Aveta mandates Jefferies for sale process

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Aveta Inc, a New Jersey-based managed care service provider, is in the midst of a sale process being run by Jefferies, a source familiar with the company and two industry sources told mergermarket.

Aveta, which provides Medicare Advantage plans in Puerto Rico, Arizona, California and Illinois, is fielding second round bids this month. Potential buyers are likely to be private equity firms, said the first industry source.

Aveta is owned by a consortium of sponsors and hedge funds that includes The Straus Group, Angelo Gordon, Biltmore Capital Group and Redwood Capital Management.

Recent conversations with industry bankers peg current M&A valuations in the space at 7x EBITDA, with public companies like Universal American and HealthSpring trading at about 6x EBITDA and 7x EBITDA, respectively. The source familiar estimated that the company would sell for around USD 1bn.

Based on Aveta’s EBITDA run-rate of roughly 200m and its USD 450m of funded debt, the company is approximately 2.25x levered, according to the second industry source and Standard & Poor’s.

The B+ rated company’s capital structure contains a USD 60m revolver due 2015 that was untapped as of 30 September, and USD 450m of TLs all due in 2015, according to S&P. The loans all have change-of-control puts at par, a CLO analyst said.

Aveta’s USD 150m Libor+ 600bps TL due 2015 is bid at 100.75-101.3, up from 100- 100.9 on 15 March, according to Markit.

Aveta has an annual revenue of more than USD 1bn and is one of the largest providers of managed healthcare services in the United States. It is considered the largest provider of Medicare Advantage in Puerto Rico, said an industry banker not involved.

Its Puerto Rico-based operations include MMM Healthcare, PMC Medicare Choice, and MSO of Puerto Rico. Aveta’s 2007 acquisition of PMC Medicare Choice was initially considered a drag on the provider and lowered EBITDA close to zero, resulting in a liquidity crunch, as reported. But management was able to successfully renegotiate contracts and increase margins. It has since completed two dividend deals totaling USD 263m last year.

In the US, Aveta operates North American Medical Management which operates in Arizona, California and Illinois.

Calls to the company as well as to the sponsors and Jefferies were not returned.

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