KKR, on a healthcare tear, builds medical-transport giant

While KKR & Co’s involvement in billions of dollars of combined healthcare deal activity was revealed in a single day last week, the groundwork for at least two acquisitions dates back several years, a partner at the firm said.

In the largest of the transactions, KKR-backed Air Medical Group Holdings bought American Medical Response, the ground ambulance unit of Envision Healthcare, in a deal valued at $2.4 billion. The Aug. 7 deal follows Air Medical’s April purchase of Air Medical Resource Group, another emergency air-medical-services provider.

Separately, the PE firm last week scooped up Covenant Surgical Partners from backers DFW Capital Partners, Iroquois Capital Group and PineBridge Investment.

KKR is also a significant investor in PRA Health Sciences, which last week bought Symphony Health Solutions, a provider of data and analytics to the life-sciences industry. The acquisition, announced the same day as the Envision and Covenant deals, includes an upfront payment of $530 million plus contingent payments.

“When you do a deal, and you balance risk and reward, you also think about what can make it exciting,” KKR Partner Jim Momtazee said in an interview with Buyouts, referring to the AMR transaction. “There are some really exciting things you can do when you integrate air and ground.”

By purchasing AMR through Air Medical, KKR owns the largest U.S. provider of medical transportation though its fleet of both the air and ground ambulances.

Momtazee, who leads the healthcare investment team at KKR and is the chairman of AMGH, said his firm had been tracking AMR for more than 12 years, having done diligence work on the business on previous occasions.

The firm’s familiarity with the business dates to its involvement in processes including that produced Onex Corp’s acquisition of EmCare and AMR in 2004, Momtazee said.

Onex bought the pair of subsidiaries from Laidlaw International in a transaction valued at $980 million, forming a combined entity called Emergency Medical Services Corp. Onex then took EMSC public in 2005.

KKR subsequently participated in the process that led to Clayton, Dubilier & Rice’s $3.2 billion take-private of EMSC in 2011, Momtazee said.

Last week KKR separately bought Covenant, an owner and operator of ambulatory surgical centers. Terms weren’t disclosed, but a source familiar with the matter previously told Buyouts the physician-services company generates EBITDA in the $30 million range.

KKR wasn’t involved in the formal process Piper Jaffray conducted in early 2016 for Covenant. Instead, the deal resulted from KKR’s longstanding relationship with the target’s CEO, Lew Little, Momtazee said.

KKR knows Little, who was appointed chief executive of Covenant in October 2016, through its previous investment in Harden Healthcare.

In 2010 KKR recapped the home health and hospice company then headed by Little. The exec held the CEO post at Harden about 11 years through its sale to Gentiva in 2013.

KKR also in August teamed up with Walgreens to take pharmacy manager PharMerica private in a $1.4 billion deal.

Action Item: KKR’s private equity portfolio: http://www.kkr.com/businesses/kkr-portfolio?page=Private_Equity

Photo of Jim Momtazee courtesy of KKR