Baxter Split-Up, a Page From Abbott's Playbook

Health and Healthcare

Published: March 27, 2014 9:15 am

Baxter International Inc. (NYSE: BAX) is taking an activist investor role of its own. The health care company has announced that it is splitting itself into two separate companies, in what is expected to be a tax-free move. One business will be focused on biopharmaceuticals (biotech and pharmaceuticals) and the other company will be focused on its remaining medical products.

Baxter’s pharmaceutical business had sales of close to $6 billion in 2013. This unit has key products and a focus on hemophilia and blood therapies that treat immune deficiencies. It also includes burns and shock.

The other medical products business of Baxter had more than $9 billion in 2013 revenues. Its product portfolio is made up of intravenous and nutritional therapies, as well as surgical products, anesthesia products, kidney dialysis from Gambro AB, and drug delivery systems. This company will continue to be named Baxter International.

The company’s new management structure is described as follows:

Robert L. Parkinson, Jr., will serve as chairman and chief executive officer of the medical products company, which will retain the Baxter International name. Ludwig N. Hantson, Ph.D., who currently serves as president, BioScience, will be named chief executive officer of the new biopharmaceuticals company.

Investors will have to be patient here, as the split is not expected to be finished until the middle of 2015. If this sounds familiar, it is very similar to the Abbott Laboratories (NYSE: ABT) and AbbVie Inc. (NYSE: ABBV) break-up of 2013.

Baxter International shares are rising handily on the news. Thursday’s trading indications were up almost 10% at $76.60, which appears to be a new all-time high, versus its 52-week range of $62.80 to $74.60. Thomson Reuters had the Baxter consensus analyst price target up at $76.85, but that was before the split-up was announced.

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