USA — Baxter, a leading medical device maker, has agreed to sell its BioPharma Solutions (BPS) business to private equity investor Advent International and growth investor Warburg Pincus for about US$4.25 billion in cash.
The deal is expected to close in the second half of 2023, and the net after-tax proceeds from the divestment are estimated at approximately US$3.4 billion.
This transaction will result in a dilution of about US$0.10 per share to the company’s earnings in Q4 2023.
José (Joe) E. Almeida, chairman, president, and CEO at Baxter, said in a statement, “Today represents an important step in Baxter’s ongoing transformation journey as we continue to execute against our strategic priorities, enhance our focus and create additional value for all our stakeholders.”
Baxter intends to use the after-tax proceeds of US$3.4 billion to pay down the debt incurred when it purchased medical device maker Hill-Rom Holdings for US$10.5 billion in 2021.
Baxter had a market value of US$19 billion and total debt of US$16.6 billion as of Dec. 31.
Baxter’s biopharma solutions business, which provides contract manufacturing and other support services for pharmaceutical companies, reported US$644 million in revenue last year.
It’s expected to generate roughly US$600 million in revenue in 2023, the companies said in a statement.
Under Advent and Warburg Pincus ownership, it will operate as an independent contract development and manufacturing organization.
The two private equity firms will acquire biopharma solutions’ manufacturing facilities, and roughly 1,700 employees in Indiana and Germany.
Advent Managing Partner John Maldonado said in a statement that the partnership can “unlock multiple opportunities for growth and help the business realize its full potential” by serving large customers, including Baxter, with specialized, end-to-end capabilities as a standalone company.
Through the deal with Baxter, the private-equity firms hope to strengthen their presence in the contract drug manufacturing space.
Private-equity firms have increasingly been investing in the drug development sector, which was deemed risky, by coming up with deals that compensate them for the uncertainty involved.
BPS provides sterile contract manufacturing solutions, parenteral delivery systems, and customized support services to the pharma and biotech industries.
As a standalone company and partnering with the two buyers, BPS will become an independent, end-to-end CDMO with a range of services from clinical research to commercial deployment.
In addition to this divestment, Baxter also named Chris Toth as the CEO of the company’s planned spinoff of its Renal Care and Acute Therapies businesses last week.
Baxter is currently transforming its portfolio and is focusing on high-growth areas such as critical care, biosurgery, and renal care.
The company aims to streamline its operations, create more value for shareholders, and enhance its focus through divestitures and spinoffs.
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