The largest group benefits company in Canada, Sun Life Financials Inc., has agreed to buy out DentaQuest, a U.S. dental benefits provider, for approximately $2.48 billion. This acquisition will bolster Sun Life Financials business south of Canada’s border.
According to Bloomberg sources, Toronto-based Sun Life informed on Sunday that Centrebridge Partners LP would be selling its minority stake in DentaQuest, as part of the whole deal.
The major stakeholder in DentaQuest is a non-profit organization CareQuest Institute for Oral Health. They plan to use the stakes sale proceeds on various programs to improve dental care for underprivileged communities.
Sun Life Financials is set to become the second-largest provider of dental benefits in the U.S. after this acquisition. Post the buyout, it will double the employee benefits revenue in the U.S. and add this new vertical to its existing portfolio of group benefits and health. The Boston-based DentaQuest, founded in 2001, has around 2400 employees and 33+ million customers in 36 states.
According to Sun Life CEO Kevin Strain, they found DentaQuest appealed to them for the buyout as it was the largest provider of Medicaid dental benefits. Plus, its Medicare Advantage and U.S. Affordable Care Act businesses were growing, which would have allowed Sun Life to access the U.S. government market. Another advantage is that, unlike long-term care insurance, the dental benefits market is less capital intensive and therefore more attractive.
Strain said in an interview that Sun Life was looking to scale up its group benefits business as they were growing quite well organically. They wanted an inorganic acquisition that would mark their presence in the U.S. group benefits market. The DentaQuest offer came at the right time in the desired space and fitted well with their strategy.
According to a statement by Sun Life, the deal’s outcome will immediately boost the earnings per share (EPS) of the company by 17 Canadian cents or 13 U.S. cents. The EPS is expected to add further 24 Canadian cents in 2024 after savings from the takeover are reflected in the profitability.
With the deal poised for closure in the first half of FY 2022, Sun Life shares increased 15% and aligned to the S&P and Toronto Stock exchange.
