Jefferies Provides Color On DVA

On the heels of a recent refinancing that netted DaVita Inc. (NYSE: DVA) $825MM in additional cash, management has earmarked $690MM of this capital to acquire DSI in a transaction valued at just over $86K/patient, Jefferies reports.

“On an EBITDA basis, we estimate that the company is likely paying upward of 11x for the assets before considering potential cost and revenue synergies, which could shave off as much as two to three turns on a forward basis, in our view,” Jefferies writes.

“While this valuation still sounds somewhat steep, we believe management is willing to pay up for a transaction such as this given its size and the fact that there are very few medium sized dialysis chains left.

“We expect DVA to use the balance of its excess cash for share repurchases, although the recent run in the stock and its current valuation leads us to believe that near-term activity on this front is unlikely.”

DaVita closed Friday at $76.56.