Korian to Buy Care-Home Operator Medica for $1.45 Billion

Korian agreed to buy Medica SA for about 1.07 billion euros ($1.45 billion) in a deal that will create the largest French operator of nursing homes.

Medica holders will receive about 0.91 of a Korian share for each Medica share, the companies said in a statement today. The deal values Medica at about 22.37 euros a share, or 12 percent above Medica’s Nov. 15 closing price in Paris.

The combination, which Korian and Medica described as a merger of equals, will create a stronger company better able to expand geographically, they said. The resulting company will have 57,164 nursing home beds Europe, including in France, Germany and Italy, the companies said. Orpea SA, France’s biggest care-home operator, has 40,374 beds, according to the company’s website.

“It was the right time for a merger,” Medica Chief Executive Officer Jacques Bailet said at a meeting with analysts today. “The two companies had reached an extremely interesting position in terms of geography, and we were both ready to develop new businesses,” such as homecare for the elderly, he said.

Korian Chief Executive Officer Yann Coleou will head the combined company while Bailet will be chairman. Christian Chautard, the chairman of Paris-based Korian, will become chairman a year after the merger.

Aging Population

Retirement home operators are betting an aging population in Europe and elsewhere in the world will help sustain their growth rate. Between 2000 and 2050, the proportion of the world’s population over 60 years old will double to about 22 percent, according to the World Health Organization.

The number of people aged 60 years and over is expected to increase from 605 million to 2 billion over the same period, according to WHO.

Medica, based in Issy-les-Moulineaux near Paris, climbed 4.8 percent to close at 21 euros. The price is a closing record for the company, which sold shares at 13 euros each in its 2010 initial public offering. Korian dropped 2.8 percent to close at 24.61 euros. Orpea gained 2.3 percent to 41.14 euros.

“If the transaction goes through, it will create a real European leader in nursing homes,” Guillaume Cuvillier, an analyst at Gilbert Dupont in Paris, wrote in a note to clients.

Korian Medica

The new entity, to be listed on Euronext Paris, will be called Korian Medica, Bailet told analysts. For marketing purposes, it will use the Korian brand.

The company will expand also through acquisitions and is targeting sales of 3 billion euros by 2017, the two CEOs told analysts. Korian Medica is forecasting annual cost savings of 15 million euros in three years’ time, they said. The merger will also create revenue savings, Coleou said, declining to quantify them.

Korian Medica’s priority will be to grow stronger in the countries where the company has a presence already, the two CEOs said in a telephone interview today.

“We prefer being strong in four countries than being average in 10 or 15,” Coleou said during the interview. “When we will have well digested the merger, we will look at other geographies in Europe, always geographies with a big potential, but as of today there is no concrete plan to enter” another country, he said.

The transaction is subject to approval by France’s antitrust regulator. Special shareholder meetings for both companies are planned in the first quarter of next year to vote on the deal.

Orpea’s View

JPMorgan Chase & Co., BNP Paribas SA, Credit Agricole SA and Bredin Prat advised Korian, while Medica received advice from Credit Suisse Group AG and Cleary Gottlieb.

Orpea has no interest in merging with another publicly traded French home operator, Jean-Claude Marian, the company’s co-founder and chairman, said in a Nov. 6 interview.

“There’s no plan to buy a big French company,” Marian said. “It’s much easier for all of us publicly traded companies to make acquisitions from the big universe of family businesses, independent homes or small companies with three, four, five, 15 homes.”

Through a spokesman, Marian declined to comment on today’s deal.

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