Equity firm creates giant diabetic supply business

Sunday, October 9, 2005

CLEARWATER, Fla. -- In what one industry watcher called "a serious, serious play," a giant private equity group paid $630 million last week to acquire two large mail-order companies, establishing itself as a leader in the diabetic supplies market.

Warburg Pincus, the global private equity firm and a leading healthcare investor, acquired CCS Medical for approximately $360 million and MP TotalCare for approximately $270 million in separate transactions. The newly combined company will operate under the CCS Medical name. The merger creates one of the largest and fastest growing direct-to-consumer providers of diabetes and other medical supplies in the United States.

"It says a lot about the diabetes business as it relates to Medicare," said a well-placed industry watcher. "What it says for Warburg Pincus is that, as a function of the Part B diabetes business, it is a very stable business that is large enough and growth-oriented enough that they were willing to invest a significant amount of money.

"This merger makes the overall business much stronger," he continued. "It will raise the visibility of the business, make the business stronger, make the service level higher, and I think, overall, the Part B beneficiary will benefit from it because they will have another national choice."

CCS Medical is a major supplier of mail-order diabetic supplies, and, to a lesser extent, respiratory meds. MP TotalCare provides diabetes testing supplies, respiratory medications, urological and ostomy products and wound care supplies directly to customers throughout the United States.

Warburg Pincus has about $12 billion under management and an additional $8 billion available for investments in a range of sectors, including healthcare, information and communication technology, financial services, energy, industrial, media and business services and real estate. The company has invested approximately $1.3 billion in 41 healthcare services companies.