$4 Billion Deal in Medical Supplies Sector (BAX)

U.S. medical instruments and supplies maker Baxter International Inc. (NYSE: BAX) said this morning that it has signed a definitive agreement to acquire privately held Swedish dialysis product firm Gambro AB for a total of about $4 billion. The deal includes the assumption of approximately $1.2 billion in Gambro debt.

Baxter’s CEO said:

Baxter has a legacy of innovation in dialysis, including the development of peritoneal dialysis for the treatment of end-stage kidney disease patients in the home. This acquisition further strengthens our global dialysis offerings by extending our portfolio in the hemodialysis segment.

Analysts cited by Bloomberg noted that Baxter’s renal division has been “undersized” in relation to some of the company’s other businesses and that this deal balances the company better.

The acquisition is expected to cost Baxter $0.10 to $0.15 in adjusted EPS in 2013. Baxter said that it expects the transaction to be neutral to modestly accretive to adjusted earnings per share in 2014. Over the next five years, Baxter expects a sales increase of 7% to 8% and growth of adjusted EPS of 8% to 10%.

Baxter said it will finance the acquisition with overseas cash and debt, which analysts also like because it allows the company to use its cash in foreign banks without having to repatriate the funds. The deal is expected to close in the first half of 2013.

Baxter’s shares are inactive in premarket trading this morning, having closed at $65.80 last night in a 52-week range of $47.55 to $68.91.

Paul Ausick