In its largest acquisition to date, WEX Inc. plans to venture deeper into the health care industry by acquiring a technology firm that facilitates patient payments, a move that positions WEX within a new billion-dollar market.

The South Portland-based technology company said Monday that it would purchase Fargo, North Dakota-based Evolution1 for $532.5 million in cash. The deal is expected to close in the third quarter.

The planned acquisition marks another step in WEX’s ongoing diversification efforts after years of focusing exclusively on fuel payment solutions for companies with fleets of vehicles. Over the past few years, WEX has begun offering payment-processing technology to health insurance providers and travel-related websites such as, company President and CEO Melissa Smith said.

“We’re the backbone on most of the online travel sites,” she said.

The purchase of Evolution1 will put WEX in the business of offering payment-processing systems for the consumer side of the health care industry, where there’s the potential to capture $1 billion in annual revenue, Smith said.

Evolution1 develops software that employers can use to make and track payments to health care providers, such as from an employee’s flexible spending account.


It licenses the technology as a “white label” product to insurance providers, financial firms, payroll companies and others. White label means the licensees can put their own brands on the technology and resell it as a service to their customers.

Investors and stock analysts reacted positively to Monday’s announcement.

News of the deal buoyed the company’s stock price to $104.12 as of market close Tuesday, a $5.32 per share increase from its closing price of $98.80 on Monday.

Citi Research stock analysts Phillip Stiller and Ashwin Shirvaikar said in a written report that the acquisition of Evolution1 is a sensible move for WEX.

“On the surface, the deal seems somewhat surprising given the size, (and) the fact that it is outside WEX’s core fleet and travel segments,” they said, adding that the near-term revenue potential of the acquisition is “limited.”

“However, the business does seem like a nice long-term strategic fit for WEX since it brings in greater exposure to a very large, growing and inefficient payments ecosystem like health care,” they said.


Stiller and Shirvaiker gave WEX stock a “buy” rating and said they expect the price to increase to $110 per share as a result of the acquisition.

Smith called the health care sector an “attractive vertical” and said Evolution1 will serve as the cornerstone of WEX’s growing health care practice.

The Evolution1 deal is the latest in a number of acquisitions WEX has made over the past few years. In 2013, it acquired the Fleet One fuel card company for $369 million. Other recent deals include buying 51 percent of UNIK SA, a Brazilian provider of payroll cards, for roughly $21.9 million, and paying about $27.5 million in cash for CorporatePay, a London-based provider of corporate prepaid cards for the travel industry.

Still, Evolution1 is by far the largest company WEX has chosen to acquire, with projected 2014 revenue of $80 million, according to Smith. WEX will use cash on hand and an existing line of credit to complete the purchase, she said.

Smith, who assumed the CEO title in January, said in a telephone interview in April that WEX was still “actively looking” at acquisition opportunities in Brazil, Southeast Asia, Europe and North America that would grow its fleet payment business and allow it to expand further into other sectors, including travel and health care.

On Tuesday, Smith said the company does not have any immediate plans to break into other industries.


“We made a big play in this one (health care), so we’re probably going to stay in the industries that we’re in,” she said.

WEX’s operations include WEX Bank, Fleet One, Pacific Pride, rapid! PayCard, WEX Australia, WEX New Zealand and WEX Europe, and it holds a majority equity position in WEX Europe Services and UNIK S.A., Brazil. WEX and its subsidiaries employ more than 1,400 people. In April, WEX reported its revenue for the first quarter was $182.1 million, a 10.1 percent increase from $165.4 million during the same quarter last year. It reported revenue of more than $717 million in 2013.

The company’s stock price has increased roughly 32 percent in the past year. WEX trades on the Nasdaq exchange under the ticker symbol “WEX.”

Evolution1 has 300 employees at its headquarters in Fargo. Smith said the acquisition is not expected to impact its day-to-day operations, nor would it directly impact WEX operations or employment in South Portland.

Evolution1 CEO Jeff Young said the move would allow his company to offer better services in payment processing, account servicing and transaction processing to customers with increasing health care management needs.

In 2013, the company processed over 65 million transactions and $5 billion in payment volume, he said.

Staff Writer Whit Richardson contributed to this report.


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