news release
Acquisition of Passport Health Communications, Inc.
6 November 2013 - Experian, the global information services company, is pleased to announce that it has signed a definitive agreement to acquire Passport Health Communications, Inc. ("Passport Health"), a leading provider of data, analytics and software in the US healthcare payments market, subject to Hart-Scott-Rodino regulatory approval in the US and other customary closing conditions. The purchase price is US$850m, payable in full at closing, which will be funded from Experian's existing committed bank facilities.
Don Robert, Chief Executive Officer of Experian, commented:
"Since entering the US healthcare payments market five years ago, we have steadily expanded our position through both organic investment and acquisition, and our business is growing strongly. We are now taking the next step and the acquisition of Passport Health will make us a clear leader in this high growth and attractive market. With our newly combined product range, we will offer our clients in the US healthcare industry a competitive one-stop-shop to manage risk and to satisfy their payments requirements. We are excited about the growth opportunities created by this combination and we greatly look forward to welcoming our new Passport Health colleagues to Experian once the transaction completes."
Business description
Founded in the United States in 1996, Passport Health provides services to healthcare providers across all 50 US states, helping them manage the administrative tasks associated with obtaining payment for healthcare services.
Passport Health is a data and software provider, with sales to over 2,500 hospitals in the US and more than 9,000 other healthcare providers. Its products are used by healthcare providers to manage payments between patients, commercial payers (such as insurance companies) and government programmes. Its services include verifying a patient's identity and ability to pay, estimating a patient's bill and establishing a patient's eligibility for financial and charitable aid. Passport Health provides its services through a modular suite which allows its customers to access all its products on one common user interface, integrated into the healthcare provider's own systems. It also has access to considerable sources of healthcare payments and claims data, spanning a ten year period.
The US healthcare industry
Healthcare industry in the US is a US$3 trillion industry that consumes approximately 18% of US GDP. It includes healthcare providers that range in size from small physician clinics and individual hospitals, to large healthcare groups.
The administrative tasks associated with obtaining payment for healthcare services have become increasingly costly for healthcare providers, while healthcare payment regulations have increased in complexity. Patients are becoming responsible for a larger portion of their healthcare bill and reimbursement rates covered by insurance policies often fluctuate. This is leading healthcare providers to make improvements in the way they gather information from patients, how they determine patient eligibility for insurance and charitable aid, and how the final bill gets presented.
To reduce costs, hospitals are increasingly relying on data and analytics in order to automate the billings cycle and to make it more efficient. This is driving a period of accelerated growth in the US healthcare payments market with spending by hospitals of US$1.9bn in 2012, forecast to reach over US$3bn by 2017¹.
Strategic rationale
Experian entered the healthcare payments market in 2008, with the acquisition of SearchAmerica, which focused on helping hospitals to manage their billings and cash flows. Experian further consolidated its position in 2011 with the acquisition of Medical Present Value, which extended its client footprint into physician practices and clinics and added new capabilities in insurance claims. Subsequently, Experian merged the two businesses to create Experian Healthcare, which in the year ending 31 March 2014 is expected to generate revenue of US$75m, with organic revenue growth in the mid-teens.
The acquisition of Passport Health will significantly expand the Group's market reach, round-out Experian's portfolio of products, add new sources of data and bring scale to Experian's healthcare business. Synergies include:
Increased addressable market
Experian's client base will increase significantly, providing considerable opportunity to cross-sell Experian products to Passport Health clients and vice versa.
· The number of hospitals served will increase from c. 500 to nearly 3,000, representing approximately 45% of hospitals in the US.
· The number of other healthcare providers served will increase from c. 350 to more than 9,000.
Expanded product suite
Experian's portfolio will expand from 14 to 28 products, creating a full-suite covering the entire healthcare payment process and enabling hospitals and physician clinics to streamline their healthcare payments processes.
· Experian Healthcare is strong in the provision of reporting, benchmarking, registration, reimbursement, fraud detection and prevention, and patient collections; all of which are key elements within the healthcare billings cycle.
· Passport Health will enhance these capabilities and add new ones in other segments of the billings cycle, including patient engagement, scheduling, claims processing, payment processing and patient follow-up.
New sources of data
The number of healthcare payment records held by Experian will also increase dramatically, rising from c. 1bn to 4bn records, providing the potential for development of new analytical tools. Experian also expects to realise efficiencies through the substitution of third party data with Experian data.
Financials
Passport Health has attractive financial characteristics, with revenues that are largely subscription based, renewal rates of c. 95% and average contract duration of 3 to 5 years. In the year ending 31 December 2013, Passport Health is expected to generate revenue of US$121m, representing organic growth of 23%, and EBIT of US$30m. In the year ending 31 December 2014, Experian expects Passport Health revenue to reach approximately US$145m (of which 84% is already booked and contracted), with EBIT margins in the high twenties.
Following completion, Experian expects Passport Health to be immediately enhancing to Benchmark earnings².
Passport Health is being acquired from private equity investors, management and employees and will form part of Experian Credit Services activities in North America.
Notes:
¹ Frost & Sullivan, U.S. Hospital Revenue Cycle Management: Overview and Outlook, 2012-2017.
² Benchmark earnings represents Benchmark PBT less attributable tax and non-controlling interests. Benchmark PBT is defined as profit before amortisation and impairment of acquisition intangibles, goodwill impairments, acquisition expenses, adjustments to contingent consideration, exceptional items, financing fair value measurements, tax and discontinued operations. It includes the Group's share of continuing associates' pre-tax results.
Contact:
Experian
Nadia Ridout-Jamieson Director of Investor Relations +44 (0)20 3042 4215
James Russell Director of Corporate Communications
RLM Finsbury
Rollo Head +44 (0)20 7251 3801
Jenny Davey
This announcement is available on the Experian website at http://www.experianplc.com.
About Experian
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2013 was US$4.7 billion. Experian employs approximately 17,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
For more information, visit http://www.experianplc.com.
Financial information is based on audited financial statements, unless otherwise stated.
Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements.
