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January 28, 2013 10:24 pm

Managed Healthcare first round bids due in early February, sources say

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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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First round bids for Managed Healthcare Associates are due in early February, a source familiar with the situation and an industry banker told mergermarket.

As previously reported by mergermarket, Diamond Castle Holdings appointed Deutsche Bank last year to start a sale process for the Florham, New Jersey-based company, which offers services to the so-called alternate site healthcare market.

Managed Healthcare is looking for a very high valuation, and at the same time the auction is expected to be a popular one with private equity firms, said the source familiar, the banker, and an industry source.

The company is looking for a sale price of 12x EBITDA, the source familiar said. The industry source also said the sell side is seeking a price of over 10x EBITDA. Both sources said the company’s EBITDA is in the mid-USD 80m range.

The source familiar added that the company’s private equity owner, Diamond Castle, would like to see it sold to a strategic buyer.

Stephen Andrew, CFO for Managed Healthcare, declined to comment. Deutsche Bank and Diamond Castle didn’t return calls.

Lenders are willing to provide a loan package at 6.5x EBITDA, said the source familiar. The leverage available for the company is around 6x EBITDA, said the industry banker.

One issue that could cause concern for buyers is that CEO Douglas Present plans to retire once the company changes hands, but the company has groomed able executives under him and a successor is in place to take over, said a source with knowledge of the company but not involved directly in the deal. Andrew declined to comment on Douglas Present or his own plans to leave the company.

Diamond Castle Holdings acquired the company in partnership with MHA’s management in 2007 for an undisclosed sum. MHA generated about mid-USD 30m in EBITDA at that time, according to the mergermarket article last June.

The company has made a number of acquisitions since 2007, including, most recently, the acquisition of Navigator Inc., a group purchasing company in January 2011, and Tidewater Group Purchasing, formally a part of Omnicare, Inc. (NYSE: OCR) in May 2011, both for undisclosed sums.

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