Insurance claims services provider Sedgwick Claims Management Services, Inc. said Monday that private equity giant Kohlberg Kravis Roberts & Co. L.P. (KKR), together with Sedgwick's management, have agreed to acquire a majority stake in the company for about $2.4 billion.
The majority stake will be acquired by KKR and Sedgwick's management from the company's current group of investors that includes private equity firms Hellman & Friedman LLC and Stone Point Capital LLC. The transaction is expected to close during the first quarter of 2014.
David North, president and CEO of Sedgwick said, "We couldn't ask for a better partner in the next stage of Sedgwick's evolution. KKR has an exceptional record of investing in financial services companies and will be a valuable strategic resource for our organization. We share a commitment to continued innovation in the claims and productivity management industry."
Last Friday, media reports had indicated that KKR was close to buying Sedgwick for more than $2 billion. Sedgwick will be KKR's second acquisition of a claims service provider in a span of four months.
In September 2013, KKR agreed to buy privately-held automotive claims services provider Mitchell International Inc. from private equity firm Aurora Capital Group in a deal reportedly valued at more than $1 billion.
Sedgwick specializes in workers' compensation, disability, FMLA, and other employee absence; managed care, general, automobile, and professional liability, warranty and credit card claims services; fraud and investigation, structured settlements, and Medicare compliance solutions.
On an annual basis, Sedgwick handles more than 2.1 million claims and has fiduciary responsibility for claim payments totaling more than $11 billion.
In 2010, buyout firms Stone Point Capital LLC and Hellman & Friedman LLC acquired Sedgwick from Fidelity National Financial Inc. (FNF) as well as private equity firms Thomas Lee Partners L.P. and Evercore Capital Partners for about $1.1 billion.
Prior to that, the business was owned by insurance brokerage and risk-management company Marsh & McLennan Companies Inc. (MMC).
Hellman & Friedman is a private equity investment firm with offices in San Francisco, New York and London. Since its founding in 1984, H&F has raised and, through its affiliated funds, managed over $25 billion of committed capital.
Stone Point Capital is a private equity firm based in Greenwich, Connecticut. Stone Point serves as the manager of the Trident Funds, which have raised more than $10 billion in committed capital to make investments in the insurance, employee benefits and financial services industries.
KKR said that equity for the investment was provided principally by KKR's North American XI private equity fund. UBS Securities LLC, Deutsche Bank Securities, Morgan Stanley, Mizuho, KKR Capital Markets LLC and MCS Capital Markets LLC provided financing for the transaction.
Simpson Thacher & Bartlett LLP and Latham & Watkins LLP provided legal counsel to Sedgwick and KKR, respectively.
KKR has announced several other billion-dollar acquisitions in recent times. In mid-December 2013, the company agreed to acquire specialty finance company KKR Financial Holdings LLC (KFN) in an all-stock transaction valued at about $2.6 billion.
In November, KKR agreed to acquire commercial landscaper Brickman Group Ltd. LLC from Leonard Green & Partners L.P. in a deal valued at $1.6 billion. KKR also said in late September that it agreed to acquire the healthcare unit of Japanese consumer electronics giant Panasonic Corp. (PC) for an equity value of about 165 billion yen, or about $1.67 billion.
KKR closed Friday's trading at $24.56, down $1.21 or 4.70 percent on a volume of 3.68 million shares.
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