Sizing Up the Superior-Davis Combination in Managed Vision Care

BALTIMORE and SAN ANTONIO, Texas—The two managed vision care companies – Davis Vision and Superior Vision – at the center of this week’s Highmark Health-Centerbridge Partners deal are “more complementary than overlapping” in their business, according to Superior Vision chief executive officer Kirk Rothrock.

“My view is that while we compete in the marketplace, there is not as much overlap as you might think,” Rothrock told VMail exclusively in a telephone interview Thursday. “So we now are really going to be able to have a combined coverage of a broader spectrum of customers in the marketplace,” he added, noting that this projection is dependent on the companies receiving regulatory approval for the transaction.

Regulatory approval of the deal is expected over the next three to six months, the companies said.

The transaction, as VMail reported Wednesday, involves the HVHC Inc. division of Highmark Inc. selling its Davis Vision business to the private equity firm Centerbridge Partners, which intends to combine Davis with its portfolio company Superior Vision. Highmark will acquire a minority interest in the combined Davis-Superior managed vision care company, according to the companies’ announcement.

In addition, Centerbridge has agreed to acquire a minority stake in HVHC’s optical retail company Visionworks, which operates 750 stores across the nation.

On the managed vision care side of the transaction, the new Davis-Superior Vision would cover about 33 million lives and rank as the new No. 3 player in this segment of the managed care market. The 33 million members of Davis-Superior would compare with Eyemed’s 47 million members and VSP Vision Care’s 82 million members (according to the companies’ websites).

Also, of the $1.6 billion in revenue generated in 2016 by HVHC, about $800 million was attributable to the Davis Vision segment of the company. (Visionworks also generated about $800 million in 2016 revenue, according to a Highmark spokesman.)

Until regulatory approval is received, Rothrock said it will be “business as usual” for the two managed care companies. “Until we get regulatory approval and we close on the sale, we are obligated to operate as independent entities,” he explained. “In the near term, it will be business as usual and leadership and management as usual for both organizations.” Superior Vision and Davis Vision will maintain their individual contracts with providers, Rothrock said.

Once the transaction closes, the companies will look to streamline how they interact with providers, he said.

Rothrock, while noting that he isn’t privy to specific information about the Davis customer base, said he believes the two companies are complementary with respect to their customer base. Superior Vision’s customers skew “a little more toward small employers,” he said, while Davis Vision skews more toward larger employers, including being part of the federal employee benefit plan.

The deal also gives the new entity more resources and tools that can make the customer experience better, Rothrock said. “The idea behind the acquisition and of putting these two companies together to become a larger entity is to be able to pool these resources to make that happen,” he noted. “Beyond those kind of benefits, we have not talked very specifically about what it practically means to put the two companies together after the closing.”

The complementary aspects of the deal extend to geography, as well. Superior, based in Baltimore, operates on a nationwide scope with business operations also in Sacramento, Calif. Its largest market is Texas, Rothrock said. Davis Vision, based in San Antonio, has substantial operations in Albany, N.Y.

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