Dialysis Firm to Purchase Rival for $1.2 Billion


Total Renal Care Holdings Inc., one of the nation’s largest providers of dialysis services, on Wednesday said it agreed to acquire rival Renal Treatment Centers Inc. for about $1.2 billion in stock and assumed debt that would nearly double the size of the Torrance-based company.

The acquisition would make Total Renal the No. 3 dialysis-center operator in the U.S. with 358 centers serving 25,900 patients in 32 states, including California.

Kidney dialysis is a treatment given to patients whose kidneys have failed. The treatment, which cleans the blood, must be given several times a week at a cost of $170 to $300 per treatment. There are about 230,000 kidney-dialysis patients nationwide.

Total Renal is also expected to buy an additional 31 centers with 3,700 patients by the end of the year.


“The deal provides us a strong platform to accelerate our growth both domestically and internationally,” said John King, Total Renal vice president and chief financial officer.

The companies would have combined annual sales of about $800 million, they said.

King said Renal Treatment was an attractive acquisition target because “they had a strategy similar to ours in terms of being focused on developing a clustering approach to regional health-care markets.”

“Clustering” refers to operating a number of dialysis centers in a single city or region, which makes them attractive for contracting by health plans.

“I think this does produce a stronger company,” said senior analyst Robert Lunbeck of Hambrecht & Quist. He called the acquisition a “marriage of equals” because both are highly performing companies.

But investors reacted coolly to the merger announcement. In New York Stock Exchange trading, Total Renal shares plunged $3.31 to close at $27.81, and shares of Berwyn, Pa.-based Renal Treatment sank $2.25 to $36.

Under the definitive agreement, Total Renal will exchange 1.335 of its shares for each Renal Treatment share. Based on Wednesday’s closing stock prices, the deal would make each Renal Treatment share worth $37.13 and the total value of the deal worth about $1.2 billion, including assumption of long-term debt.

Total Renal said it had identified annual cost savings of $8.2 million in 1998 and $22.8 million in 1999. It said it expects the deal to increase earnings immediately.


Total Renal is the biggest player in the California dialysis-treatment market, with 49 centers across the state. About half of these are in Southern California.

The acquisition would allow Total Renal to enter new markets in Oklahoma, North Carolina, Maryland, Hawaii and Pennsylvania.

King said that after the acquisition, Total Renal would have about 12% of the U.S. dialysis-center market, ranking it barely behind Sweden’s Incentive Gambro, which has a 13% market share, and No. 1 Fresenius Medical Care of Germany, with market share of 21%, or 40,000 patients nationwide.

“This is clearly an indication that the consolidation trend in the dialysis industry is not abating,” said Alan P. Jacobs, an analyst with Avalon Research. The strength of both Fresenius and Gambro are the results of successful industry consolidation, he said.


Total Renal owns and operates 194 free-standing kidney dialysis centers and home peritoneal dialysis programs in 18 states and the District of Columbia, Puerto Rico, Guam and Europe, serving about 14,900 patients.

Renal Treatment operates 164 dialysis centers in 23 states, Washington, D.C., and Argentina, treating about 11,000 patients. The company also provides in-patient dialysis services to more than 125 hospitals.

King said the merger would allow Total Renal “to move to international markets on a much quicker and stronger basis.”



Times staff writer David R. Olmos contributed to this report.