SafeGuard Health Goes Private, Cites Competition, Regulation
By VITA REED
SafeGuard Health Enterprises Inc., an Aliso Viejo-based provider of dental and vision insurance, has put Wall Street in its rearview mirror.
SafeGuard, which was publicly traded since 1983, effectively went private last month via a one-for-1,500 reverse stock split. The move cut the company’s shareholders from an estimated 900 to fewer than 300.
With so few shareholders, SafeGuard ended its registration as a public company reporting to the Securities and Exchange Commission. SafeGuard used to trade on the low-profile over-the-counter exchange and still is listed on Pink Sheets.
As of late last year, SafeGuard counted a market value of about $100 million.
SafeGuard estimates it will save up to $1.2 million a year by not being public, said Ronald Brendzel, the company’s senior vice president and general counsel.
John Hancock Life Insurance Co. owns about 47% of SafeGuard. CAI Partners, a fund with offices in New York and Canada, owns about 36%. Those stakes include options and convertible debt.
“The people that really own the stock own it for long-term investment purposes,” Brendzel said. “There really wasn’t the need for the company to be publicly held.”
Some 650 investors own fewer than 1,500 shares, SafeGuard said in a Securities and Exchange Commission filing, calling that “unwieldy.”
SafeGuard said it is looking to save money on insurance premiums, public communications and other expenses relating to the Sarbanes-Oxley Act of 2002.
Not having those costs, Brendzel said, would allow SafeGuard to invest in its business, technology and people, rather than paying filing fees.
SafeGuard offers dental and vision health maintenance organizations, preferred provider organizations, indemnity insurance and other plans to some 1.5 million people, mainly in California, Florida and Texas.
The company is profitable, though both earnings and revenue are in a downtrend. SafeGuard reported a profit of $1.1 million for the March quarter, down from $6.2 million a year earlier. Sales for the quarter were $44 million, down 58% from a year earlier.
SafeGuard has made its share of acquisitions. Brendzel said the company isn’t worried about doing future deals as a private company.
“We are very, very fortunate to have investors who are willing to continue to fund the investment needs of the company,” he said.
Large shareholders funded SafeGuard’s buy last year of the dental and vision arms of Woodland Hills-based Health Net Inc. for $10.7 million in cash.
Besides, Brendzel said thin trading of SafeGuard shares didn’t provide much of a pool to tap for acquisitions.
Another factor in going private is competition, SafeGuard said in its federal filing. Privately held rivals have had an edge because they didn’t have to incur the same costs as SafeGuard did, according to the company.
Among them is San Francisco’s Delta Dental Plan.
SafeGuard’s big rivals are public, including the dental and vision units of Cigna Corp., Aetna Inc. and PacifiCare Dental and Vision, part of Cypress-based PacifiCare Health Systems Inc.
SafeGuard employs about 400 people, including almost 310 in OC, Brendzel said.
Alvin Baileys and two partners founded SafeGuard in 1974. The company was considered an early pioneer in managed dental care. Baileys’ son, Steven Baileys, is SafeGuard’s chairman.
