AIG American International Group Inc

By Liz Hoffman and Dana Cimilluca 

Private-equity firm Hellman & Friedman LLC is nearing a deal to buy health-care services provider MultiPlan Inc. for about $7.5 billion including debt, in what would be one of the largest recent leveraged buyouts.

Hellman & Friedman is in advanced talks with MultiPlan's owner, Starr Investment Holdings LLC, according to people familiar with the matter. A deal for MultiPlan, which processes claims for big insurers, could come this week, they said. As always, there is no guarantee an agreement will be reached.

It has been a fallow stretch for private-equity firms, which have struggled to make acquisitions as a result of high valuations and choppy debt markets.

Starr, which is part of the insurance and investment conglomerate run by former American International Group Inc. chief Maurice "Hank" Greenberg, paid $4.4 billion for MultiPlan in 2014.

Starr and its co-investor, Swiss asset manager Partners Group, put up about $1.4 billion and borrowed the rest, according to one of the people. It is the biggest-ever acquisition for Starr, which Mr. Greenberg founded after leaving AIG in 2005.

Since Starr bought the company, Multiplan's annual earnings before interest, taxes, depreciation and amortization have risen by more than 50% to about $650 million, this person said.

The expected deal is set to be a big win for Starr and shows that even amid the dearth of activity, there are still big gains to be reaped from well-chosen private-equity buyouts. In fact, MultiPlan, which has traded private-equity hands several times, has been a consistent winner.

Carlyle Group LP and Welsh, Carson, Anderson & Stowe bought the company in 2006 and sold it four years later to BC Partners and Silver Lake for about $3 billion.

Carlyle more than tripled its money, while Silver Lake and BC Partners more than doubled theirs, people familiar with the matter have said.

MultiPlan was founded in 1980 as a network of New York hospitals and is now one of the biggest independent U.S. preferred-provider organizations. These companies organize and manage networks of doctors and hospitals on behalf of insurers. MultiPlan counts Cigna Corp. and Humana Inc. among its clients. It has about 900,000 health-care providers under contract and manages 40 million insurance claims a year, according to its website.

Hellman & Friedman, founded in 1984, has raised a total of $35 billion over the years. Notable investments it has made include discount supermarket chain Grocery Outlet Inc., consulting firm Wood Mackenzie Ltd. and Getty Images Inc.

Starr didn't run a traditional auction to sell MultiPlan, according to people familiar with the matter. It had been considering recapitalizing the business by using new debt to pay itself a dividend when Hellman & Friedman made an offer, one of the people said.

Write to Liz Hoffman at liz.hoffman@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

(END) Dow Jones Newswires

May 04, 2016 02:49 ET (06:49 GMT)

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