German healthcare giant Fresenius’ inpatient rehab business is moving from hospital subsidiary Helios to its service provision and project management subsidiary Vamed in a group-internal acquisition. We talk to Fresenius about the timing and logic of the deal and strategy for both companies going forward.
The inpatient rehab business comprises 38 facilities under 13 holding companies, with 7,700 employees and forecasted €460m in sales and €37m in EBIT in 2018. Total transaction volume is €485m, including €15m in net debt, valuing the inpatient rehab business at just over 13x 2018 EBIT. Outpatient rehab is more closely tied to acute care so it was not part of the deal, a spokesperson for Fresenius tells us.
We put two possible reasons for this move to them. One is the new position of Helios as an international acute hospital chain after buying Quironsalud making it logical to simplify its service offering to grow further nationally and internationally.
Another is a wealth of inpatient rehab opportunities in emerging markets like Saudi Arabia and Turkey which are, we hear, looking to outsource public provision to international operators. Combining Vamed’s international experience (over 80 countries according to its site) with greater access to rehab management and expertise could make it well-placed to capitalise on this trend.
On the first: “After Fresenius Helios’ successful start of internationalisation through the acquisition of Quirónsalud and its proven synergies, this is the right time to put Fresenius Helios on a stronger growth footing, with an even clearer focus on acute care.”
The second: “Bundling the inpatient post-acute care with Fresenius Vamed will build a platform for further international growth which Fresenius Vamed clearly aims at. However, please understand that we do not give any indication on certain regions at this point.”
Vamed is already in inpatient rehab through its own facilities in Austria, Switzerland, the Czech Republic and the UK, and its website says it has completed projects or service contracts in over 80 countries worldwide.
As a result of this deal, Fresenius has revised both groups 2018 EBIT growth forecasts accordingly, 5-8% rather than 7-10% previously for Helios, while Vamed’s has leapt to 32-37% up from 5-10% previously (2017 results here). Both group’s organic sales forecasts for 2018 remain unchanged as will those of the Fresenius group. Helios will need to find €90-120m of additional EBIT this year to achieve the new forecast, which the spokesperson says will be largely organic aside from a small boost from consolidating the Quironsalud acquisition for the full year rather than the 11 months of 2017.
On Wednesday, June 6, the day this was announced, Fresenius shares closed 2.5% higher than the previous day.We would welcome your thoughts on this story. Email your views to Cameron Murray or call 0207 183 3779.