DaVita Inc. (DVA - Analyst Report) announced that it will offer $1 billion worth of senior notes due 2022, in order to make part payment for its $4.42 billion acquisition of HealthCare Partners. The company will finance the remaining part of the purchase consideration from borrowings made under its amended senior secured credit facility and cash balance.
Further, DaVita will use the residual portion of the borrowing under the amended senior secured credit facility and cash balance to pay off a $198.5 million Term Loan A-2 outstanding under the existing senior secured credit agreement. The amount will be further used to repay HealthCare Partners’ existing indebtedness and to pay the fees and expenses associated with the acquisition.
Moreover, in case the acquisition is not completed by the end of November 2012 or the merger agreement is terminated prior to the closure, DaVita will redeem all the senior notes. However, the company retains the right to extend the date of completion of the acquisition under certain situations.
DaVita announced the agreement to purchase HealthCare Partners, one of the largest operators of medical groups and physician networks in the U.S., in May 2012. The transaction amount comprises $3.66 billion in cash and about 9.38 million shares of DaVita. Moreover, the shareholders of HealthCare Partners will get an additional $275 million if the company achieves certain performance targets in 2012 and 2013.
Post acquisition, the merged company will operate under the name DaVita HealthCare Partners Inc., although HealthCare Partners will operate as a subsidiary of the umbrella company. The acquisition is expected to be completed in the fourth quarter of 2012, subject to approval of the regulatory authorities and owners of HealthCare Partners, apart form other customary closing conditions. JPMorgan Chase & Co. (JPM - Analyst Report) acted as DaVita's financial advisor for the deal.
HealthCare Partners operates primarily in the Southern California, Central Florida and Southern Nevada regions. The company provides primary care and specialty physician services as well as hospital and other healthcare services.
DaVita frequently acquires companies both domestically as well as internationally in order to expand its business. However, recently the company has been focusing more on international expansion.
In April 2012, DaVita announced the purchase of a controlling interest in a Saudi Arabian kidney care company - Lehbi Care. Earlier, in March 2012, the company announced a joint venture with 3SBio Inc. , a China-based biotechnology company, to jointly invest about $20 million in China.
DaVita currently caries a Zacks #3 Rank, implying a short-term Hold rating.