(Reuters) - Private equity firm Centerbridge Partners LP said on Wednesday it had agreed to buy a majority stake in U.S. health insurer Highmark Health’s managed vision care benefits unit Davis Vision unit for an undisclosed amount.
The deal provides a cash boost to the Pittsburgh-based nonprofit as it tries to cope with losses as a result of covering patients in Pennsylvania, Delaware and West Virginia under U.S. President Barack Obama’s Affordable Care Act.
Centerbridge will also take a minority stake in Highmark’s retail subsidiary, Visionworks, with Highmark maintaining majority control. Peter Bridgman, whose experience includes at Luxottica Group Spa’s Pearle Vision and LensCrafters, will join Visionworks as CEO.
“We believe the combination of Davis Vision with Superior Vision presents the opportunity to create the leading national managed vision benefit offering,” said Dan Osnoss, managing director of Centerbridge in a statement.
Centerbridge also owns a majority stake in Superior Vision, a Linthicum, Maryland-based provider of vision plans, including comprehensive eye exams, eyeglasses and contact lenses, to companies. It plans to combine Superior Vision with Davis Vision, with Highmark having a minority stake in the combined company.
San Antonio, Texas-based Highmark is the fourth-largest operator of Blue Cross and Blue Shield healthcare plans in the United States. It had consolidated revenue in 2015 of $17.7 billion.
Its two business units, Davis Vision and Visionworks, together make more than 3.5 million pairs of glasses a year. Visionworks has more than 700 retail stores across the U.S.
Highmark has requested large premium increases to help offset losses incurred as result of being on the ACA exchange. Many insurers have complained that the costs of treating patients on the exchanges was higher than anticipated.
CapM Advisors acted as financial advisor to Highmark and Harris Williams & Co. provided advisory services. Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel.
Barclays and Macquarie Capital acted as financial advisors to Centerbridge. Willkie Farr & Gallagher LLP served as legal counsel.
Reporting by Lauren Hirsch in New York; Editing by David Gregorio