Fresenius takes tentative step on road to breakup
The author is a Reuters Breakingviews columnist. The opinions expressed are their own.
LONDON, Feb 22 (Reuters Breakingviews) -Fresenius’s FREG.DE sprawling business is getting tighter. On Tuesday evening the $17 billion German medical technology company said it will relinquish control of its listed dialysis firm, Fresenius Medical Care FMEG.DE, in order to focus on its core businesses.
Fresenius currently controls the dialysis business and can appoint its board despite only owning a 32% stake, thanks to its arcane German legal structure. Changing the business to a traditional stock corporation will make the embattled unit more accountable to shareholders, and mean Chief Executive Michael Sen will no longer have to consolidate it in his accounts, a helpful change given the dialysis business regularly misses earnings expectations. The news sent Fresenius Medical Care stock up around 12% on Wednesday.
Further surgery looks likely. Sen will also hold Vamed, a hospital development business, as an investment, implying it could be sold. It’s worth 3 billion euros, Barclays analysts reckon. If Sen sells that unit as well as the 32% stake in Fresenius Medical Care, he will have 8 billion euros to cut debt or invest. His core intravenous drugs and hospital operating divisions should be worth 20 billion euros each, according to the UK bank. That implies a total value for the group including debt of 48 billion euros, far above its current 40 billion euro enterprise value. Fresenius’s long-overdue unbundling may be good news for shareholders, and German corporate finance. (By Aimee Donnellan)
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