And Praxair's homecare biz goes to...Apria
LAKE FOREST, Calif., and DANBURY, Conn. - Need proof that, with competitive bidding and other reimbursement pressures, providers are looking to build scale? Here it is: Apria Healthcare announced Feb. 2 that it will buy Praxair's U.S. homecare business.
"Given the current environment, it takes scale to be effective," said Bob Leonard, an analyst with The Braff Group, a Pittsburgh-based M&A firm.
Terms of the deal were not disclosed. Apria and Praxair expect to close the deal in the first quarter of 2011, according to press releases from the two companies.
So what does Apria get? Praxair has 85 branches providing home respiratory and durable medical equipment and services across 27 states. It employs about 1,100.
While Apria stated in a release that its deal with Praxair will expand its service offerings in "several key states," industry watchers suspect it's less about geography and more about consolidating the branches of the two companies.
"The economics are compelling to absorb some additional patient base and streams of revenue into existing infrastructure," Leonard said.
Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based M&A firm, agreed.
"Apria has a well built-out network already," he said. "They want to add more business with as few additional expenses as possible."
That strategy could be good news for smaller providers who compete with Apria, industry watchers say.
"It could create an opening in the market," Glass said. "Anytime you close a branch and try to provide services from another branch 10 miles away or 20 miles away, it opens up opportunities for everyone else to get some of their referrals."