H.I.G. nears pair of deals for Arizona eye-care companies

H.I.G. Capital is negotiating a pair of deals for two medically focused Arizona eye-care companies, according to two sources.

The Miami sponsor is in discussions to acquire SouthWestern Eye and Barnet Dulaney Perkins with the intention of merging the two, the sources said.

Combined, the two ophthalmology providers would account for north of $10 million in EBITDA, with the larger SouthWestern generating about $6 million to $7 million of the total, they said.

SouthWestern expects to command a double-digit level of Ebitda, one of the sources said, implying an expected valuation of at least $60 million to $70 million or so for its part.

There is no assurance that the transactions will close, the sources said, one of whom noted that H.I.G. intends to complete the deal with BDP first.

BDP, with a statewide presence, offers a range of services including Lasik surgery, advanced cataract surgery, glaucoma treatment, ophthalmic plastic surgery, and retina and cornea surgery. SouthWestern, based in Mesa, offers Lasik, optometry and ophthalmology services in the Phoenix, Mesa and Sedona areas.

While the anticipated transactions are not the result of formal sales processes, BDP entered into exclusivity with another PE firm in 2016 following a formal process, but the deal never closed, one of the sources said.

Market view

Broadly speaking, the vision space is viewed as being the next dental, which has seen significant consolidation in the past few years. While the number of true platform companies in ophthalmology is limited, several smaller-sized deals are on the market or approaching completion, the sources said.

Sponsors flocking to the space view ophthalmology as having tremendous runway for growth, favorable reimbursement rates and an attractive patient population, among other things.

Waud Capital Partners earlier this month emerged as the winning suitor for Minnesota Eye Consultants, concluding a Provident Healthcare-run sales process for the Minneapolis network of ophthalmology-focused surgery centers generating about $4 million of Ebitda, one source said at the time. The process for Minnesota encompassed about 20 PE firms, another source said.

Two PE-backed vision-related companies of size are FFL Partners-backed EyeCare Partners, which is considered one of the largest medically focused optical retailers in the country; and Varsity Healthcare Partners-backed EyeCare Services Partners, which offers general, surgical and retail optometry as well as ophthalmology services.

FFL’s EyeCare Partners generates EBITDA of roughly $35 million, whereas Varsity’s EyeCare Services Partners is approaching $20 million, one of the sources noted.

H.I.G. has deep roots in the healthcare space and isn’t new to vision. Its current portfolio includes Calhoun Vision, which makes an adjustable intraocular lens technology for surgeons, as well as ForSight VISION5, which makes a noninvasive treatment for eye diseases including glaucoma.

In dental, assets currently bracing for a sale include Black Canyon Capital’s Jefferson Dental, which is working with Moelis on a process; and West Coast Dental, whose Houlihan Lokey-run process is expected to come to a head by the end of February, as initially reported by The Deal in January.

An H.I.G. spokeswoman didn’t return requests for comment on Thursday, while officials with SouthWestern and BDP couldn’t be reached.

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A patient in the operating room during ophthalmic surgery. Photo courtesy ©iStock/robertprzybysz