Fresenius to deal majority investment in Sound Inpatient Physicians to PE consortium for $2.2B

Fresenius Medical Care (NYSE:FMS; ETR:FRE) said last Saturday it inked a deal to divest itself of its controlling interest in Sound Inpatient Physician Holdings in a deal worth approximately $2.2 billion (EU €1.8 billion).

The company said it is divesting its holdings in Sound to a consortium led by Summit Partners, and that it expects to generate a pre-tax book gain of approximately $978 million (EU €800 million)

Fresenius became a majority shareholder in Sound in 2014, just before the company acquired Cogent Healthcare. The company said it invested in Sound to “learn about and broaden its experience in value-based care programs”, and that following the application of that knowledge, it’s now “in a position to divest the shareholding and free up the invested capital for further growth investments.”

Last year, Sound reported revenues of approximately $1.5 billion (EU €1.3 billion) and an EBIT of approximately $110 million (EU €90 million) with a workforce of approximately 3,500 individuals.

“In the previous years we have gained insight and successfully applied the knowledge on efficient patient coordination and on value-based programs in our unit called Fresenius Health Partners where we run the ESCOs, our own Medicare Advantage plan and various sub-capitated arrangements. This was an important milestone in the execution of our Care Coordination strategy. As we are now very well positioned in the U.S. to ensure high quality outcomes for our dialysis patients in a health care system that is moving towards value-based care, we are enabled to divest Sound and release the invested capital for further focused growth investments to add value for our shareholders,” Fresenius CEO Rice Powell said in a press release.

Fresenius said it expects the deal to close some time later this year, and that its financial targets for 2018 and 2020 don’t include the divestiture.

“The acquisition by Summit provides Sound with the opportunity to expand its existing service lines in a rapidly changing market and tap into new areas. This is a great chance for Sound’s employees to be part of this next development step,” Fresenius NA CEO Bill Valle said in a prepared statement.

Today, Fresenius said it is walking away from a $4.3 billion merger with U.S. generic drugmaker, Akorn Inc. (NSDQ:AKRX), citing an investigation that found material breaches of FDA data integrity requirements relating to Akorn’s operations.

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