Oak Investment Is Selling PayFlex for $202 Mln

Oak Investment Partners is set to exit PayFlex Holdings after five years.

Yesterday, Aetna announced it was buying PayFlex, an Omaha provider of web-based benefit administration services, for about $202 million. The deal is expected to close during the second half of this year. Aetna will buy PayFlex using available resources, a spokesman says. The transaction will be neutral to Aetna’s financial results, according to a statement.

In 2006, Oak Investment Partners invested roughly $40 million to acquire a majority of PayFlex. Other investors include Mark Huber, PayFlex’s chairman, co-founder and largest individual shareholder. Bob Moyle, a PayFlex cofounder, also owns a stake as well as company management, a source says. Both Huber and Moyle are now part of Corporate Ventures, an Omaha investment bank.

Aetna is buying all of PayFlex, including Oak’s stake, a different source says.

PayFlex was put up for sale earlier this year. The auction began in February with a focus mainly on financial buyers and a limited number of strategics, the second source says. However, strategics were very interested in PayFlex and outbid PE firms, the person says. “Aetna paid a price above what PE could reach,” the source says.

PayFlex was sold for a strong valuation and a double-digit EBITDA multiple, the source says. “It was a very good outcome for Oak,” the second source says.

Oak Investment, which has offices in Norwalk, Conn., Palo Alto, Calif. and Minneapolis, typically invests $25 million to $150 million per deal. It usually buys stakes of at least 20%. Oak focuses on technology, consumer internet/new media, financial services technology, healthcare information and services along with clean energy and retail.  The VC firm’s investment in PayFlex came from Oak Investment Partners’ Fund XII, which raised $2.6 billion in 2006. Oak’s fund XII has an IRR of 2.1%, according to March 31 data from the Oregon Public Employees Retirement Fund.

Aetna did not disclose if it used outside financial advisors, the spokesman says. Oak Investment was advised by Jim Bunn, Reed Welch, Jon Steele, Kate Crespo, Nick Potter of Raymond James & Associates.