Fresenius Medical Care Spends $2.1B On Dialysis

Fresenius Medical Care is spending a combined $2.09 million to acquire private equity-backed Liberty Dialysis Holdings, and the smaller American Access Care Holdings, Reuters reported. Germany-based Fresenius will pay $1.7 billion for Liberty Dialysis, which is currently controlled by buyout firms KRG Capital Partners and Bain Capital. The deal includes about $1 billion in assumed debt. American Access Care Holdings, which operates 28 vascular access centers for preparing patients for dialysis, sold for $385 million, Reuters wrote.

(Reuters) – Fresenius Medical Care announced two takeovers worth a combined $2.09 billion on Tuesday, to gain scale as the largest U.S. dialysis company as the government pressures dialysis centres to cut costs.

The Germany-based company said it would buy privately held Liberty Dialysis Holdings for $1.7 billion including about $1 billion in assumed debt.

That would add about 19,000 U.S. patients to the 140,000 FMC already has and extend the company’s lead over its biggest U.S. rival DaVita , with 128,000 patients.

The U.S. Medicare system, which provides insurance for about 80 percent of FMC’s U.S. patients, no longer pays clinic operators for individual services and drugs but instead pays a so-called “bundled rate” per dialysis session, forcing the operators to increase efficiency.

The lump-sum reimbursement, which is only paid if patients are being kept in good health, created fresh incentives for clinics to cut costs, use drugs sparingly and renegotiate procurement prices, which tends to be easier for bigger operators.

Liberty is controlled by buyout firms KRG Capital Partners and Bain Capital and the deal, which is expected to close in early 2012, will add about $1 billion to FMC’s annual sales.

“Multiples are reasonable on first estimates,” said Oliver Reinberg, an analyst with Cheuvreux, adding he expects the deal to increase next year’s earnings per share by 3 percent.

FMC also agreed to buy American Access Care Holdings, which operates 28 vascular access centres for preparing patients for dialysis, for $385 million.

Medicare is expected to extend its bundled rate to vascular access by 2014, making dialysis clinics financially liable for the costly treatment that is needed when vascular access complications occur.

Both deals should lead to an increase in earnings per share in the first year after closing of the transactions, the company said.

The shares slipped 1.4 percent to 51.99 euros by 0751 GMT, lagging the 0.7 percent drop in the STOXX Europe 600 Health Care’s performance.

FMC also said it still expects to post net income between $1.07 and $1.09 billion this year.

In the second quarter, net income rose 5 percent to $261 million, on par with the average estimate in a Reuters poll of analysts.

(Reporting by Ludwig Burger and Andreas Kroener; Editing by Greg Mahlich)