Business Context and Reporting Period
DaVita Inc. filed this Form 8-K on September 2, 2011, to report the completion of a significant acquisition and a related regulatory divestiture. The company operates in the dialysis services sector.
Key Financial Metrics and Transaction Details
- Acquisition Cost: DaVita paid approximately $689 million (subject to adjustments) to acquire CDSI I Holding Company, Inc. (CDSI), the parent of DSI Renal, Inc. (DSI).
- Acquired Assets: DSI operates 113 dialysis centers serving approximately 8,000 patients.
- Acquired Revenue: DSI generated approximately $367 million in unaudited revenues for the 12 months ended June 30, 2011.
- Divestiture Proceeds: As a condition of the acquisition, DaVita agreed to sell 30 dialysis centers for a total price of $91 million (subject to adjustments).
- Divested Assets: The 30 centers served approximately 21,904 patients and generated approximately $82.7 million in unaudited revenues for the 12 months ended June 30, 2011.
- Buyer of Divested Assets: Dialysis Newco, Inc., a portfolio company of Frazier Healthcare VI, L.P., and New Enterprise Associates 13, Limited Partnership.
Material Changes and Regulatory Actions
The primary material change is the consolidation of DSI into DaVita via a merger with a wholly-owned subsidiary. Concurrently, the Federal Trade Commission (FTC) issued a Consent Order requiring the divestiture of 30 centers to maintain competition. The divestiture includes centers acquired in the merger as well as some previously owned by DaVita. The transaction is expected to close within 30 days of the merger consummation.
Outlook, Risks, and Contingencies
- Regulatory Compliance: The acquisition is contingent upon the successful execution of the divestiture mandated by the FTC Consent Order.
- Related Party Transaction: The buyer of the divested centers, New Enterprise Associates 13, Limited Partnership, is managed by New Enterprise Associates, where John Nehra, a member of DaVita's board of directors, serves as a special partner.
- Liability Allocation: In the divestiture, the buyer will assume specified liabilities related to the centers, while DaVita retains all other liabilities, cash, and accounts receivable.
Investor Verification Checklist
- Verify the final purchase price of the DSI acquisition after working capital and other adjustments.
- Confirm the closing date of the divestiture of the 30 centers to ensure compliance with the FTC Consent Order timeline.
- Review the specific liabilities assumed by Dialysis Newco, Inc. versus those retained by DaVita in the divestiture agreement.
- Assess the financial impact of the $91 million divestiture proceeds against the $689 million acquisition cost on DaVita's balance sheet.