Greenwich, Connecticut-based private equity firm General Atlantic announced that it will acquire a controlling 52 percent interest in Emdeon Business Services for about $1.2 billion (€946 million) in cash and debt.
The acquisition will be financed with approximately $925 million in bank debt and approximately $320 million in equity from General Atlantic. The remaining 48 percent will be owned by Emdeon, an interest worth about $300 million. The entire transaction values Emdeon Business Services at about $1.5 billon.
General Atlantic has received commitment letters for the bank debt from Citigroup Global Markets, Deutsche Bank Trust Company Americas and Bear Stearns. The close is expected in the fourth quarter of this year.
Though General Atlantic has considerable expertise in both the healthcare and outsourced services industries, “it was really our focus in the healthcare sector that identified this firm as a leading company,” said Pat Hedley, senior VP of marketing and communications at General Atlantic. “We began the dialogue with them over a year ago, and over the summer had closer conversations about how we could work together.”
The growth of the healthcare billing industry will be driven by a continued shift to electronic processing, and cross-selling of services, said Hedley, and Emdeon “have a very good, established franchise among both payers and providers, and they have an opportunity—and we’ll continue to pursue that opportunity—to cross-sell new products and services to that customer base.”
“The things that attracted us to Emdeon Business Services were its current position, and its broader strategy to target payers and providers,” said Jonathan Korngold, head of General Atlantic’s healthcare investment group. “We really view this is as more of an acceleration of that growth objective. With our capitalization behind them, it’s taking advantage of a lot of the momentum that the company’s built to help take out costs between payers and providers—particularly as things move from a more paper-based environment to more of an electronic-based environment.”
Emdeon Business Services processes some 2.5 billion transactions annually, involving a total of $700 billion in insurance claim dollars. Last month, Emdeon sold its software firm, Emdeon Practice Services, to software company Sage Group for $565 million in cash.
General Atlantic has approximately $10 billion of capital under management, and currently has holdings in 50 portfolio companies, with about half of these companies based outside the United States.