Whoa! DentaQuest Bought by Canadian Insurer for $2.475 Billion

Dentaquest headquarters in Boston, MA

Texas Medicaid dental providers should know that DentaQuest was purchased by Canadian group benefits giant, Sunlife Financial Inc, that country's largest.  The sale took place back in early October.

The price?  $2.475 billion US.

Bloomberg reported:

The acquisition gives Sun Life the second-largest provider of dental benefits in the U.S., more than doubling its employee-benefits revenue there and adding to its portfolio of health and group benefits in the country. Boston-based DentaQuest, founded in 2001, has more than 33 million customers in 36 states and about 2,400 employees. DentaQuest is the largest provider of Medicaid dental benefits and is expanding its Medicare Advantage and U.S. Affordable Care Act businesses, giving Sun Life access to the U.S. government market.

Who knew?

The following release was published both on DentaQuest and Sunlife's websites:

Sun Life to acquire DentaQuest, a leader in dental benefits in the United States

  • Strategic fit for Sun Life in attractive dental segments, more than doubling its U.S. employee benefits revenues and complementing its existing portfolio as a leader in health and group benefits
  • Positions Sun Life as a leading dental benefits provider
  • DentaQuest is the second largest provider of dental benefits in the United States, serving more than 33 million members
  • Leading manager and provider of Medicaid dental benefits in the U.S. with growing Medicare Advantage and commercial businesses
  • Immediately accretive to both underlying EPS and ROE; highly cash generative
  • Conference call to be held on Monday, October 4, 2021, at 8 a.m. ET, details below

WELLESLEY, Mass., BOSTON and TORONTO, Oct. 3, 2021 /PRNewswire/ - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF), through its U.S. business, has entered into a definitive agreement to acquire DentaQuest, for US$2.475 billion (approximately C$3.1 billion). Headquartered in Boston and founded in 2001, DentaQuest is the largest provider of Medicaid dental benefits in the U.S. with growing Medicare Advantage, commercial and U.S. Affordable Care Act (ACA) exchange businesses. Currently DentaQuest has more than 33 million members in 36 states and approximately 2,400 employees.

Upon close of the transaction, DentaQuest will become part of the Sun Life U.S. business. Sun Life U.S. currently offers dental benefits through employers for their employee benefits plans and has an extensive national commercial dental network. The acquisition of DentaQuest aligns to Sun Life's business strategy of being a leader in health and group benefits.

"We're excited about the acquisition of DentaQuest and expanding our leadership into the U.S. dental benefits space," said Kevin Strain, President and CEO of Sun Life. "DentaQuest is a values-driven industry leader dedicated to improving oral health, with a focus on underserved populations and access to dental care. The addition of DentaQuest is consistent with our strategy to focus on health and group benefits in the U.S.  More importantly, it supports both our Purpose to help Clients achieve lifetime financial security and live healthier lives and our sustainability focus on improving health and wellness outcomes for all."

Upon close, DentaQuest will more than double the size of Sun Life's U.S. employee benefits business by revenues and will position it as a leader in providing government dental benefits, alongside another leading business at Sun Life U.S., its medical stop-loss business.

"DentaQuest is a great organization that provides high-quality dental care and insurance benefits to tens of millions of people in the United States, with an emphasis on government programs, a fast-growing segment that now rivals the size of the employee benefits space," said Dan Fishbein, M.D., President of Sun Life U.S. "DentaQuest brings Sun Life a leading dental business, and we plan to build on DentaQuest's strength in dental programs along with Sun Life's national commercial provider network and distribution team. DentaQuest's strong values are highly compatible with our own, focused on delivering quality oral health care to all communities. We're thrilled to have DentaQuest's team join us."

"DentaQuest's combination with Sun Life marks an important next step in our long-term transformation that will enhance and broaden our existing capabilities," said Steve Pollock, President and Chief Executive Officer of DentaQuest. "A variety of longstanding barriers have created significant unmet oral health needs, which are disproportionately felt by historically marginalized groups. With support from Sun Life, we will be even better positioned to fulfill this critical need, and we look forward to partnering with them as we begin this exciting next chapter."

Over the past 20 years, DentaQuest has pioneered a differentiated approach to oral health that emphasizes prevention, innovation and expansion of value-based solutions, with a focus on underserved communities. DentaQuest innovated its Preventistry® model, which aligns providers, payors and members by focusing on access, quality care and measurable outcomes, with its broad and deep Medicaid dental network in the U.S. and its proprietary claims management system, Windward. In addition to its leadership in Medicaid and Children's Health Insurance Programs (CHIP) programs, DentaQuest has seen robust growth in its Medicare Advantage and other segments, including offerings through health plan partners, as well as individuals on the U.S. ACA healthcare exchanges.

Dental benefits are the second-most popular benefit after health insurance and are growing in importance because of the correlation between oral and overall health. Dental benefits programs continue to be an area of growth in employer and government benefits programs. Millions of Americans, especially low-income populations and the elderly, have insufficient access to dental care and benefits, spotlighting the importance of the work that DentaQuest does.

The transaction will also enable CareQuest Institute for Oral Health ("CareQuest Institute") to expand on its strategic priorities in support of its mission.  CareQuest Institute, the current parent organization of DentaQuest, is a U.S.-based nonprofit organization that seeks to advance a more accessible, equitable, and integrated oral health system, particularly for underserved communities. DentaQuest and CareQuest Institute will continue to work closely together following Sun Life's acquisition of DentaQuest. CareQuest Institute plans to deploy the proceeds from the transaction into programs and initiatives that advance its mission.

"Today marks an important milestone in our journey with DentaQuest to improve the oral health of all, and we believe that Sun Life is the right partner for DentaQuest going forward given their similar cultures and shared purpose," said  Myechia Minter-Jordan, MD, MBA, President and Chief Executive Officer of CareQuest Institute. "The transaction will also enable CareQuest Institute to expand on our strategic priorities in support of our mission. We are pleased that CareQuest Institute and DentaQuest will continue to work together closely so that we can advance our mission of creating a more accessible, equitable, and integrated health system."

DentaQuest's minority shareholder, Centerbridge, will also be selling its stake in DentaQuest. "It has been a great pleasure to work so closely with Steve Pollock and the DentaQuest management team, who stand out for their exceptional skill in delivering value for customers, members, and all stakeholders, always in constant pursuit of DentaQuest's important mission," said Dan Osnoss, Senior Managing Director of Centerbridge. "We are also honored by our association with our partners at CareQuest Institute, who make critical contributions to the wellbeing of so many people. Sun Life is a fantastic home for DentaQuest with complementary capabilities and an aligned mission, and we look forward to their success together."

The acquisition is expected to be immediately accretive, adding approximately C$0.17 to underlying earnings per share and 42 basis points to underlying return on equity in 2022 on an annualized basis. In 2024, upon realization of expense synergies, Sun Life expects the acquisition to add approximately C$0.24 to underlying earnings per share and 50 basis points to underlying return on equity. The transaction will be financed using a combination of cash and debt and is expected to close in the first half of 2022, subject to receipt of regulatory approvals and satisfaction of customary closing conditions.

Barclays is acting as exclusive financial advisor to Sun Life on the transaction.  Debevoise & Plimpton LLP is serving as legal advisor to Sun Life. Centerview Partners LLC, Morgan Stanley & Co. LLC and CapM Advisors are acting as financial advisors and Ropes & Gray LLP serves as legal counsel to DentaQuest in connection with this transaction. Willkie Farr & Gallagher LLP serves as legal counsel to Centerbridge Partners L.P. in connection with this transaction.

One Response

  • The ONLY way an insurance company/group/provider/whatever they call themselves is worth $2.475B is they are skimming it off the top, gouging payments, and earning the cogs behind the scenes….that’s it.

    As a company DentaQuest isn’t a producer of a product or commodity…they have no real product equity. Their only value is their ability to make someone some (a lot of!) money. It’s how that earning potential occurs that is highly suspect.

    They sure made their mint off of Texas taxpayers so far.

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