Fresenius to enter U.S. drug market with APP

By James Regan and Kim Dixon

FRANKFURT/WASHINGTON (Reuters) - German medical group Fresenius (FREG_p.DE: Quote, Profile, Research, Stock Buzz) unveiled a $3.7 billion deal to buy U.S. company APP Pharmaceuticals APPX.O to take control of a key drug used by its dialysis unit.

The agreed takeover, one of the biggest by the healthcare group, sent Fresenius shares tumbling as much as 11 percent as analysts cited a high price and after the company said it would finance part of the deal through a capital increase.

Fresenius owns the biggest worldwide provider of dialysis services, and dominates that market with U.S. rival DaVita Inc. (DVA.N: Quote, Profile, Research, Stock Buzz). APP has become the main supplier of the drug heparin after a recall by Baxter International Inc (BAX.N: Quote, Profile, Research, Stock Buzz).

Heparin is a vital blood-thinning drug used in patients on dialysis, a procedure to clear the blood of waste that is used mostly in patients with kidney disease.

By taking control of APP, Fresenius could curb the rise in heparin's price, Oppenheimer analyst Balaji Gandhi said. "DaVita could ride the coattails" of that price moderation, he added.

APP shareholders will receive $23 a share in cash, a 29 percent premium to the stock's last closing price, valuing APP at $3.7 billion, the companies said on Monday.

They could get a further $6 a share in the second quarter of 2011 if APP beats a core profit target. Fresenius will also take on APP's net debt of about $940 million, APP added.

Fresenius stock was 9.3 percent lower at 49.44 euros, among the biggest percentage losers in the German mid-cap index . APP soared 32 percent, or $5.68 to $23.52 on Nasdaq.