Moody's Investors Service, the credit rating arm of
), has changed its outlook of Fresenius SE & Co. KGaA - the
parent company of
Fresenius Medical Care
) - from positive to negative due to the increase in leverage
following the recent acquisition of 43 hospitals from
Rhoen-Klinikum AG. The outlook has been downgraded despite the
fact that the acquisition will lead to improved coverage of
Fresenius SE hospitals across Europe.
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Moody's Investors Service has also affirmed the Ba1 corporate
family rating, Ba1-PD probability of default rating and the Ba1
unsecured bond)Baa3/(P)Baa3 secured bank instrument ratings for
Fresenius SE's debt issuing finance subsidiaries.
Fresenius' acquisition of hospitals from private health-care
provider Rhoen-Klinikum by its Helios unit is expected to make
the company the largest private hospital operator in Europe.
Post-acquisition, Fresenius SA will operate 117 hospitals across
the continent. Fresenius expects the acquisition of new
hospitals, consisting of 11,800 beds and 15 outpatient
facilities, to produce synergies leading to a 1%-2% rise in
Helios EBITDA margin.
Fresenius will pay €3.07 billion ($4.07 billion) for the
Rhoen-Klinikum assets using debt. It anticipates the acquisition
to generate annual sales of €2 billion and EBITDA of nearly €250
million. However, the company expects one-time charges of about
€80 million before tax due to the acquisition
Later, Helios and Rhoen-Klinikum will also enter a cooperation
agreement covering latter's remaining hospitals. The cooperation
will be valued at €40 million, of which, Fresenius will
contribute 75% and Rhoen the remaining.
Fresenius Medical Care announced second quarter 2013 adjusted
earnings of 44 cents per American Depositary Share (ADS), which
was flat year-over-year and lower than the Zacks Consensus
Estimate of 46 cents per ADS.
Net revenues grew 5% (6% in terms of constant currency) year over
year to $3,613 million in the reported quarter. Revenues
marginally missed the Zacks Consensus Estimate of $3,615 million.
Organic sales growth was 5% on a global basis.
FMS reaffirmed its revenue forecast for 2013. The company expects
sales of over $14,600 million for 2013, up 6% year over year. It
raised the upper end of its net income guidance (for
shareholders) for 2013 to $1,100-$1,500 million from
Currently, FMS carries a Zacks Rank #3 (Hold). Other medical
instruments stocks that are performing well include
Delcath Systems, Inc.
Echo Therapeutics, Inc.
). Both of them carry a Zacks Rank #2 (Buy).