Marpai, Inc., an AI-technology company transforming the $22 billion Third-Party Administrator (TPA) market that supports self-funded employer health plans, announced today that it has signed a definitive agreement to acquire Maestro Health (“Maestro”), a leading TPA serving over 80 self-insured employers based in Chicago, Illinois. The merged company will serve over 40,000 employees lives at the closure, with combined proforma annual revenues of roughly $40 million in 2022. Significant cash of more than $20 million is projected on the combined balance sheet at closure, which will be used to finance the integration of the two firms. While Maestro has suffered significant operating losses as it has invested in growth, the joint venture hopes to achieve positive EBITDA within 18 months. Maestro’s in-house Clinical Management and Cost Containment skills will help Marpai provide better value to its clients and better health outcomes to its members. The purchase price of $22.1 million is due in April 2024, but the seller may finance it over four years if the Company meets its responsibilities under the agreement. The companies will work together to continue to provide innovative health plan administration for self-insured clients, fueled by technology. “Maestro shares our vision on how to improve healthcare for employees and family members covered by self-insured plans,” said Edmundo Gonzalez, CEO of Marpai.
Marpai, Inc. (“Marpai” or the “Company”) (Nasdaq: MRAI), an AI-technology company transforming the $22 billion Third-Party Administrator (TPA) market supporting self-funded employer health plans, today announced it has signed a definitive agreement to acquire Maestro Health (“Maestro”), a leading TPA servicing over 80 self-insured employers, based in Chicago, Illinois.
Highlights of the transaction include:
- At the closing the combined company will serve over 40,000 employee lives with expected combined proforma annual revenues of approximately $40 million in 2022.
- Significant cash of over $20 million on the combined balance sheet expected at closing, which is expected to finance the integration of the two companies.
- While up to date Maestro has posted substantial operating losses as it invested in growth, the joint company expects to target positive EBITDA within 18 months.
- Maestro’s Clinical Management and Cost Containment in-house capabilities will enhance Marpai’s ability to deliver better value to its clients and better health outcomes to its members.
- Purchase Price of $22.1 million is due in April 2024, but, subject to the Company meeting its obligations under the agreement, may be financed over four years by the seller.
Together, the companies will continue to provide innovative health plan administration for self-insured clients driven by technology.
“Maestro shares our vision on how to improve healthcare for employees and family members covered by self-insured plans,” said Edmundo Gonzalez, CEO of Marpai. “There are tremendous revenue synergies. Maestro has in-house care management that helps members live healthier lives, and we intend to roll this out to the Marpai member base. The Maestro cost containment solutions will also be rolled out to our client base. Marpai’s proactive match making of members to the best care will also be introduced to the Maestro client base.”
The acquisition is expected to more than double Marpai’s revenues (exclusive of third parties’ share of revenues), number of customers and number of members it serves.
“We are committed to continue delivering the high level of customer service that both Maestro’s and Marpai’s customers are used to. We believe that this combination will create long-term benefits for our members, clients as well as our stockholders,” said Gonzalez.
“Combining our TPA experience with Marpai is incredibly exciting. Over the last couple of years, we have made significant investments in cost containment and clinical solutions that are delivering outstanding results for our customers. Marpai brings deep TPA domain expertise, expanded discount network options and incredibly sophisticated approaches to data analytics,” said Brandon Wood, CEO of Maestro Health. “The combined organization will help employers proactively provide benefits that are expected to lead to healthier and more satisfied member populations. This will be unmatched in the market.”
Transaction Summary
The transaction is expected to close within 60 days, subject to completing certain regulatory notices and filings as well as satisfying certain other customary closing conditions.
Under the terms of the agreement, the purchase price of $22.1 million will be payable in cash on April 1, 2024. However, subject to the Company meeting its obligations under the agreement, this payment may be financed over four years by the seller with minimum annual cash payments, reflecting a 10% per annum cost of capital, of $5 million, $6 million, $8 million and $9 million which will be payable on December 31, 2024, 2025, 2026 and 2027, respectively. In addition, Marpai has agreed that a minimum of 35% of the net proceeds of any equity offering will be used to pre-pay its minimum payment obligations. Such payments will offset the minimum payments described above.
In addition, the parties have also agreed that Maestro’s free cash position at closing will be $15.79 million and have also agreed that Maestro will have certain minimum working capital amounts at closing. The cash on the combined company’s balance sheet, as well as synergies from the transaction, are expected to drive the joint company’s plan of integration, which is expected to include a target of reaching positive EBITDA within 18 months.
Marpai management will discuss the transaction on the previously announced second quarter operating results conference call which is scheduled for Thursday, August 11 at 8:30 a.m. ET
Source: PR Newswire
