Earlier this week,
) announced that it has entered into an agreement to purchase
HealthCare Partners, one of the largest operators of medical groups
and physician networks in the U.S., for about $4.42 billion. The
transaction amount comprises $3.66 billion in cash and about 9.38
million shares of DaVita.
However, the purchase consideration is subject to post-close
adjustments and contingent consideration. Moreover, the
shareholders of HealthCare Partners will get an additional $275
million on achieving certain performance targets by the company in
2012 and 2013. DaVita is expected to borrow funds to finance the
acquisition, apart from using its free cash balance and senior
secured credit facility.
Post acquisition, the merged company will operate under the name
DaVita HealthCare Partners Inc., although HealthCare Partners will
operate as a subsidiary of the umbrella company. The acquisition is
expected to be completed in the fourth quarter of 2012, subject to
approval of regulatory authorities and owners of HealthCare
Partners, apart from other customary closing conditions.
JPMorgan Chase & Co.
) acted as DaVita's financial advisor for the deal.
HealthCare Partners operates primarily in the Southern
California, Central Florida and Southern Nevada regions. The
company provides primary care and specialty physician services as
well as hospital and other healthcare services.
HealthCare Partners covers the health care needs of almost
667,000 managed care patients. However, the company has a much
smaller operating scale compared to DaVita, with revenues of
approximately $2.4 billion in 2011 versus DaVita's revenue of $6.98
Following the announcement, Standard & Poor's Rating
Services affirmed the corporate credit rating of DaVita at "BB-"
and the debt rating on its senior unsecured debt at "B." However,
the rating agency placed the "BB" credit rating on the company's
senior secured debt on CreditWatch with negative implications.
Another rating agency, Fitch ratings also affirmed the "BB-"
issuer default rating on DaVita. The rating agency also affirmed
the company's senior secured bank credit facility rating of "BB"
and senior unsecured notes rating of "BB-" with a stable
DaVita frequently acquires companies both domestically as well
as internationally in order to expand its business. However,
recently the company has been focusing more on international
In April 2012, DaVita announced the purchase of a controlling
interest in a Saudi Arabian kidney care company - Lehbi Care.
Earlier, in March 2012, the company announced a joint venture with
), a China-based biotechnology company, to jointly invest about $20
million in China.
DaVita currently caries a Zacks #3 Rank, implying a short-term
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