Baxter International has entered into a significant agreement to divest its kidney care segment to the Carlyle Group for a staggering $3.8 billion. This strategic move, announced on Tuesday, aims to streamline Baxter’s operations while maximizing shareholder value. According to the latest statement from the companies, Baxter is set to receive approximately $3.5 billion in cash, with after-tax proceeds projected to be around $3 billion.
These proceeds will primarily be allocated to debt reduction, marking a pivotal step in Baxter's financial strategy. Last year, Baxter, a leading medical equipment supplier, unveiled plans to establish a standalone kidney care company. However, in March 2024, the company signaled its intentions to explore a sale of this segment.
The divestiture becomes a crucial part of Baxter's strategy to deepen operational focus and enhance efficiency, especially after the kidney care division, which will henceforth be known as Vantive, recorded revenues of $4.5 billion in 2023. Baxter's CEO, Jose Almeida, shared insights about the proposed transaction, stating, "As a result of this proposed transaction, Baxter will emerge a more focused and more efficient company, better positioned to redefine healthcare delivery and advance innovation that benefits patients, customers and shareholders." Following the announcement, Baxter's stock experienced a decline of 6.3% as markets approached the close on Tuesday, while Carlyle Group saw a 3% rise in its shares.
This reflects a broader market reaction to significant corporate changes within the healthcare sector. Carlyle Group's investment in Vantive is made in collaboration with Atmas Health, setting the stage for a dynamic restructuring within the kidney care market. Chris Toth, who holds the title of group president of kidney care at Baxter, will transition to become the CEO of Vantive.
In a detailed response, Atmas co-founder Kieran Gallahue will take on the role of chairman, thereby bolstering leadership within the new entity. Robert Schmidt, Carlyle's global co-head of healthcare, expressed excitement regarding the endeavor, stating, "We are delighted to partner with the Vantive team to pursue their strategic vision through the separation from Baxter and transformation into a standalone global business." The companies anticipate the closing of this deal to occur later this year or in early 2025.
Post-sale, Baxter projects an operational sales growth ranging from 4% to 5% annually. Furthermore, for the upcoming year, Baxter forecasts an adjusted operating margin of 16.5% from continuing operations, indicating robust financial health and strategic foresight. Looking ahead, Baxter is optimistic about mitigating stranded costs and bridging the gaps created by the cessation of transition service agreement income by 2027, through diligent cost containment measures that they have already initiated..