State Bankshares, the parent company of Fargo, N.D-based Bell Bank, announced Jan. 17 it signed an agreement to sell its wholly-owned subsidiary, Discovery Benefits, Inc., to WEX, a leading global provider of payment processing and business solutions.
Under the terms of the agreement, WEX will pay State Bankshares total cash consideration of approximately $425 million. In addition, State Bankshares will retain a 5 percent equity interest in the combination of Discovery Benefits and WEX’s health division. The transaction is expected to close in in the first quarter, subject to regulatory approval and other customary closing conditions.
WEX is based in South Portland, Maine. Discovery Benefits has been a partner of WEX’s health division for more than a decade, using WEX’s healthcare technology platform to manage a portion of its consumer-directed account administration.
The acquisition will combine one of the industry’s fastest-growing benefits administrators — known for its leading benefits account technology — with WEX’s dynamic, cloud-based technology platform. The acquisition is expected to accelerate WEX’s growth rate, provide partners and customers with a more comprehensive suite of products and services, and expand Wex’s diverse go-to-market channels to include consulting firms and brokers.
Discovery Benefits was started by Bell Bank in 2003 and is an administrator of consumer-directed benefits, including health savings accounts and flexible spending accounts. What began with seven employees has grown during the past 15 years to a company that now employs 900 people at its Fargo headquarters and in Brookings, S.D.
According to the latest research from Devenir on the top 20 HSA providers, Discovery Benefits is the fastest-growing provider. The company generated approximately $100 million in revenue during 2018.
“The acquisition of Discovery Benefits enhances WEX’s position as a leading technology platform in the healthcare space and aligns with our longer-term strategy to further reduce exposure to macroeconomic forces,” said Melissa Smith, CEO of WEX. “This combination strengthens our overall value proposition through new partnerships, integrated products, and the opportunity to offer a more comprehensive set of solutions. We are excited to extend our reach into the rapidly-growing employee benefits market and look forward to building on our track record of success in the healthcare space.”
Bell Bank president and CEO Michael Solberg said the opportunity developed because of WEX’s commitment to employees and the Fargo market. With the addition of the Discovery Benefits team, WEX will employ more than 1,100 people in Fargo, West Fargo and Brookings.
“Bell Bank remains not for sale,” Solberg emphasized.
“The best part of this transaction is that Bell gets to continue to remain a part of building something special in our community,” Solberg said. “I’m extremely proud of the people at Discovery Benefits and the growth they’ve achieved. I’m excited for Bell’s continued investment and role with WEX moving forward.”