DaVita (DVA) has agreed to pay about $4.42 billion in cash and stock for privately-held HealthCare Partners to expand its domestic presence and relieve possible revenue pressures deriving from changes to the healthcare system.
The largest U.S. operator of dialysis clinics said it will pay about $3.66 billion in cash and 9.38 million shares of common stock valued at $758 million for Torrance, Calif.-based HealthCare.
HealthCare operates medical groups and physical networks in Southern California, Central Florida and Southern Nevada under a network of 700 physicians and thousands of access points, including 152 medical clinics and 8,300 independent physicians.
The company made $2.4 billion in revenue last year and had total care dollars under management of about $3.3 billion. Its operating income in 2011 was $488 million.
Upon close, slated for early in the fourth quarter, DaVita will be renamed DaVita HealthCare Partners and the purchased unit will operate as a separate subsidiary. It will be led by HealthCare Partners’ current management team.
HealthCare Partners’ chief executive officer, Robert Margolis, will join the board of directors and become co-chairman of the combined enterprise along with DaVita CEO Kent Thiry.
DaVita, which is funding the transaction using available cash and borrowings under existing senior credit facilities, said it will pay the owners of HealthCare Partners an additional fee of up to $275 million in cash if certain performance targets are met in 2012 and 2013.
“This combination will create a unique patient- and physician-focused organization,” Thiry said in a statement.
DaVita is being financially advised by JPMorgan (JPM). Its shareholders include Warren Buffet’s Berkshire Hathaway.