Ross pledges $1bn for healthcare investments

Wilbur Ross is forming a joint venture with the former chairman of CVSCaremark to take advantage of opportunities created by US healthcare reform.

Distressed investor Wilbur Ross is making a push into healthcare investments, committing to spend more than $1 billion to seize opportunities in the “dislocation” that will be created by healthcare reform in the US.

Ross is teaming up with Edwin “Mac” Crawford, former chairman of CVSCaremark, which was formed in 2007 through the merger of CVS and Caremark.

The joint venture will co-invest in and restructure healthcare companies.

“A lot of the changes [with healthcare reform] will cause major dislocation. That’s what will create the opportunities,” Ross told PEO in an interview.

Wilbur Ross

The JV will look into services and distribution segments in the healthcare sector, as opposed to companies dealing in products.

Ross’ firm, WL Ross & Company, looks to enter new markets by teaming with “superior management teams first, once we’ve decided we like the idea of the industry.

“It’s much better to start out and have the fellow running the business go with you on the due diligence and develop the programme,” Ross said.

Limited partners have expressed an appetite for investments in the healthcare sector, Ross said. “Our LPs have called me and are quite excited about the idea of joining forces with Mac,” he said.

In March, US President Barack Obama signed a sweeping healthcare reform bill into law that mandates every person in the US must have healthcare insurance. The law is expected to eventually bring in 30 million new entrants into the US healthcare system. Some firms like Linden and SV Life Sciences have raised fresh capital for investments in the sector.

“Healthcare is the largest industry in the US, and probably in the world, and it’s growing,” James Garvey, chairman and managing partner of SV, told PEO in a prior interview. “The technology is continuing to solve problems, or make problems more livable. Healthcare is always defensive, healthcare stocks generally do well because there’s built-in demand. People get sick, go to the hospital, take medications, have procedures.”

WL Ross, which was formed in 2000 when Ross and five other executives left Rothschild, will continue to focus on its more traditional areas, including manufacturing and financial services investing. The firm has made healthcare investments in past funds, including in assisted living companies.

Ross is currently raising its fifth distressed fund, targeting $4 billion, according to a fundraising report from RR Donnelley. Ross declined to comment on the fundraising.

WL Ross created a similar joint venture in 2008 when it hired John Kanas, chief executive officer of North Fork Bancorp, to advise on financial services investments. Since the hiring, Ross has made several bank investments, including the most recent, joining an investor group that is injecting $100 million in Sun National Bank, the second largest commercial bank in New Jersey, for a 25 percent stake.