WEX Signs Agreement To Acquire Discovery Benefits
Advances WEX’s employee benefits platform with the addition of one of the fastest-growing solutions providers in the marketplace
WEX, a leading financial technology service provider, announced the signing of an agreement to acquire Discovery Benefits, Inc. (DBI), a high-growth employee benefits administrator to more than one million consumers across all 50 states. DBI plays a key role in the consumer-directed healthcare ecosystem by offering account administration technology and services.
DBI has been a well-established partner of WEX’s Health division for more than a decade, trusting WEX’s proven healthcare technology platform to manage a portion of its consumer-directed account administration. This acquisition will combine one of the industry’s fastest-growing benefits administrators—known for its leading benefits account technology—with WEX’s dynamic, cloud-based technology platform. The acquisition is expected to accelerate WEX’s growth rate, provide partners and customers with a more comprehensive suite of products and services, and expand the Company’s diverse go-to-market channels to include consulting firms and brokers.
“The acquisition of Discovery Benefits enhances WEX’s position as a leading technology platform in the healthcare space and aligns with our longer-term strategy to further reduce exposure to macroeconomic forces,” said Melissa Smith, CEO of WEX. “This combination strengthens our overall value proposition through new partnerships, integrated products, and the opportunity to offer a more comprehensive set of solutions. We are excited to extend our reach into the rapidly-growing employee benefits market and look forward to building on our track record of success in the healthcare space.”
According to the latest research from Devenir on the top 20 HSA providers, DBI is the fastest-growing provider. The company generated approximately $100 million in revenue during 2018. Under the terms of the agreement, WEX will pay a total cash consideration of approximately $425 million, including $50 million which will be deferred until January of 2020. In addition, the transaction is expected to generate approximately $50 million in net present value of tax benefits. WEX is in advanced discussions with its relationship banks to expand available borrowing capacity and expects to announce further details regarding these arrangements in the near future. The sellers of DBI will also retain an equity interest of approximately 5% of the entity resulting from the combination of WEX’s Health division and Discovery Benefits. WEX expects the acquisition to be immaterial to adjusted net income in year one and yield approximately $15 million in annual run-rate synergies within the first 24 months following the close of the transaction. The transaction is expected to close in the first quarter of 2019, subject to regulatory approvals and other customary closing conditions.