• 1. Principles
• 2. Acquisitions, divestitures and investments

2. Acquisitions, divestitures and investments

Acquisitions, Divestitures and Investments

The Fresenius Group made acquisitions and investments of €3,172 million and €1,612 million in 2012 and 2011, respectively. Of this amount, €2,630 million was paid in cash and €542 million was assumed obligations in 2012.

Fresenius Medical Care

In 2012, Fresenius Medical Care spent €1,408 million on acquisitions, mainly for the acquisition of Liberty Dialysis Holdings, Inc., United States.

Acquisition of Liberty Dialysis Holdings, Inc.

On February 28, 2012, Fresenius Medical Care acquired 100% of the equity of Liberty Dialysis Holdings, Inc. (LD Holdings), the owner of Liberty Dialysis and owner of a 51% stake in Renal Advantage Partners, LLC (the Liberty Acquisition). This transaction was accounted for as a business combination, subject to finalization of the acquisition accounting which will be finalized during the first quarter of 2013. LD Holdings mainly provided dialysis care in the United States through the 263 clinics it owned (the Acquired Clinics).

Total consideration for the Liberty Acquisition was US$2,181 million, consisting of US$1,696 million cash, net of cash acquired and US$485 million non-cash consideration. Accounting standards for business combinations require previously held equity interests to be fair valued with the difference to book value to be recognized as a gain or loss in income. Prior to the Liberty Acquisition, Fresenius Medical Care had a 49% equity investment in Renal Advantage Partners, LLC, the fair value of which, US$202 million, is included as non-cash consideration. Fresenius Medical Care has determined the estimated fair value based on the discounted cash flow method, utilizing an approximately 13% discount rate. In addition to Fresenius Medical Care’s investment, it also had a loan receivable from Renal Advantage Partners, LLC of US$279 million, at a fair value of US$283 million, which was retired as part of the transaction.

The following table summarizes the estimated fair values as of the date of the acquisition based upon information available as of December 31, 2012, of assets acquired and liabilities assumed at the date of the acquisition. Any adjustments to acquisition accounting, net of related income tax effects, will be recorded with a corresponding adjustment to goodwill.

As of December 31, 2012, it is estimated that amortizable intangible assets acquired in this acquisition will have weightedaverage useful lives of 6 – 8 years.

Goodwill in the amount of US$2,000 million was acquired as part of the Liberty Acquisition. Of the goodwill recognized in this acquisition, approximately US$436 million is expected to be deductible for tax purposes and amortized over a 15 year period.

The noncontrolling interests acquired as part of the acquisition are stated at estimated fair value, subject to finalization of the acquisition accounting, based upon utilized implied multiples used in conjunction with the Liberty Acquisition, as well as Fresenius Medical Care’s overall experience and contractual multiples typical for such arrangements.

LD Holdings’ results have been included in the consolidated statement of income since February 29, 2012. Specifically, LD Holdings has contributed sales and operating income in the amount of US$714 million (€556 million) and US$182 million (€142 million), respectively, to the consolidated income. This amount for operating income does not include synergies which may have resulted at consolidated entities outside LD Holdings since the acquisition closed. In addition, the results include those of divested Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA) clinics prior to their divestiture.

The fair valuation of Fresenius Medical Care’s 49% equity investment in Renal Advantage Partners, LLC at the time of the Liberty Acquisition resulted in a non-taxable gain of US$140 million and is presented in the separate line item investment gain in the consolidated statement of income. The retirement of the loan receivable resulted in a gain of US$9 million which was recognized in net interest.

Divestitures

In connection with the United States Federal Trade Commission consent order relating to the Liberty Acquisition, Fresenius Medical Care agreed to divest a total of 62 renal dialysis centers. In 2012, 24 of the 61 clinics sold were FMC-AG & Co. KGaA clinics, which resulted in a US$33.5 million gain.

In 2012, the income tax expense related to the sale of these clinics of approximately US$20.8 million has been recorded in the line item income taxes in the consolidated statement of income, resulting in a net gain of approximately US$12.7 million. The after-tax gain was offset by the after-tax effects of the costs associated with the Liberty Acquisition.

In 2011, Fresenius Medical Care spent €1,429 million on acquisitions, primarily for acquisitions of International Dialysis Centers, the dialysis service business of Euromedic International, and American Access Care Holdings, LLC, which operates vascular access centers, and for loans provided to, as well as the purchase of a 49% ownership of, the related party Renal Advantage Partners, LLC, the parent company of Renal Advantage, Inc., a provider of dialysis services.

In December 2010, Fresenius Medical Care announced a renal pharmaceutical joint venture between Fresenius Medical Care and Galenica Ltd., Vifor Fresenius Medical Care Renal Pharma Ltd. (VFMCRP), to develop and distribute products to treat iron deficiency anemia and bone mineral metabolism for pre-dialysis and dialysis patients. Closing in the United States occurred at the end of 2010. In the fourth quarter of 2011, VFMCRP received approval from the responsible European Union antitrust commission and formal closing occurred on November 1, 2011.

Further acquisition spending in 2011 related mainly to the purchase of dialysis clinics.

Fresenius Kabi

In 2012, Fresenius Kabi spent €877 million on acquisitions.

Acquisition of Fenwal Holdings, Inc.

On July 20, 2012, Fresenius Kabi announced the signing of a purchase agreement to acquire 100% of the share capital in Fenwal Holdings, Inc. (Fenwal), a leading U.S.-based provider of transfusion technology products for blood collection, separation and processing.

In 2011, Fenwal had sales of US$614 million with an adjusted EBITDA of US$90 million. The company, with about 4,900 employees worldwide, runs a state-of-the-art R & D center and operates five manufacturing facilities.

The transaction was financed from the proceeds of the May 2012 capital increase.

The transaction could be closed on December 13, 2012 after approval by the antitrust authorities. The Fresenius Group has consolidated Fenwal as of December 2012.

The transaction was accounted for as a business combination. The following table summarizes the current estimated fair values of assets acquired and liabilities assumed at the date of the acquisition. This allocation of the purchase price is based upon the best information available to management at present. Due to the relatively short interval between the closing date of the acquisition and the date of the statement of financial position, this information may be incomplete. Any adjustments to acquisition accounting, net of related income tax effects, will be recorded with a corresponding adjustment to goodwill.

It is currently estimated that amortizable intangible assets acquired in this acquisition will have weighted-average useful lives of 10 to 15 years. The acquired amortizable intangible assets primarily consist of customer relationships in the amount of €82 million and technology in the amount of €237 million.

The goodwill in the amount of €379 million that was acquired as part of the Fenwal Acquisition is not deductible for tax purposes.

In December 2012, Fenwal has contributed sales in the amount of €39 million and operating income in the amount of €1 million to the consolidated income.

Divestitures

In December 2012, Fresenius Kabi announced that it had signed an agreement to sell its subsidiary Calea France SAS (Calea) to The Linde Group. Calea is active in the French homecare market and focuses on respiratory therapy, which is not a core business of Fresenius Kabi.

The transaction was completed in January 2013. The assets and liabilities of Calea were thus shown as held for sale in the consolidated statement of financial position as of December 31, 2012 under other assets and other liabilities.

In 2011, Fresenius Kabi spent €11 million on acquisitions, mainly for compounding companies in Germany.

Fresenius Helios

In 2012, Fresenius Helios spent €579 million on acquisitions, mainly for the acquisition of Damp Holding AG.

Acquisition of Damp Holding AG

In March 2012, Fresenius Helios closed the acquisition of Damp Holding AG (Damp), Germany, after approval by antitrust and other governmental authorities. 100% of the share capital was acquired.

Damp is among the 10 largest private hospital operators in Germany.

The Fresenius Group has consolidated Damp as of March 31, 2012.

The transaction was accounted for as a business combination, subject to finalization of the acquisition accounting which will be finalized in the near future. The following table summarizes the current estimated fair values of assets acquired and liabilities assumed at the date of the acquisition. This allocation of the purchase price is based upon the best information available to management at present. Any adjustments to acquisition accounting, net of related income tax effects, will be recorded with a corresponding adjustment to goodwill.

The goodwill in the amount of €439 million that was acquired as part of the Damp Acquisition is not deductible for tax purposes.

Damp’s results have been included in the consolidated statement of income since April 1, 2012. Specifically, Damp has contributed sales and operating income in the amount of €306 million and €8 million, respectively, to the consolidated income.

In 2011, Fresenius Helios spent €45 million on acquisitions, mainly for the acquisition of 51% of the share capital in the Katholisches Klinikum Duisburg GmbH, Germany, in December 2011 and for the acquisition of the Gesundheitszentren Landkreis Rottweil GmbH, Germany, in May 2011. Furthermore, Fresenius Helios made an additional purchase price payment for the HELIOS St. Marienberg Klinik Helmstedt GmbH, Germany.

Fresenius Vamed

In 2012, Fresenius Vamed spent €44 million on acquisitions, mainly for the acquisition of H.C. Hospital Consulting S.p.A., Italy, and the intercompany acquisition of the HELIOS Klinik Zihlschlacht AG, Switzerland, from HELIOS Kliniken GmbH.

In 2011, Fresenius Vamed did not make any material acquisition.

Corporate / Other

In November and December 2011, Fresenius SE & Co. KGaA purchased 1,399,996 ordinary shares of Fresenius Medical Care AG & Co. KGaA (FMC-
AG & Co. KGaA). In January and February 2012, Fresenius SE & Co. KGaA purchased further 2,100,004 ordinary shares of FMC-AG & Co. KGaA. Therefore, the voting rights in FMC-AG & Co. KGaA increased to 31.18% at December 31, 2012. A total of 3.5 million ordinary shares were acquired with a total transaction volume of approximately €184 million, whereof €113 million were spent in the year 2012.

Takeover offer to the shareholders of RHÖN-KLINIKUM AG

On April 26, 2012, Fresenius announced its intention to make a voluntary public takeover offer to RHÖN-KLINIKUM AG shareholders of €22.50 per share in cash. The total purchase price for all outstanding shares in the company was approximately €3.1 billion. The takeover offer was contingent upon a minimum acceptance threshold of 90% and one share of RHÖN-KLINIKUM AG’s share capital at the end of the offer period, amongst others, and on antitrust approval.

At the end of the offer period, 84.3% of RHÖN-KLINIKUM AG shares had been tendered. The minimum acceptance threshold of more than 90% was not met. Consequently, the takeover offer was not consummated.

Relating to the takeover offer to the shareholders of RHÖN-KLINIKUM AG, until September 5, 2012, Fresenius acquired 6.9 million shares of RHÖN-KLINIKUM AG. This is equivalent to 5.0% of the subscribed capital of RHÖN-KLINIKUM AG.

Divestitures

In December 2012, Fresenius has decided to focus on its four established business segments Fresenius Medical Care, Fresenius Kabi, Fresenius Helios and Fresenius Vamed. The Fresenius Biotech subsidiary will be discontinued. Fresenius assesses the option of continuing the immunosuppressive drug ATG-Fresenius S within the Group, but will divest the trifunctional antibody Removab business.

As a result of this decision, the assets and liabilities of Fresenius Biotech were shown as held for sale in the consolidated statement of financial position as of December 31, 2012 under other assets and other liabilities.

In the first quarter of 2011, in the segment Corporate / Other, the remaining shares of HELIOS Kliniken GmbH, Germany, were acquired for a purchase price of €54 million.

Impacts on Fresenius Group’s consolidated financial statements resulting from acquisitions

In the fiscal year 2012, all acquisitions have been accounted for applying the purchase method and accordingly have been consolidated starting with the date of acquisition. The excess of the total acquisition costs over the fair value of the net assets acquired was €2,561 million and €931 million in 2012 and 2011, respectively.

The purchase price allocations are not yet finalized for all acquisitions. Based on preliminary purchase price allocations, the recognized goodwill was €2,561 million and the other intangible assets were €471 million. Of this goodwill, €1,707 million is attributable to the acquisitions of Fresenius Medical Care, €396 million to Fresenius Kabi’s acquisitions, €447 million to the acquisitions of Fresenius Helios and €11 million to the acquisitions of Fresenius Vamed.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill arises principally due to the fair value placed on acquiring an established stream of future cash flows versus building a similar business.

The acquisitions completed in 2012 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:

The acquisitions increased the total assets of the Fresenius Group by €3,857 million.

The following unaudited financial information, on a pro forma basis, reflects the consolidated results of operations as if the acquisitions of Liberty, Damp and Fenwal had been consummated on January 1, 2012.

With respect to the Liberty Acquisition, the pro forma information is based on the assumption that the divestiture of the clinics had already been consummated on January 1, 2012.

With respect to the acquisition of Damp and Fenwal, the pro forma financial information mainly includes adjustments for interest expenses in connection with the acquisition of Damp and income taxes.

The pro forma financial information is not necessarily indicative of the results of operations as it would have been had the transactions been consummated on January 1, 2012.