By Makiko Kitamura - May 21, 2012 5:11 AM ET
DaVita Inc. (DVA) , whose biggest shareholder is billionaire Warren Buffett ’s Berkshire Hathaway Inc. (BRK/A) , agreed to pay about $4.42 billion in cash and stock to acquire HealthCare Partners, continuing an international spending spree on providers of medical care.
DaVita, a U.S. provider of kidney dialysis services, will pay about $3.66 billion in cash, plus 9.38 million shares of its stock, which had a value of $758 million as of May 18, for closely held HealthCare Partners, the companies said today in a statement.
DaVita, based in Denver, has purchased companies in the U.S., Germany and India to meet rising demand for dialysis services as the number of people with diabetes increases. HealthCare Partners of Torrance, California , manages medical groups and physician networks, providing services to more than 667,000 patients through a team of 700 physicians employed by the company or its affiliates. The company, whose key operations are in southern California, central Florida and southern Nevada , had revenue last year of about $2.4 billion.
“We believe our combined enterprise will offer new and exciting levels of clinical quality, service, and consumer and taxpayer savings,” Kent Thiry, chairman and chief executive officer of DaVita, said in the statement.
The purchase price is about 8.4 times HealthCare Partners’ 2011 earnings before interest, tax, depreciation and amortization of $527 million. That compares with a median of 9.7 times Ebitda for seven deals announced in the last three years, according to data compiled by Bloomberg.
The transaction will probably close early in the fourth quarter and the combined entity will be known as DaVita HealthCare Partners Inc., the companies said. The cash portion of the purchase price will be funded through available cash, credit and debt financing, they said. Once merged with DaVita, HealthCare Partners will operate as a separate subsidiary of the new company.
Berkshire Hathaway has a 6.4 percent stake in DaVita, according to data compiled by Bloomberg. The Omaha, Nebraska- based firm reported in March that it had more than doubled the number of shares it owns in the first three months of the year.
About 552 million people may have diabetes by 2030, compared with about 366 million now, if nothing is done to curb the epidemic, the Brussels-based International Diabetes Federation said in a report in November. Diabetes results when the body is unable to properly control sugar levels in the blood. High blood sugar can stress the kidneys, causing them to stop working and leading to dialysis treatment , in which the blood is cleansed using a machine.
DaVita in April acquired a majority stake in Lehbi Care, a Saudi Arabian provider of kidney care, for an undisclosed price. Lehbi operates three dialysis clinics in Riyadh . DaVita bought NephroLife Care India Pvt., a dialysis center operator, in January.
Last year DaVita bought ExtraCorp AG, the owner of two dialysis centers in Germany, home of rival dialysis provider Fresenius Medical Care AG, for undisclosed terms. It also acquired DSI Renal Inc. in the U.S. for about $690 million. Fresenius Medical is the biggest dialysis provider in the U.S., and DaVita is the second-largest.
DaVita operated or provided administration for 1,809 dialysis facilities in the U.S., serving about 142,000 patients, it said in April. At the time, the company operated 11 outpatient dialysis centers in three other countries.
JP Morgan Securities LLC served as financial adviser and Morrison & Forrester LLP served as lead counsel on the transaction, while Sheppard Mullin Richter & Hampton LLP worked as regulatory counsel to DaVita. Munger, Tolles & Olson LLP and Nossaman LLP served as legal advisers to HealthCare Partners.
Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, has served on DaVita’s board of directors since 1994.
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