Former Facebook executive Chamath Palihapitiya is to merge his latest blank cheque company with a Google-backed healthcare insurer in a $3.7bn deal.
Mr Palihapitiya’s Social Capital Hedosophia III, which raised $828m in April, will merge with Clover Health, it was announced on Tuesday. It is the third such deal for Mr Palihapitiya, who has used his special purpose acquisition vehicles to take public Virgin Galactic, the space travel company, and property start-up Opendoor.
Clover, which provides insurance services to about 50,000 elderly people via the US government-backed plan Medicare, will receive a $1.2bn cash infusion. That includes the money raised by the Spac as well as $400m in investor commitments led by Mr Palihapitiya himself and institutional investors such as Fidelity Investments and Senator Investment Group.
As part of the deal Clover shareholders will receive up to $500m, with the remaining proceeds to be used by the company.
The wave of takeovers led by Spacs further underscores how the rise of a once unusual financial investment vehicle is now fuelling a boom in mergers and acquisitions despite the fallout from the coronavirus pandemic and an uncertain economic and geopolitical environment.
Spacs have become a popular alternative to the traditional initial public offering process, allowing companies faster access to financing and public markets, and Mr Palihapitiya has been at the centre of the boom. Several well known Wall Street figures such as former Citigroup dealmaker Michael Klein have also raised cash through multiple vehicles.
Clover was launched in 2013 by Vivek Garipalli, the insurer’s chief executive, together with a small group of investors who were seeking to disrupt the Medicare system through the use of technology. Google has been an investor since 2017.
Clover’s proprietary software technology is used by patients to scout for affordable healthcare services covered by their insurance plan.
Doctors use the data processed by Clover’s machine-learning system, which collects health information from patients, to deliver better care to consumers, it says.
The injection of new capital by Social Capital Hedosophia will allow Clover to grow its customer base at a particularly critical time, as the coronavirus continues to affect millions of people hit by the pandemic.
Clover recently reached a partnership agreement with Walmart, the world’s largest retailer by revenues, to set up joint Medicare plans in the US state of Georgia. Depending on the success of the partnership, Walmart could agree to expand the offering across the US.
“I believe Clover is uniquely positioned to disrupt the entire Medicare Advantage market as well as expand into new and exciting opportunities in Original Medicare,” Mr Palihapitiya said in a statement on Tuesday.