Fargo-based Discovery Benefits sold to WEX for $425 million

Discovery Benefits is seen Thursday, Jan. 17, 2019, at 4321 20th Ave. S., Fargo.
Michael Vosburg / Forum Photo Editor
Discovery Benefits is seen Thursday, Jan. 17, 2019, at 4321 20th Ave. S., Fargo. Michael Vosburg / Forum Photo Editor

FARGO — State Bankshares, the parent company of Fargo-based Bell Bank, announced Thursday, Jan. 17, that it has signed an agreement to sell its wholly-owned subsidiary, Fargo-based Discovery Benefits Inc., to WEX, a global provider of payment processing and business solutions that has a large office in West Fargo.

WEX is paying State Bankshares $425 million, and State Bankshares retains about 5 percent equity interest in the combination of Discovery Benefits and WEX’s health division.

The deal is expected to close in the first quarter of this year, subject to regulatory approval and other customary closing conditions.

Discovery Benefits administers consumer-directed benefits, including health savings accounts and flexible spending accounts.

Discovery Benefits started with seven employees, but after 15 years has grown to more than 900 employees between its Fargo headquarters and offices in Brookings, S.D.

Bell Bank president and CEO Michael Solberg said the deal 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 said in a statement.

On Twitter, Bell Bank said the deal would not affect its employees or operations.

“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.”

For WEX, headquartered in South Portland, Maine, the addition of Discovery Benefits to its Fargo-based health division advances WEX’s consumer-directed benefits platform.

“The acquisition of Discovery Benefits combines two integral parts of the consumer-directed value chain and solidifies WEX’s position as a leading provider of innovative healthcare technology solutions,” WEX CEO Melissa Smith said in a statement.

WEX said Discovery Benefits has been a partner of WEX’s health division for more than a decade, with WEX’s health care technology platform managing a portion of its consumer-directed account administration.

The acquisition is expected to speed WEX’s growth, provide partners and customers with a more comprehensive suite of products and services, and expand the company’s go-to-market channels to include consulting firms and brokers.

"Discovery Benefits, once acquired, will be fully integrated into WEX. Our goal is to continue to innovate and leverage both organizations' talent and leading technologies, and further invest in our healthcare benefits technology solutions," said Rob Gould, the public relations director for WEX. "The transaction is subject to regulatory approval and other closing conditions and we will share more details once the deal is final."

The Chamber of Commerce of Fargo Moorhead West Fargo's most recent listing of major employers lists Discovery Benefits as the 18th largest employer in the area, with the equivalent of 712 full-time employees. However, it is the 11th largest employer on the list if governmental employers such as the city of Fargo, public school districts, large universities and VA health care system are excluded.

The price for WEX on the New York Stock Exchange closed Thursday at $158.17 per share, up 66 cents per share.

According to WEX's third-quarter 2018 earnings report, released Oct. 31, the company posted revenues of $382.7 million for the quarter, up 18.1 percent from $324 million during the same time period in 2017.