👀 Ones to watch: Undervalued stocks to buy before they report Q3 earningsSee Undervalued Stocks

Carlyle acquires Baxter's Kidney Care unit for $3.8 billion

Published 2024-08-13, 11:12 a/m
BAX
-
CG
-

DEERFIELD, Ill. & NEW YORK - In a significant reshaping of its business, Baxter International Inc. (NYSE:BAX) has agreed to sell its Kidney Care division to global investment firm Carlyle (NASDAQ:CG) for $3.8 billion. The deal, which is part of Baxter's broader strategy to streamline operations and focus on its core strengths, is expected to close between late 2024 and early 2025, pending regulatory approvals and other customary closing conditions.

The divestiture will result in Baxter receiving approximately $3.5 billion in cash, with net after-tax proceeds estimated at around $3 billion. This strategic move is anticipated to provide Baxter with increased flexibility to pursue growth opportunities and reduce its debt, in line with its capital allocation priorities.

The Kidney Care business, which will be rebranded as Vantive, is a key player in the global kidney care market, offering a range of products and services for dialysis and organ support therapies. Vantive boasts over 23,000 employees and reported revenues of $4.5 billion in 2023.

Carlyle's acquisition is made in partnership with Atmas Health, a collective founded by three healthcare industry executives. Kieran Gallahue, a co-founder of Atmas, is set to become the Chairman of Vantive post-acquisition, while Chris Toth, currently executive vice president and group president of Kidney Care at Baxter, will take on the role of CEO for Vantive.

Baxter has shared a preliminary financial outlook following the sale, targeting operational sales growth of 4% to 5% annually and an adjusted operating margin of approximately 16.5% for 2025. The company plans to offset anticipated costs and lost income related to the divestiture through ongoing cost containment initiatives, aiming to achieve its target adjusted operating margin expansion.

This transaction aligns with Baxter's transformation strategy initiated in early 2023, designed to enhance performance and stakeholder value. The company will continue to prioritize investments toward high-growth areas to drive further value creation.

The information for this article is based on a press release statement.

In other recent news, Baxter International has reported strong second-quarter results for 2024, exceeding expectations with sales growth in multiple sectors, and an increased full-year sales outlook. Baxter International's sales from continuing operations grew 3% on a reported basis and 4% at constant currency rates, with the Medical Products and Therapies segment and the Pharmaceuticals segment seeing increases of 4% and 9% respectively.

The company has improved its full-year sales growth forecast to around 3% and expects an increase in adjusted operating margin by over 50 basis points. Baxter is preparing for the separation of its Kidney Care business, aiming for completion by late 2024 or early 2025. New product launches, pricing opportunities, and operational efficiencies are driving margin improvements.

Shortly, Baxter anticipates a stronger second half of the year, with improvements in the primary care market and growth in cardiology and acute settings. The company expects to gain market share with the introduction of its Novum product. However, some segments like Healthcare Systems and Technologies and Front Line Care underperformed due to market conditions and reduced government orders.

InvestingPro Insights

As Baxter International Inc. (NYSE:BAX) enters a pivotal phase with the sale of its Kidney Care division, a closer look at some key financial metrics could provide a clearer picture of the company's current standing and future potential. According to InvestingPro data, Baxter's market capitalization stands at $18.84 billion, reflecting the scale of its operations within the healthcare sector.

An InvestingPro Tip highlights Baxter's track record of raising its dividend for 7 consecutive years, signaling a commitment to rewarding shareholders. This is further supported by the company having maintained dividend payments for 54 consecutive years, a testament to its financial resilience and strategic foresight. Moreover, the current dividend yield sits at 3.14%, which is competitive within the industry and attractive to income-focused investors.

Another relevant InvestingPro Tip is that analysts have revised their earnings upwards for the upcoming period, indicating a positive sentiment around Baxter's financial prospects. This is particularly noteworthy as the company predicts operational sales growth and an improved adjusted operating margin by 2025. Additionally, the company is expected to return to profitability this year, which could be a catalyst for the stock's future performance.

InvestingPro also provides more specific data points such as a price-to-earnings (P/E) ratio of 7.58, suggesting that the stock may be undervalued relative to its earnings. Despite a challenging past year reflected in a negative price total return of -11.93%, the company's focus on strategic growth and cost containment initiatives could pave the way for a rebound.

For readers interested in a deeper dive into Baxter's financials and future outlook, InvestingPro offers additional tips and insights. There are 11 more InvestingPro Tips available for Baxter, which can be accessed for a comprehensive analysis of the company's investment potential.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.