$2.4 billion deal KKR will buy Sedgwick Claims Management for $2.4B

Jan. 28--With a $2.4 billion deal announced Monday, New York investment firm KKR will take over Memphis-based Sedgwick Claims Management Services Inc.

The agreement signed with Sedgwick by KKR & Co. L.P., formerly known as Kohlberg Kravis Roberts & Co., is more than twice as high as the $1.1 billion that investors affiliated with Stone Point Capital LLC and Hellman & Friedman LLC paid for Sedgwick in 2010.

The deal is expected to close by the end of March.

"This is a normal part of their cycle," Jason Hood, chief administrative officer and chief legal officer for Sedgwick, said in an interview. "Private equity firms invest with the idea that at some point when they can realize a good return, that they will get out of their investment."

Sedgwick has more than 11,000 "colleagues," as the firm calls its employees -- nearly two-thirds of them are claims adjusters or examiners -- in about 200 offices in the United States and Canada. In Memphis, the firm employs more than 700 at the East Memphis headquarters as well as a claims center and a call center.

"Of the vast majority of the 11,000 colleagues, they won't even sense that there is a difference," said Steve Penman, Sedgwick's chief operating officer.

One of the larger private employers in Memphis, Sedgwick is "clearly the largest third-party administrator in the industry by a margin of double" the firm's closest competitor, Illinois-based Gallagher Bassett Services Inc., Penman said.

For clients ranging from small firms to Fortune 100 companies, Sedgwick handles about 2.1 million claims representing more than $11 billion in payments, according to the firm. Developed over 20 years, Sedgwick's proprietary technology system, called Juris, administers claims and provides clients "with amazing amounts of data," Penman said.

The firm also provides "productivity management" services for managing absenteeism, medical leave and the like. It also handles credit card warranty claims.

Of the company's revenue, which will reach a little over $1 billion for 2013, about half comes from handling workers' compensation claims, about 20 percent from liability insurance claims and the rest from health care-related, disability and other areas.

Hood, echoing a statement by Sedgwick chief executive officer David North, praised KKR as a pre-eminent private investment firm and noted the New York firm's experience in insurance, health care risk and technology investments.

Hood said the value Sedgwick brings to its clients, value that has grown with acquisitions since 2010, helps account for the new $2.4 billion deal.

___

(c)2014 The Commercial Appeal (Memphis, Tenn.)

Visit The Commercial Appeal (Memphis, Tenn.) at www.commercialappeal.com

Distributed by MCT Information Services