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Centerbridge, Vistria seek minority stake sale of Sevita ahead of GP-led deal

Sevita, which offers various home- and community-based care services to the nation’s most in-need populations, has already produced gains for its current owners.

Centerbridge Partners and Vistria Group are looking to sell a sizable minority equity stake in Sevita, which will set the stage for a secondaries process for the provider of home and community-based specialized healthcare, according to multiple sources with knowledge of the matter. 

Barclays is advising on the minority stake sale; Evercore is working on the secondaries process; and Jefferies is engaged for additional advice, sources told PE Hub.

The minority stake sale process is ongoing and likely two to three weeks away from getting done, some of the people said. A variety of firms are participating, although it remains unclear how large of a stake will be sold. New York’s Centerbridge is the majority owner of Sevita, which last month rebranded from Civitas and previously did business as The Mentor Network. 

The company’s estimated 2021 EBITDA is around $300 million and sources expect the minority sale to value Sevita north of 10x EBITDA. That would suggest a transaction ultimately values Sevita in excess of $3 billion. 

Off the back of the stake sale, and once a value for the company is set, a secondaries process will start. This process has yet to fully ramp up, but sources said both Centerbridge and Vistria plan to remain investors in Sevita through a continuation fund on a pro-rata basis. 

A single-asset continuation fund generally allows limited partners in older funds that hold the asset to either cash out of their interests, and/or reinvest in the continuation pool. Such deals also bring in new investors, usually secondaries buyers, who become LPs through the continuation fund structure. Increasingly, big LPs have also started to invest in GP-led secondaries processes alongside traditional buyers.

Centerbridge invested in Sevita through its third fund, according to a regulatory filing. Centerbridge Capital Partners III closed in 2014 on $6 billion. Vistria invested in Sevita through its second fund, which closed on $872 million in 2017.

The size of the secondary will be determined once the minority stake sale closes, sources said. One secondaries buyer with knowledge of the deal said the firms could be targeting $800 million to $1 billion for the continuation fund.

“In the minority [sale] process, what the actual buyers want, that sort of drives how big the continuation fund is,” one of the secondaries sources said.

Several recent single-asset secondaries deals have had their valuations set by earlier minority stake sales. This is considered a strong mechanism because it gives the asset value market validation, as opposed to hiring one or more external firms to provide fair value assessments.

One recent example was Clearlake Capital’s single-asset process last year for Ivanti, which received a minority investment from TA Associates prior to the secondary.

History

In a short amount of time, Sevita has already produced gains for its current owners, returning more capital to shareholders via dividends than invested capital, sources said. Centerbridge and Vistria completed their take-private transaction in March 2019 at an enterprise value of $1.4 billion, providing an exit for slight majority owner Vestar Capital Partners. 

In February 2021, the company raised new debt to repay existing term loans and fund a $375 million distribution to shareholders, according to Moody’s. This followed a $100 million dividend payout in October 2019, just months after the take-private, the ratings agency said. 

Following the take-private, Sevitas also recruited a new seasoned leadership team led by CEO William McKinney. McKinney held previous senior leadership roles at Fresenius Medical Care, MedSpring Urgent Care and WellCare Health Plans.

Sevita serves adults and children with intellectual and developmental disabilities, individuals with complex care needs, people recovering from brain and spinal cord injury, seniors in need of daily support, children in foster care, adults and children with autism, and other individuals who may require care across a lifetime. 

The Boston-headquartered company operates through four business segments, providing care for 50,000 individuals in 40 states: Community Support Services (CSS), Specialty Rehab Services (SRS), Children & Family Services (CFS), and Adult Day Health (ADH).

Centerbridge and Vistria, meanwhile, are each repeat investors in and around both home- and community-based care as well as the treatment for complex populations. 

Indicating a strong relationship between the firms, the duo teamed up again about a year ago to acquire Help at Home, which provides in-home care to seniors and persons with disabilities. The deal was valued at approximately $1.4 billion, PE Hub wrote, with existing shareholder Wellspring Capital Management rolling equity in the deal to remain invested. 

Centerbridge followed late last year with the acquisition of Community Psychiatry Management, a provider of outpatient behavioral health services, from New Harbor Capital.

Elsewhere, Vistria recently generated more than a 4x return on its investment in Agape Care, a southeast provider of hospice care, a source with knowledge of the matter said. In September 2020 it sold St Croix Hospice, an end-of-life care provider serving the Midwest, to HIG Capital. The deal was valued at $580 million, PE Hub reported.

Representatives of Centerbridge, Vistria, Evercore and Barclays declined to comment. Jefferies did not immediately return a request for comment.