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WEX Announces Completion of Discovery Benefits Acquisition

Zacks Equity Research

WEX Inc. WEX yesterday announced the completion of previously-announced acquisition of Discovery Benefits, Inc. (DBI). The transaction is valued at $425 million in cash, which includes $50 million to be deferred till January 2020.

Discovery Benefits is a high-growth employee benefits administrator serving more than one million consumers across 50 states. The company has been in a longstanding partnership with WEX’s Health division, hence the takeover formalizes its status.

We observe that shares of WEX have gained 27% year to date compared with 15.9% rise of the industry it belongs to.


How Will WEX Benefit?

The buyout integrates WEX’s cloud-based technology platform with Discovery Benefits’ leading benefits account technology. This should boost WEX’s position as a technology platform in the healthcare space and enhance employee benefits platform.

WEX Inc. Revenue (TTM)


WEX Inc. Revenue (TTM) | WEX Inc. Quote


The company expects to witness at least $15 million of annual run-rate synergies in the first two years following the deal closure. The sellers of Discovery Benefits will retain nearly 5% equity interest of the combined entity.

The acquisition is likely to boost WEX’s Health and Employee Benefit Solutions segment, which reported 1.2% year over year decline in revenues in third-quarter 2018 due tomacroeconomic headwinds in Brazil.

Zacks Rank & Stocks to Consider

Currently, WEX carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few top-ranked stocks in the broader Zacks Business Services sector are Omnicom OMC, Robert Half RHI and Automatic Data Processing ADP. While Robert Half sports a Zacks Rank #1, Omnicom and Automatic Data Processing carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for Omnicom, Robert Half and Automatic Data Processing is 6.9%, 8.4% and 12.8%, respectively.

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