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Fresenius Medical to Buy Liberty Dialysis for $1.7 Billion

Fresenius Medical Care to Buy Liberty Dialysis
Fresenius Medical Care AG plans to acquire 100 percent of U.S.-based Liberty Dialysis Holdings Inc. in a transaction valued at about $1.7 billion. Source: Fresenius Medical Care AG via Bloomberg

Fresenius Medical Care AG agreed to buy Liberty Dialysis Holdings Inc. for $1.7 billion, one of two acquisitions announced today to expand its U.S. clinic network.

Liberty Dialysis, a closely held company based in Mercer Island, Washington, has 260 clinics with annual revenue of about $1 billion, Bad Homburg, Germany-based Fresenius Medical said in a statement today. The deal is expected to close early next year, the German company said. Fresenius Medical also will buy U.S.-based American Access Care Holdings LLC for $385 million.

“Fresenius has certainly shown that scale matters,” Lisa Clive, a London-based analyst for Sanford C. Bernstein Ltd., said by phone today. She has an “outperform” recommendation on the shares. “It makes strategic sense.”

Bigger dialysis chains have an advantage under a new U.S. Medicare reimbursement system, Sanford’s Clive said. Called the bundled rate, the new system is a fixed compensation amount designed to reduce overuse of drugs that were previously separately billable.

Blood Cleaning

American Access runs outpatient clinics for procedures such as fistulas and grafts that give permanent surgical access to veins, reducing the need to use temporary catheters for dialysis blood-cleaning treatment. Using such procedures may help Fresenius reduce the number of expensive-to-treat infections, Clive said. Catheters also tend to make patients require higher doses of some drugs, she said.

Companies similar to American Access may increasingly be acquisition targets for dialysis chains, she said, because they may help cut drug costs under bundled pricing.

Second-quarter net income rose 5 percent to $260.8 million from $248.3 million a year earlier, Fresenius Medical said today. The result met the $261 million average estimate of 12 analysts surveyed by Bloomberg.

Revenue per treatment in U.S. clinics, a measure of profitability, fell to $348 from $356 in the year-earlier period. International sales rose 26 percent to $1.16 billion.

Acquisition Budget

Fresenius Medical fell 1.10 euros, or 2.1 percent, to 51.64 euros at the close of Frankfurt trading, giving the company a market value of 15.4 billion euros ($21.8 billion). The stock returned 24 percent in the past year.

Fresenius Medical repeated a forecast issued May 4 that net income will be between $1.07 billion and $1.09 billion, with revenue of more than $13 billion this year. The company said it expects to spend about $1.9 billion on acquisitions this year.

Separately, Fresenius SE, which owns 36 percent of Fresenius Medical, increased its 2011 forecast, saying it expects net income adjusted for the acquisition of APP Pharmaceuticals to rise by 15 percent to 18 percent at constant exchange rates. The company had previously forecast a 12 percent to 16 percent increase. Fresenius repeated that sales will rise 7 percent to 8 percent this year.

First-half adjusted net income rose 20 percent to 363 million euros.

The shares rose 26 cents, or 0.4 percent, to 72.75 euros.

Fresenius SE, also based in Bad Homburg, runs private-hospital operator Helios, the Vamed health-care services unit and Fresenius Kabi, which sells infusion therapies and clinical nutrition products.

The shareholders of Liberty Dialysis include private equity companies KRG Capital Partners, which is based in Denver, and Bain Capital, which has its headquarters in Boston, according to a statement.

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