2. ACQUISITIONS AND DIVESTITURES
ACQUISITIONS AND DIVESTITURES
The Fresenius Group made acquisitions of € 613 million and € 3,714 million in 2007 and 2006, respectively. Of this amount, € 444 million were paid in cash and € 169 million were assumed obligations in 2007.
Fresenius Medical Care made acquisitions of € 257 million in 2007. The main acquisition took place on November 26, 2007, as Fresenius Medical Care completed the acquisition of all of the common stock of Renal Solutions, Inc., (RSI), an Indiana corporation with principal offices in Warrendale, Pennsylvania, United States. The RSI acquisition agreement provides for total consideration of up to US$ 204 million, consisting of US$ 20 million, previously advanced to RSI in the form of a loan, US$ 100 million paid at closing, US$ 60 million payable after the first year which was recorded as a liability at closing, US$ 3 million receivable related to a working capital adjustment and up to US$ 30 million in milestone payments over the next three years, contingent upon the achievement of certain performance criteria. Fresenius Medical Care recorded a liability of US$ 27.4 million representing the net present value of the US$ 30 million milestone payments as it was deemed beyond reasonable doubt that the future performance criteria will be achieved. Furthermore, acquisitions of € 108 million are mainly attributable to the purchase of dialysis centers.
Fresenius Medical Care sold the perfusion business unit of Fresenius Medical Care Extracorpοreal Alliance (FMCEA) during the second quarter of 2007. In 2006, FMCEA’s perfusion business contributed revenue of approximately € 83 million. The US perfusion business was deconsolidated effective May 9, 2007.
In 2006, acquisitions of Fresenius Medical Care in an amount of € 3,561 million related mainly to the purchase of Renal Care Group, Inc. (RCG), a Delaware corporation with principal offices in Nashville, Tennessee, United States. On March 31, 2006, the acquisition was completed for an all cash purchase price, net of cash acquired, of US$ 4,158 million for all of the outstanding common stock and the retirement of RCG stock options. The purchase price included the concurrent repayment of US$ 658 million indebtedness of RCG. The operations of RCG are included in Fresenius Group’s consolidated statements of income and cash flows from April 1, 2006; therefore, the results of 2007 are not comparable with the results of 2006.
On November 14, 2006, Fresenius Medical Care acquired the worldwide rights to the PhosLo® phosphate binder product business and its related assets of Nabi Biopharmaceuticals, Inc. PhosLo® is an oral application calcium acetate phosphate binder for treatment of hyperphosphatemia primarily in end-stage renal disease patients. Fresenius Medical Care paid cash of US$ 65.3 million including related direct costs of US$ 0.3 million plus a US$ 8 million milestone payment in December 2006 and a US$ 2.5 million milestone payment in 2007. An additional milestone payment of US$ 10.5 million will be paid over the next two to three years, contingent upon the achievement of certain performance criteria. The purchase price was allocated to technology with an estimated useful live of 15 years (US$ 64.8 million), and in-process research and development project (US 2.8 million) which is immediately expensed, goodwill (US$ 7.3 million) and other net assets (US$ 0.9 million).
In connection with the transaction, Fresenius Medical Care also acquired worldwide rights to a new product formulation currently under development, which Fresenius Medical Care expects will be submitted for approval in the United States during 2009. Following the successful launch of this new product formulation, Fresenius Medical Care will pay Nabi Biopharmaceuticals, Inc. royalties on sales of the new product formulation commencing upon the first commercialization of the new product and continuing until November 13, 2016. Total consideration, consisting of initial payment, milestone payments and royalties will not exceed US$ 150 million.
In 2007, Fresenius Kabi spent € 178 million on acquisitions mainly related to the acquisition of Nestlé’s enteral nutrition businesses in France (Novartis Nutrition S.A.S.) and in Spain (Nestlé España S.A.), the artificial colloid product business of Kyorin Pharmaceuticals Co. Ltd., Japan, the purchase of the remaining shares in Pharmatel Fresenius Kabi Pty Ltd., Australia, as well as the acquisition of all shares of Laboratorios Filaxis S.A., Argentina. In December 2007, Fresenius Kabi has reached an agreement to acquire Laboratorio Sanderson S.A., Chile, and Ribbon S.r.L., Italy. Both acquisitions were closed in January 2008.
In 2006, Fresenius Kabi made acquisitions of € 14 million, mainly referring to subsequent costs for the acquisition of Endomed Laboratório Farmacéutico Ltda., Brazil, as well as the take over of a distributor in South Africa.
In 2007, Fresenius ProServe spent € 175 million on acquisitions mainly related to the acquisition of the remaining 40% of the shares of HUMAINE Kliniken GmbH (HUMAINE), Germany, and the acquisition of a majority stake of 75% in the Krefeld Municipal Hospitals, Germany, by HELIOS Kliniken GmbH (HELIOS).
In the first quarter of 2007, Fresenius ProServe closed the divestiture of its subsidiary Pharmaplan GmbH, Germany, to NNE A/S, Denmark. Furthermore, Fresenius ProServe sold its subsidiary Pharmatec GmbH, Germany, to Robert Bosch GmbH, Germany. This transaction was completed on June 30, 2007.
Fresenius ProServe made acquisitions in an amount of € 139 million, which mainly referred to the acquisition of 60 % of the stakes in HUMAINE by HELIOS and additional stakes in HELIOS in 2006. Since the beginning of the third quarter of 2006, HUMAINE has been consolidated.
In the fourth quarter of 2006, Fresenius Biotech signed a contract to acquire additional shares of Trion Pharma GmbH, Germany in an amount of € 9 million. Contingent upon the achievement of certain performance criteria, additional contractual milestone payments in a maximum amount of € 14 million have been agreed. The acquisition was closed in the first quarter of 2007.
IMPACTS ON THE FRESENIUS GROUP’S CONSOLIDATED FINANCIAL STATEMENTS
RESULTING FROM ACQUISITIONS
In the fiscal year 2007, all acquisitions have been accounted for applying the purchase method and accordingly have been consolidated starting with the date of acquisition. Each single acquisition is not material. The excess of the total acquisition costs over the fair value of the net assets acquired was € 585 million and € 2,811 million in 2007 and 2006, respectively.
The purchase price allocations are not yet finalized for all acquisitions. Based on preliminary purchase price allocations, the recognized goodwill was € 495 million and the other intangible assets were € 90 million. Of this goodwill, € 210 million is attributable to the acquisitions of Fresenius Medical Care, € 163 million to Fresenius Kabi’s acquisitions and € 122 million to Fresenius ProServe’s acquisitions.
The acquisitions completed in 2007 or included in the consolidated statements for the first time for a full year, contributed the following amounts to the development of sales and earnings:
| in million € | 2007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales | 538 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EBITDA | 97 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EBIT | 77 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest | -51 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | 5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The acquisitions increased the total assets of the Fresenius Group by € 618 million.