CCMP Capital Advisors prevailed in the auction for Eating Recovery Center, a deal expected to produce a 4x return for exiting shareholder Lee Equity Partners, Buyouts has learned.
New York-based CCMP’s winning bid concludes what was said to be a robust process conducted by Moelis & Co, resulting in a deal valued at $550 million to $600 million, according to sources familiar with the matter.
Finalists for the provider of eating-disorder-treatment services included FFL Partners, Welsh, Carson, Anderson & Stowe and Apax Partners, some of the sources said.
Lee Equity is poised to make about 4x on its investment, according to another source with knowledge of the matter. The Denver company’s revenue, EBITDA and capacity also all grew fourfold during the firm’s ownership, the source said.
New York’s Lee Equity, founded by legendary PE investor Thomas H. Lee, completed its recap of ERC in January 2013. The investment was made through the firm’s Fund I, which closed on about $1.2 billion in 2008.
The deal for ERC underscores continued interest from the PE community in the eating-disorder segment. Underlying fundamentals that appeal to sponsors include significant barriers to entry, regulatory tailwinds including the 21st Century Cures Act, as well as a misalignment between supply and demand.
The segment remains highly fragmented, presenting what investors view as an opportunity for consolidation and tremendous runway for growth.
At ERC, a payer mix dependent primarily on in-network commercial pay — with zero exposure to Medicare or Medicaid reimbursement — added to its appeal, one of the sources noted.
ERC, founded in 2008, offers treatment for eating disorders including anorexia, bulimia and binge-eating disorder. The company provides services for female and male adults, adolescents and children through inpatient, residential, partial hospitalization and outpatient programs.
ERC has expanded to about 26 facilities in 10 metro areas, from about 10 facilities in three metro areas in 2012. The company has locations across Texas, Washington, Illinois, Ohio, Colorado, South Carolina and California.
CEO Ken Weiner will continue to lead ERC under its new ownership, one of the sources said.
As the Moelis process for ERC comes to a head, another eating-disorder-treatment platform of scale that has yet to trade hands is Webster Capital Management’s Discovery Practice Management, which does business as Center for Discovery.
Webster in early 2016 tapped Cain Brothers to explore a sale of the Los Alamitos, California, company, but ultimately opted to hold off on launching a process. The company was projecting about $20 million of EBITDA for 2016, sources previously said.
In other recent activity, Centre Partners Management in September 2015 announced the sale of Monte Nido Holdings, another West Coast eating-disorder company, to Levine Leichtman Capital Partners.
Potential takeover candidates might also include privately held Renfrew Center and Emily Program, the latter backed by Triple Tree Capital Partners.
For CCMP, the deal follows the C$345 million IPO of its portfolio company Jamieson Wellness on the Toronto Stock Exchange. CCMP, in reducing its stake to just below 40 percent, realized about 3x its investment in the vitamin maker, Buyouts reported earlier this month.
Representatives of Lee, CCMP, Moelis, Apax, Welsh Carson and FFL declined comment.
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