadian firm CAI has sold dental and vision insurer SafeGuard Health to MetLife, generating a 20 percent IRR on the investment.

Canadian firm CAI Private Equity has sold portfolio company SafeGuard Health Enterprises for an undisclosed amount to insurance company MetLife, earning more than three times return on its investment and generating an internal rate of return of more than twenty percent, said Les Daniels, the CAI Partner who led the deal.

SafeGuard provides dental and vision benefit products in California, Florida, Texas and Nevada through HMO subsidiaries. CAI bought the company in 2000.

“We acquired a good business; what we had to do was put in a good management team,” Daniels said. He estimated that CAI replaced half of SafeGuard’s senior management team during its seven years of ownership.

Since 2000, SafeGuard’s profits have since doubled and its earnings before interest, taxes, depreciation and amortisation have increase fourfold, Daniels said.

MetLife already administers dental benefits for 21 million people. The merger, expected to close by the end of the year, will add 1.8 million new customers. Both parties will benefit from the transaction, said SafeGuard chairman and chief executive James Buncher.

“MetLife has the problem of not having a dental HMO capability,” Buncher said.
“Safeguard is a smaller company, and because of its financial history its investment rating is in the B category, precluding it from certain very large companies that only invest in A-rated companies.”

When the two companies merge, MetLife will be able to offer its customers a dental HMO option, and SafeGuard will benefit from MetLife’s A rating, Buncher said.

Shattuck Hammond represented SafeGuard in the transaction.

CAI is currently investing its third, $375 million (€274 million) fund. The firm typically invests between $20 million and $75 million in each transaction.