CD&R makes 2.5x its money on naviHealth, exiting in under two years

NaviHealth, which aims to reduce the cost of post-acute healthcare, trades hands yet again in a deal valued around $2.5 billion including debt, according to sources. 

Less than two years into its investment, Clayton, Dubilier & Rice generated a 2.5x multiple of invested capital on naviHealth through its sale to UnitedHealth Group’s Optum unit, PE Hub has learned.

An Optum spokesperson confirmed its purchase of naviHealth, whose tech-enabled tools and services help healthcare providers reduce the costs associated with post-acute care. 

The deal was first reported by the Nashville Business Journal on Tuesday but no formal announcements have been made. CD&R did not return requests for comment and a representative for Cardinal Health, which also owned a stake in naviHealth, declined to comment.

In connection with the transaction, CD&R received approximately $1.1 billion in cash proceeds, producing a gross IRR of approximately 65 percent for the New York firm, one of the sources said.

Three sources said the deal placed naviHealth’s total enterprise value at around $2.5 billion, comprising approximately $2 billion in equity and the remainder in debt.  

That represents an EBITDA multiple of around 18x, based upon the asset’s approximately $135 million of EBITDA, two of the sources said. 

Short-hold

The deal marks a quick exit for CD&R. 

The buyout firm in August 2018 completed its acquisition of a 55 percent stake in naviHealth from Cardinal Health, one of the world’s largest distributors of pharmaceutical and medical products. 

Cardinal, which retained its remaining stake with an option to buy back all of naviHealth in five years, said it expected to receive after-tax net proceeds of $650 million. The company bought its majority stake in naviHealth in 2015 from Welsh, Carson, Anderson & Stowe. 

It is unclear where CD&R and Cardinal’s respective stakes stood at the time of the sale to Optum. 

Additional financial terms weren’t disclosed in the 2018 deal; however, sources familiar with the matter told PE Hub at the time the deal was valued at around $1.2 billion – less than half its value today. 

CD&R, which invested out of Fund X, invested roughly $400 million in naviHealth, two of the people said. 

Founded in 2012, naviHealth uses technology to reduce the cost of healthcare and improve care for patients after they are discharged from the hospital. It collaborates with health plans, risk-bearing doctor groups and hospitals, providing software to improve care for patients in post-acute care settings like home-health agencies.

The company manages care services for 4.5 million Medicare Advantage members and nine of the top 10 health systems. 

“Bringing together naviHealth’s post-acute clinical model and data-driven insights with Optum’s community-based healthcare and clinical capabilities will help meet the growing demand for highly personalized, value-based care coordination for patients with complex health conditions across the entire care spectrum,” an Optum spokesman wrote in an email to PE Hub

NaviHealth will continue to be led by the current team under CEO Clay Richards, the spokesperson said, operating as a standalone entity under OptumHealth, the healthcare services and delivery business of Optum.

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