Thursday, July 8, 2010

MultiPlan a 3 Bagger for Carlyle Group & WCAS

Private equity underwriters (PEU's) will deal MultiPlan, America's largest preferred provider organization. The Carlyle Group and Welsh, Carson, Anderson & Stowe will sell MultiPlan for $3.1 billion to BC Partners and Silver Lake Partners.

The Carlyle Group purchased MultiPlan in 2006. The amount was not disclosed. Carlyle added Viant, owned by WCAS, and PHCS. Neither purchase price was revealed. How much did Carlyle make from MultiPlan via management fees and special distributions over the last four years? The public won't know as the deal is private.

However, Carlyle wanted one number shared. The WSJ stated the politically connected PEU will make more than three times its investment in MultiPlan. This is Carlyle's latest cash in, partly designed to beat changes to carried interest taxation. It's also good to let investors touch their money now & then.

Buying prices undisclosed, while selling proceeds are broadcast widely? It's new fund marketing time.

MultiPlan will pass on deal costs to the health insurance plans it serves. How much will interest expense go up? How will increased valuations work their way through depreciation schedules and goodwill amortization? Will BC Partners and Silver Lake expect a lower rate of return than Carlyle & company?

What will Carlyle do with their proceeds? Buy HealthScope, an Australian for-profit hospital chain, or Tenet Healthcare, a domestic for-profiteer? Stay tuned.
PPACA is a boon to PEU's.

Update: Ferrer Freeman & Co. owns part of MultiPlan. This fact was omitted from Carlyle's press release.