Organ failure

7 August 2017 By Olaf Storbeck

Kidney dialysis group Fresenius Medical Care is forking out $2 bln in cash for loss-making rival NxStage. The German group enjoys a remarkably low cost of capital. But even if it delivers ambitious cost savings and the American group keeps getting better, returns will fall short.

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Fresenius Medical Care announced on Aug. 7 it had signed an agreement to buy U.S.-based medical company NxStage Medical for $2 billion in cash. The German healthcare company is offering $30 per NxStage share, a 30 percent premium to its closing price on Aug. 4.

The U.S. group, which is based in the Boston, Massachusetts area, makes medical equipment for home dialysis and critical care. It has 3,400 employees and generated $366 million in revenue in 2016, up 9 percent from a year earlier. It made an operating loss of $4.3 million, down from $14.6 million in 2015, according to Thomson Reuters data.

FMC said the deal will create annual cost synergies of $80 million to $100 million over three to five years. It expects integration costs to be $150 million over the first three years. The transaction is subject to the approval of NxStage’s shareholders as well as regulatory authorities. The buyer said the deal will close in 2018.

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