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Jackie Lam/MEDILL

Baxter International Inc. has been showing a solid performance in the stock market. Its price per share rose from about $50 in December last year to its current position at $65.

Baxter expands offshore dialysis operation with $4 billion Gambro buy

by Jackie Lam
Dec 04, 2012

Baxter International Inc., moving to strengthen its already-substantial presence in the global kidney-dialysis market, disclosed Tuesday that it has agreed to pay about $4 billion to acquire Swedish dialysis equipment maker Gambro AB.

With its latest purchase, the Deerfield, Ill medical-products giant will expand its market share in Europe: The privately held Gambro, based in Lund, Sweden, generates 56 percent of its $1.6 billion sales in the European market.

“This acquisition further strengthens out global dialysis offerings by extending our portfolio in the hemodialysis segment,” Robert L. Parkinson, Jr., chairman and chief executive of Baxter, said in a prepared statement. The acquisition, he predicted, “will provide attractive returns and enhance Baxter’s sales and earnings growth over the company’s current long-range financial plan.”

Ben Andrews, analyst at William Blair & Co. said the acquisition makes sense, and is in line with Baxter’s recent strategy of looking for opportunities that would accelerate its growth rate and increase its exposure to international and emerging markets.

“As they cross-fertilize, you should see them accelerate sales growth rate in a few years but they still have a lot of work to do,” Andrew said in an interview.

Baxter, he noted, “has been losing market share in certain product areas and geographical areas." And although there were “a lot of skeptical questions from Wall Street on the industry call,” he added, “it’s healthy” for the investing community to offer a reaction that will keep the company motivated to improve.

Baxter develops and manufactures medical treatment products for diseases including hemophilia, immune disorders, infectious diseases and kidney diseases. Gambro is one of the largest makers of clinical equipment for hemodialysis.

Geographical expansion has been part of Baxter’s long-term plan for growth, and “The overall strategy should allow the company to achieve the long-term growth plan of 5 percent top-line and 7 percent to 9 percent bottom-line growth,” said Blair’s Andrews, in a report to investors.

Baxter, he said, “has worked on driving potential peritoneal dialysis penetration in countries like Thailand.”

Tuesday’s disclosure wasn’t a total surprise: Published reports surfaced last month hinting that the deal was in the works. Shares for the Illinois company rose 4.1 percent on Nov. 23 after talks about the acquisition hit the street, marking the stock’s biggest one-day increase for all of 2012.

Excluding special items, Baxter said, the Gambro transaction is expected to trim next year’s adjusted earnings per diluted share by 10 to 15 cents, and to be either neutral or “modestly accretive” to 2014 adjusted per-share earnings.

In New York Stock Exchange trading Tuesday, Baxter shares slipped 48 cents, or less than one percent, to close at $65.33.