Fresenius buys Spains largest private hospital chain for $6.4B

(Reuters) – German healthcare group Fresenius is buying Spain’s biggest private hospital chain Quironsalud for 5.8 billion euros ($6.4 bln), including assumed debt, in its biggest takeover ever.

The deal, announced late on Monday, will cement Fresenius’s position as Europe’s largest private hospital operator, adding Quironsalud’s 2.5 billion euros of sales expected for 2016 to roughly 5.8 billion at Fresenius’s Germany-based hospitals business Helios.

It is the 1st deal under Fresenius’s new CEO Stephan Sturm, who has signaled that acquisitions would be a hallmark of his leadership.

Shares in Fresenius jumped almost 6% on the news to a nine-month high of 70 euros in early trade on Tuesday.

Quironsalud, which runs hospitals and outpatient centres in Madrid, Barcelona and other Spanish cities, is being sold by buyout firm CVC Capital Partners and by members of the group’s management board.

Fresenius, with businesses ranging from kidney dialysis and tube feeding equipment to running hospitals, said in a statement that it had agreed the deal, which would boost its 2017 earnings per share.

It has a history of large takeovers, leaning mainly on debt from lenders who favour the group’s steady earnings stream, which is largely immune to the overall business cycle.

Fresenius said it would issue 400 million euros worth of new shares to Quironsalud CEO and founder Victor Madera, who will remain in charge of the business and also play a role in the combined group. The rest of the takeover price will be debt-financed.

Acquiring the Spanish company would lead to pre-tax synergies of approximately 50 million euros a year over the medium term without meaningful implementation expenses, Fresenius said.

UBS analyst Ian Douglas-Pennant said that while the price, valuing Quironsalud at 2.3 times expected 2017 sales, seemed fair, Fresenius was becoming increasingly complex and difficult to manage.

“Whilst the company expects 50 million euros in synergies as a result of the deal we need educating on the significant overlap between Spanish and German hospital management, given the very different natures of the healthcare systems,” said Douglas-Pennant, who has a “buy” recommendation on Fresenius.

The deal underscores Sturm’s ambitions to grow the company. Before taking over as Fresenius’s CEO in July, he worked on several takeovers for the diversified healthcare group in his previous role as finance chief.

Sources told Reuters in June that Fresenius had placed a bid for U.S. drugmaker Pfizer’s infusion pumps business in a possible deal worth close to $1.5 billion but no agreement has emerged.

The German company acquired injectable generic drugs maker APP for $3.7 billion in 2008, and in recent years spent 3 billion euros to buy hospitals from Rhoen Klinikum and purchased blood collection equipment company Fenwal for more than $1 billion.

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