Societe Generale has financed German health group Fresenius in its strategy to foster its market-leading position in the German hospital market. Given Fresenius’ sound and resilient business profile in a stable industry with high recurring cash flows, the Group is actively using leverage to drive returns. Our knowledge of the group combined with strong trust in its management enabled us to quickly decide to support Fresenius in its €3bn acquisition of the vast majority of Rhön Klinikum AG’s hospitals.
Fresenius’ acquisition path is long and successful – from RCG Group via Helios and APP to Rhön with various additional stops along the way. As we have supported the Group in its most recent acquisitions, we have gathered a profound knowledge of Fresenius and developed a trust-based relationship at Senior Management level.
With the acquisition of 43 clinics and 15 outpatient facilities from its rival Rhön Klinikum at the end of 2013, Helios – Fresenius’ hospital business – has become the European leader in its sector. This wasn’t a straightforward operation: an initial public takeover bid for the entire Rhön Klinikum AG in 2012 was not successful given opposition from competitors.
Societe Generale, also involved in the first attempt, participated as part of a very small group of lead managers in the financing of this € 3bn acquisition. The initial financing included a syndicated term loan as well as a bridge-to-capital-markets. The latter was subsequently replaced by Senior Notes issues in various currencies and maturities as well as, notably, an innovative convertible bond structure. Societe Generale successfully acted as Joint Bookrunner for Fresenius’ equity-neutral zero-coupon convertible bond issue. Today’s buoyant equity-linked markets enabled Fresenius to obtain financing costs well below those of comparable Senior Notes while further diversifying its funding sources and investor base without incurring dilution. This transaction is innovative and unparalleled in the European market as Fresenius, at the time of issuance, purchased OTC call options mirroring those embedded in the convertible bonds and thus fully hedged its position.
“Fresenius is an a-typical non-Investment Grade issuer as the group consciously combines leverage with strong recurring cash flows. Whilst rating agencies assign Fresenius to the ‘High Yield’ segment, they acknowledge its strong investment grade like business profile. This unique combination makes Fresenius one of the most sought after bond issuers“, explains Sven Streiter, Senior Banker for Fresenius. “The acquisition of Rhön’s hospitals fosters Fresenius’ already leading position in the German and European hospital market. We view it as a further milestone to expand Fresenius’ diversified operations into a growing and resilient market with stable cash flows. We are proud to accompany this leading player.”