MADRID: Fresenius, Europe’s biggest publicly traded healthcare provider, is buying a Spanish hospital group for €5.76bn ($6.42bn) in its largest acquisition as it seeks to expand its German network across Europe. The stock soared the most in more than a year.
Shares worth about €400mn will be issued to Victor Madera, the founder of IDC Salud Holding, and the rest of the transaction will be funded with debt, according to a statement on Monday from Bad Homburg, Germany-based Fresenius.
Spain’s largest private hospital company, also known as Quironsalud, is 58% owned by the London-based private equity firm CVC Capital Partners, with the rest held by its management.
The transaction highlights the international ambitions of Fresenius chief executive officer Stephan Sturm, who took the helm on July 1. The deal with Quironsalud gives the Fresenius Helios unit, which is the largest hospital company in Germany, control of 43 hospitals across Spain, with projected 2016 revenue of about €2.5bn and profit expected to grow more than 10% next year. Helios accounted for about 20% of Fresenius’s sales last year.
Shares of Fresenius rose as much as 5.8%, the most since August 2015, and were up 4% to €68.82 at 10:25 a.m. in Frankfurt. The stock has returned 4.7% this year, compared with a 0.4% gain in Germany’s benchmark DAX Index.
Fresenius negotiated the deal without hiring bankers. Sturm had served as the health-care company’s chief financial officer since 2005. During his tenure, Fresenius created the biggest hospital network in Germany by buying rival Rhoen-Klinikum for €3.07bn in a deal completed two years ago. Shortly after Sturm took over as CEO, the company’s talks to acquire Pfizer’s pumps and devices business stalled over price, according to people familiar with the matter.
Madera, Quironsalud’s CEO, will join Fresenius after the transaction. He is required to hold the 6.1mn shares he will receive as part of the transaction for at least two years.
The acquisition should result in savings of about €50mn a year and will be “highly accretive” to net income next year, Fresenius said. The company expects the deal to close by the end of the first quarter in 2017, and will update its guidance for next year.
Quironsalud’s earnings before interest, taxes, depreciation and amortisation will probably rise from a projected €460mn to €480mn this year to between €520mn and €550mn next year, the companies said.
The transaction also solves a problem of where to seek large-scale growth as looming parliamentary elections and cheap debt combine to make hospital privatisations less likely in Germany. Fresenius had signalled its desire to expand elsewhere in Europe, and “the big question was when and where,” said Ulrich Huwald, a Hamburg-based analyst with Warburg Research.
Fresenius is one of the world’s largest providers of kidney dialysis and also supplies home infusion-therapy services. The company plans a conference call to discuss the Quironsalud deal at 2 p.m. local time.
Private equity firm CVC is perhaps best known as one of the owners of auto racing league Formula One. The investment firm, a former unit of Citigroup, is considering selling the racing business for as much as $10bn. Its owns a 35% stake.