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UPDATE 1-Germany's FMC takes $600 mln stake in Sound Physicians
June 27, 2014 / 10:30 AM / 3 years ago

UPDATE 1-Germany's FMC takes $600 mln stake in Sound Physicians

* FMC takes majority stake in Sound Physicians

* FMC seeks to expand services linked to core dialysis ops

* Says deal to be operating earnings accretive in first year

* Says also acquired MedSpring Urgent Care Centers (Adds source on size of stake, MedSpring acquisition, analyst comment)

FRANKFURT, June 27 (Reuters) - Germany’s Fresenius Medical Care (FMC) agreed to buy a majority stake in U.S.-based Sound Inpatient Physicians Inc for about $600 million in its drive to offer additional services linked to its core business of kidney dialysis.

FMC is to become a majority shareholder as part of a recapitalisation of Sound, alongside existing investor TowerBrook Capital Partners and Sound’s senior management team, the company said in a statement on Friday.

A person familiar with the matter told Reuters the company’s stake in Sound would be above 80 percent.

FMC also said it was buying MedSpring Urgent Care Centers with operations in the U.S. states of Illinois and Texas, without providing financial details.

Dialysis specialist FMC said at its investor day in April it aimed to expand its services to medical fields related to kidney failure in a push to almost double group sales to $28 billion by 2020.

Analysts at Berenberg said the acquisitions should take FMC’s annual revenues from so-called total care coordination to more than $1 billion, compared with a goal to reach $5 billion euros a year by 2020.

“To put this in context, FMC will shortly be 20 percent of the way to its goal three months into a six-year programme. The market wanted progress, and that is what it appears FMC is making,” they said.

Sound Physicians employs and manages physicians working at more than 100 hospitals across the United States. It provides medical staff to hospitals, also offering services such as billing, accounting and purchasing management.

Medical insurers in the United States are gradually moving towards a system of lump sum payments per chronically ill patient rather than reimbursing individual drugs and services.

Insurers hope to cut costs because the system, called disease management or care coordination, encourages healthcare providers to work more diligently, reduce side effects and increase patients’ compliance with the treatment regimens.

FMC said it expects Sound to generate about $500 million in revenue in the next 12 months and sees it adding to its own operating earnings, adjusted for transaction costs, within the first year after closing. Closing is due in the next 10 days.

It said it would fund the acquisition through available cash and committed credit facilities as well as additional debt financing. (Reporting by Ludwig Burger; Editing by Maria Sheahan; Editing by Elaine Hardcastle)

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