MetLife said Thursday it has agreed to acquire Versant Health, which itself owns Davis Vision and Superior Vision, in an all-cash $1.675 billion deal that will make it the third-largest vision provider in the United States.
The insurer will be acquiring Versant Health from a private investor group led by Centerbridge Partners, and the transaction is expected to close in the fourth quarter of 2020, pending regulatory approvals.
MetLife’s acquisition will land the company access to Versant’s approximate 35 million members, with existing MetLife customers gaining access to the extensive provider network Versant offers.
The deal will end with MetLife having a 17% market share in the vision industry and a combined total of 38 million members, MetLife President of U.S. Business Ramy Tadros said in a conference call Thursday. Tadros added that Versant’s contracts with nearly every major chain gives MetLife a strategic advantage in the industry.
“The provider networks and relationships that come with Versant were built over decades, and are very difficult to replicate,” Tadros said. “The time and effort required to do so creates a wide moat for any competitor to cross.”
MetLife said that, with more than 90% of employees recently surveyed expressing interest in receiving vision care through their employer, the company “sees significant potential” for growth in the market. MetLife President and CEO Michel Khalaf noted on the call with investors that the U.S. vision care market has been expanding with a 5% annual membership growth and “favorable demographic trends.”
“Vision care is a capital life business with strong, risk-adjusted returns and high free cash flow generation,” Khalaf said. “In short, it is right in the wheelhouse of our next horizon strategy.”
Khalaf added that the acquisition of Versant will generate value for MetLife shareholders, as the company sees vision care as “recession-resistant.”
“Our confidence could not be higher that we are making the right investment at the right time in the right business,” Khalaf said.
MetLife ended its second quarter with cash and liquid assets of $6.6 billion, and even after the completion of the all-cash purchase of Versant Health, the company expects to still be above its target range, Khalaf said.
MetLife’s existing group benefits business currently offers more than 35 group products and services to roughly 41 million U.S. employees and their dependents. The company has offered group vision insurance since 2012 and has recently expanded its lineup of products to include pet insurance, digital estate planning and health savings and spending accounts.