CVS CVS Health Corporation

WellDyneRx Inc. has hired an investment bank to explore a sale of itself to private equity, said people familiar with the situation.

The Lakeland, Fla.-based pharmacy-benefit manager hired J.P. Morgan Chase & Co. to run a limited process, the people said. They added that WellDyneRx is only talking to a small number of private-equity firms.

WellDyneRx's sale process provides an opportunity for private equity to back a sizable pharmacy benefit manager, which negotiates for medicines on behalf of employers and health plans.

Pharmacy-benefit managers typically garner a price multiple of about 12 to 13 times their earnings before interest, taxes, depreciation and amortization. Based on the company's $75 million in annual ebitda, WellDyneRx could be valued at about $1 billion, the people said.

They said the pricing for WellDyneRx could be higher given the intense interest in assets in an industry that is consolidating as companies seek to build scale to better negotiate against rising prescription-drug costs.

The nation's largest insurers and pharmacies have in recent years purchased a number of assets, sometimes from private-equity owners, in an effort to contain spending on drugs.

Insurer UnitedHealth Group, for example, last year acquired pharmacy-benefits manager Catamaran Corp. for $12.8 billion to add to its OptumRx unit, while Aetna Inc. agreed to buy Humana Inc. for $34 billion. Also in 2015, CVS Health Corp. paid $10.4 billion for Omnicare Inc., while Rite Aid Corp. acquired Envision Pharmaceutical Services Inc. for about $2 billion from TPG.

WellDyneRx serves health-plan members through a retail network of more than 65,000 pharmacies, and uses robotics to fill more than 1 million mail-order prescriptions each year, according to the company's website.

Interest in WellDyneRx likely will be buoyed by the increasingly scarce availability of sizable companies in the space. Data provider IBISWorld said pharmacy benefit management is an area with a "high level of concentration," with the top four providers estimated to account for more than 72% of industry revenue for 2015.

Although private equity has backed pharmacy-benefit managers over the years, a number of them have been absorbed by corporate buyers.

Between 2010 and 2012, private-equity firm Abry Partners LLC held a minority ownership interest in HealthTrans LLC, a Greenwood Village, Colo., provider of midmarket pharmacy benefit management services and health-care information technology. Abry in early 2012 sold its stake in HealthTrans to larger peer SXC Health Solutions Corp. for $250 million.

Another private-equity firm, SilverStream Capital LLC, sold Apex Affinity, a provider of consumer prescription-savings programs, to MedImpact Healthcare Systems Inc. in 2013.

Consonance Capital Partners continues to be invested in Enclara Health LLC, a hospital-specialty pharmacy services provider it has backed since 2014. The New York firm helped the company acquire excelleRx Inc. and PBM Holding Co. later that year.

Write to Amy Or at amy.or@wsj.com

(END) Dow Jones Newswires

June 29, 2016 18:25 ET (22:25 GMT)

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