Wall Street Journal // June 21, 2016
Anna Wilde Mathews and Matt Jarzemsky
PITTSBURGH NONPROFIT IS WORKING WITH MERGER-ADVISORY FIRM CAPM TO FIND BUYER FOR HVHC
Highmark Health is seeking to sell its vision unit, which could bring in around $2 billion, after the Blue Cross Blue Shield insurer suffered losses in its core health-coverage business.
The Pittsburgh nonprofit is working with a merger-advisory firm CapM, which over the past few months has been in contact with potential buyers in the benefits business and among private-equity firms, people familiar with the matter said. It isn’t clear when and if there will be a deal.
The Highmark unit, known as HVHC, includes a retail chain called Visionworks, which has more than 700 stores in 42 states, and an optical-insurance arm known as Davis Vision. HVHC was a bright spot for Highmark in 2015, with profit of around $122 million on revenue of about $1.5 billion.
CapM has told prospective buyers that the unit is projected to have revenue of around $1.65 billion in 2016, with adjusted earnings before interest, taxes, depreciation and amortization of around $190 million, the people said. A typical valuation for such a company would be around 10 times Ebitda, they said.
A Highmark spokesman said the company is “routinely contacted by people interested in this non-core asset of ours. We always keep our options open.” Highmark isn’t in need of a cash infusion, he said. CapM officials couldn’t immediately be reached.
Highmark operates large Blue Cross Blue Shield insurance plans in Pennsylvania, West Virginia and Delaware. The company had a loss last year of $85 million on revenue of $17.7 billion. It suffered steep losses on its government business, mainly due to Affordable Care Act plans, which the company says it is making changes to improve.
Highmark has sued the federal government in an effort to claim money it says it is owed under an ACA program.
Insurance rating agency A. M. Best Co. this month downgraded the outlook on Highmark’s insurance operations to negative from stable, pointing to the ACA losses.
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