Connecture management under fire

Analysts and shareholder suggest selling company


A new report from mergers and acquisitions intelligence site MergerMarket indicates Brookfield-based Connecture Inc. is facing shareholder pushback and should consider selling the company.


The health enrollment software and services platform has demonstrated “lackluster” performance since it went public in December 2014, according to industry bankers anonymously quoted in the report.

Connecture’s IPO was priced at $8 per share, but its stock now is trading at $1.98 per share. The company had planned to be the technology platform for Affordable Care Act health insurance exchanges, but that goal was not met.

The shareholder presenting a challenge to Connecture management’s current strategy is Dr. Jeffrey Jay, senior managing member of Great Point Partners LLC, which owns about 18.5 percent of the company. On Feb. 6, Jay wrote a letter to Jeffrey Surges, chief executive officer of Connecture, criticizing his management of the company and asking him to review its strategic options, such as splitting Connecture into two companies, selling the company, cutting costs significantly or partnering its commercial enterprise business. The board of directors also received the letter, according to an SEC filing by GPP.

“Based on our analysis of the company’s public information and our knowledge of the markets which it serves, we believe both that Connecture is deeply undervalued and that multiple avenues exist for the management team and board of directors to create value for all shareholders,” Jay writes in the letter. “Furthermore, it is self-evident that changes need to be made and actions taken to reverse the trajectory of poor operating and financial performance. It is our view that such actions are necessary to either reposition Connecture for future success or position the company for an outright sale to one of the many potential strategic acquirers that operate either in, or adjacent to, the company’s product and service offerings and end markets. Many of those acquirers have been active consolidators throughout their history.”

Jay, who said the company displayed an “absolute failure in building the private exchange platform” suggests UnitedHealth/OPTUM, Cigna, WellPoint, Change Healthcare, Anthem, eHealth and HMS may be interested in purchasing Connecture.

MergerMarket’s report also points to potential targets to which Connecture could sell, such as Accenture, Aon, Deloitte, Willis Towers Watson, Mercer, InfoSys and Cognizant Technology Solutions, according to an unnamed analyst.

In May, Connecture received a $52 million equity investment from private equity firm Francisco Partners, in return for 52,000 preferred shares, which means it holds about 44 percent of the company’s shares. In June, Connecture acquired Chicago-based benefits technology firm ConnectedHealth LLC for $5 million.

Connecture also has recently undergone some leadership changes, with James Purko leaving his role as chief financial officer in December and Vincent Estrada taking on the position in January.

Surges could not be reached for comment about the MergerMarket report.

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Molly Dill, former BizTimes Milwaukee managing editor.

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