WEX to Acquire Evolution1, Payment Solutions firm in Healthcare Industry

WEX says the acquisition advances its strategy to provide solutions to high-growth industries with complex payment systems.

WEX Inc. (NYSE: WEX), a leading provider of corporate payment solutions, and Evolution1, a leader in cloud-based technology and payment solutions in the healthcare industry, announced that they have entered into a definitive agreement for WEX to acquire Evolution1 for $532.5 million in cash.

The transaction is expected to be accretive to adjusted net income in the first 12 months after close, excluding acquisition costs, and to close in the third quarter of this year.

“The acquisition of Evolution1 advances WEX’s long-term strategy to extend our scalable business model into high-growth, high-value markets with complex payment systems,” said Melissa Smith, WEX’s president and chief executive officer. “As a leading provider of technology-based solutions that simplify healthcare payments, Evolution1 will enable WEX to address multiple aspects of the healthcare payment system, expanding our addressable market while building on our growth in the fleet and travel space.

Similar to WEX, Evolution1 has established strong partner loyalty through its innovative technologies, and together we will enhance our position in an attractive vertical that will serve as the cornerstone of WEX’s Healthcare solutions strategy.”

Jeff Young, chairman and chief executive officer of Evolution1, said, “WEX is a great fit for Evolution1 both culturally and operationally, enabling the business to enhance its leadership position in the consumer-directed healthcare payments space. WEX is well established as a premier payment solutions provider, and we will now have the ability to leverage its expertise in payment processing, account servicing and transaction processing to meet our customers’ increasing healthcare management needs.”

Significant Healthcare Market Opportunity
The payment system within the healthcare industry consists of three primary parties – consumers, providers and payers, with employers and exchanges as intermediaries – that all have different payment relationships and responsibilities according to an intricate set of business rules.

To date, WEX has focused on virtual product solutions for payer to provider payments, which accounts for almost $1 trillion dollars of annual spend industry wide. This will continue to be an area of further opportunity for the company.

WEX also sees an opportunity to address other aspects of the healthcare system, consumer to provider payments, as more spend is shifting toward consumer controlled. Through the acquisition of Evolution1, WEX will build on its existing B2B business model, providing payment services to intermediaries such as exchanges and third party administrators (TPA) that have direct contact with consumers.
Evolution1 currently has an addressable market of more than $1 billion in revenue with a meaningful and growing market share position. This market opportunity is expected to double by 2019.

Evolution1 – A Leading Provider
Evolution1 is a leading provider of cloud-based technology and payment solutions that help simplify the healthcare experience for millions of employers and consumers. In 2013, Evolution1 processed over 65 million transactions and $5 billion in payment volume.

To date, it serves 90,000 employers and 10 million consumers in the U.S. and Canada. The company’s powerful, all-in-one, multi-tenant technology platform, card products, and mobile offering supports a full range of healthcare account types.

This includes consumer-directed payments for Health Savings Accounts (HSA), Health Reimbursement Arrangements (HRA), Flexible Spending Accounts (FSA), Voluntary Employee Beneficiary Associations (VEBA), and defined contribution and wellness programs.

Evolution1 has approximately 500 partners using and distributing solutions, among health plans, TPAs, financial institutions, payroll companies and software providers.

Headquartered in Fargo, ND, Evolution1 has more than 300 employees including an experienced senior management team that brings deep software, payments and healthcare expertise.

Transaction Details
WEX Inc. and Evolution1 have entered into a definitive agreement through which WEX will acquire Evolution1 for $532.5 million, which will be funded through cash on hand and WEX’s existing credit facility.

This transaction is expected to generate approximately $42 million in present value of tax benefits to WEX and is expected to be accretive to adjusted net income in the first 12 months after close, excluding acquisition costs. The transaction, which has been unanimously approved by the boards of directors of both companies, is subject to regulatory approvals and other customary closing conditions and is expected to close in the third quarter of this year.

BofA Merrill Lynch acted as financial advisor to WEX while WilmerHale provided legal counsel. Deutsche Bank acted as financial advisor to Evolution1 while Weil Gotshal & Manges provided legal counsel.

Source: WEX Inc.