Fresenius Medical Inks $2B Deal To Take Over NxStage Medical
Zacks Investment Research | Aug 08, 2017 09:22PM ET
In an initiative to boost its long-term strategy or the ‘Growth-Strategy 2020’, Fresenius Medical Care (NYSE:FMS) recently signed an agreement to acquire all outstanding shares of NxStage Medical (NASDAQ:NXTM) for $30 a share.
The transaction has been valued at $2 billion and is subject to close by 2018, on approval of NxStage stockholders and other customary conditions. Fresenius expects the acquisition to prove accretive to earnings within three years from deal closure.
Furthermore, the deal is expected to provide annual pretax cost savings of $80 million to $100 million over the next three to five years. Fresenius also expects integration costs of about $150 million over the next three years from the time of announcement.
Per management, the takeover will boost revenues at the Care Coordination segment. In this regard, in the last quarter, margins at Care Coordination declined substantially on a year-over-year basis owing to lower profits in vascular services and higher costs in pharmacy services. We believe the latest development will help the company counter the pressure on margins.
Growth-Strategy 2020 at a Glance
Per management, the latest development is a significant step to boost the company’s grand long-term goal. Fresenius has set up a strong long-term objective – ‘Growth-Strategy 2020’ – to formulate a few initiatives for attaining solid market traction.
Per the postulates of ‘Growth-Strategy 2020’, Fresenius aims to boost its revenues to $28 billion by 2020, corresponding to an average annual growth rate of around 10% by enhancing its core business and the Care Coordination unit.
Meanwhile, for full-year 2017, Fresenius estimates revenue growth of 8–10% at cc. Net income attributable to shareholders of the company is likely to increase around 7–9%.
Shares Shine Bright
Meanwhile, the stock represents a solid return of 11.5%, comparing favorably with the Zacks Investment Research
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