DaVita Inc. (DVA) recently declared that it has purchased a controlling interest in a Saudi Arabian kidney care company – Lehbi Care. All the three hemodialysis clinics of Lehbi, which are situated in the Saudi Arabian capital, Riyadh, will now be managed by DaVita.
Riyadh-based Lehbi currently has over 400 patients under its care. These patients will be benefited by DaVita’s plans to open a vascular access center and expand home dialysis services.
The acquisition is an important step in DaVita’s international expansion strategy as Saudi Arabia has substantial demand for dialysis services and offers strong growth opportunities in the long term. The company has been rapidly expanding its international operations recently through acquisitions and alliances.
DaVita announced in March 2012, a joint venture with 3SBio Inc. (SSRX), a China-based biotechnology company. The companies will jointly invest about $20 million in China, in the ratio of 7:3 (DaVita:3SBio). Additionally, the companies have also inked a supply deal for anemia management drugs in China.
Earlier, in January 2012, DaVita announced the purchase of a majority stake in NephroLife, an India-based kidney care company. Prior to that, in November 2011, the company announced the acquisition of ExtraCorp AG by its wholly-owned subsidiary, DV Care GmbH. Alongside, DaVita operates a dialysis center in Singapore and has also signed an agreement to develop and operate various clinics in Malaysia.
Of late, DaVita has been looking for suitable global acquisition and partnership opportunities, primarily in Europe and Asia. We expect more meaningful mergers and acquisitions, given the company’s strong international reputation, which provides competitive advantage in terms of global acquisitions.
The Zacks Consensus Estimate for DaVita’s first-quarter 2012 earnings is currently pegged at $1.45 per share, up by an estimated 51% year over year. None of the 12 analysts covering the stock revised their estimates in the last 30 days. For 2012, earnings are expected to be $6.23 per share, showing a forecasted 21% climb over 2011.
DaVita currently carries a Zacks #3 Rank, implying a short-term ‘Hold’ rating. Additionally, we maintain a long-term ‘Neutral’ recommendation on the company.
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