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FRANKFURT (Reuters) -German healthcare group Fresenius SE (ETR:FREG) will slash costs and proceed with plans to cede strategic control over struggling dialysis group Fresenius Medical Care (NYSE:FMS) (FMC (NYSE:FMC)) as its new CEO seeks to simplify the diversified healthcare group, it said.
The move comes after Elliott Investment Management took a stake in Fresenius last year, sparking speculation the activist investor might push for a break-up of the company.
“This is an inflection point for Fresenius,” Chief Executive Michael Sen said. “The new structure will greatly benefit both companies: Fresenius Medical Care needs an operational turnaround, to improve its performance and focus on its core business.”
Fresenius said it aimed to exclude FMC, which has been hit hard by a high death rate from COVID-19 among its patients, from its regular financial reporting by changing its legal form to that of a stock corporation from KGaA, likely by the end of 2023.
That set-up currently gives Fresenius strategic control and the right to appoint leadership positions even though it only holds 32% of FMC’s capital.
Fresenius said it would continue to hold that stake regardless of the change.
“Fresenius needs to simplify its complex corporate structures and commit to its Operating Companies and to maximizing value from its investments,” Sen said.
FMC is expected to hold an extraordinary general meeting in July to let shareholders vote on the proposed change of the legal form, Fresenius said.
Frankfurt-listed shares of Fresenius and FMC were up 1% and 2.2%, respectively.
Fresenius also said it expected its 2023 earnings before interest, taxes (EBIT) and special items to come in between flat and down by a “high-single-digit” percentage, when adjusted for currency changes, after 2022 adjusted EBIT declined 6% to 4 billion euros ($4.3 billion).
It is also targeting annual structural cost savings of around 1 billion euros before interest and tax by 2025.
In a separate statement, FMC said full-year net income dropped 31% to 673 million euros, below an analyst consensus of 681 million euros posted on the company’s website, marking the fourth consecutive annual decline.
It expects sales to grow at a low to mid-single digit percentage rate in 2023.
($1 = 0.9395 euros)
