DaVita Shares Rise on News of Acquisition Talks
Shares of DaVita Inc. jumped 10% on Monday on reports that the El Segundo kidney-care company was about to acquire the dialysis operations of Sweden’s Gambro in a $3-billion deal that would almost double DaVita’s patient load in the U.S.
DaVita, formerly known as Total Renal Care Holdings, serves 52,000 patients at more than 600 centers in 35 states, and Gambro’s dialysis network in the U.S. treats 43,000 kidney patients at 560 clinics.
The Wall Street Journal reported Monday that DaVita was close to buying Gambro’s dialysis operations, citing people familiar with the talks, and said the deal could be announced as early as this week. DaVita executives couldn’t be reached for comment.
The Stockholm Stock Exchange halted trading in Gambro shares after they rose 3%. A Gambro spokesman said the company couldn’t comment on what he called “rumors.”
DaVita’s shares hit a 52-week high of $37.20 before closing at $36.82, up $3.32, on the New York Stock Exchange.
“This is an opportunity for [DaVita’s] management team to almost double the size of the company and provide a two- or three-year horizon of solid growth” by taking over Gambro’s business, said Darren P. Lehrich, an analyst at Piper Jaffray & Co.
People with kidney failure go to clinics run by DaVita or its rivals to have waste removed from their blood.
If the deal goes ahead, it could create overlap in dialysis clinics in California, Florida and Georgia, Lehrich said. As a result, DaVita, the largest independent provider of dialysis services in the country, may have to sell 50 to 100 of Gambro’s kidney-care clinics, he said.
Besides its dialysis-care network, Stockholm-based Gambro also makes dialysis products and provides blood collection services.
The company has recently been hit with legal problems. Last week, its healthcare unit in the U.S. agreed to pay $350 million to settle civil and criminal charges that it defrauded the federal Medicare program.
The fraud allegations included Gambro paying kickbacks to physicians for referrals to the company’s clinics, setting up a sham company that resulted in inflated billings to Medicare and falsifying billing statements to patients to justify unnecessary tests.
Separately, DaVita said in October that it was part of a federal probe of the kidney dialysis industry. Half a dozen companies, including DaVita, received subpoenas from the U.S. attorney’s office.
The Justice Department wanted documents related to DaVita’s kidney dialysis operations and laboratory services, the company said.
Federal investigators wanted information on vitamin D therapies and tests given to kidney patients to determine whether they needed the treatments, among other requests, DaVita said.
Intravenous vitamin D is routinely given to dialysis patients to regulate a hormone that can cause bone loss. DaVita said it was cooperating with the investigation.
Experts said investigators probably were looking at either serious deficiencies in patient care or Medicare billing fraud.
The federal Medicare health program covers all dialysis patients regardless of age.
Times wire services were used in compiling this report.
