Baxter International’s plans to streamline its operations are taking a big step with the proposed $3.8 billion sale of its kidney care business to private equity firm The Carlyle Group.
The two companies announced Tuesday that they have signed a definitive agreement for Carlyle to acquire the kidney business, which will be named Vantive. Net after-tax proceeds to Deerfield, Illinois-based Baxter are estimated to be about $3 billion. Baxter said it plans to use these proceeds to reduce its debt, which is consistent with its ongoing strategy.
Two years ago, Baxter’s board of directors commenced a strategic review of the company’s business with a goal of increasing shareholder value. In early 2023, Baxter unveiled the results. One of the proposed actions was spinning off kidney care as a separate publicly traded company. But in March of this year, Baxter disclosed it was in discussions with private equity firms about a potential sale of the kidney business. The buyer turns out to be Carlyle, whose Vantive acquisition is comparable to prior deals that gave the firm a stake in companies providing healthcare services.
Baxter is set to receive less for the kidney care business than it was able to fetch last year for its much smaller biopharma solutions unit. The private equity firms Advent International and Warburg Pincus paid $4.25 billion for biopharma solutions. Slowing sales might be the reason for the lower price for the kidney care business.
Kidney care is currently one of four Baxter operating segments. The others are medical products and therapies, healthcare systems and technologies, and pharmaceuticals. The kidney business includes dialysis services and therapies as well as organ support therapies. Measured by revenue, kidney care is Baxter’s second largest segment behind only medical products and therapies. For 2023, Baxter reported kidney care accounted for $4.45 billion in sales, a 36.4% increase compared to the prior year and about 30% of Baxter’s overall sales.
However, kidney care revenue has flattened this year. The segment’s $2.2 billion in sales in the first half of 2024 is just a 1.4% increase compared to the same period last year, according to Baxter’s report of second quarter 2024 financial results. In chronic therapies, a unit within kidney care, revenue is decreasing. In the report, Baxter states it conducted a goodwill impairment test of the chronic therapies unit. This test basically determines if the stated goodwill of the chronic therapies unit exceeds its market value. Such tests are a way for a buyer to ensure it does not overpay for an acquisition. Baxter said in the report it recorded a $430 million goodwill impairment charge related to chronic therapies, representing all of the goodwill of that reporting unit.
Carlye says its investments in medical technology companies over the past decade total more than $40 billion in equity value. The firm’s Vantive investment was made in partnership with Atmas Health, a collaboration of three healthcare executives that began in 2022. Atmas is focused on acquiring and medical technology companies.
The Baxter kidney care business has more than 23,000 employees globally. As Vantive, it will continue to be led by CEO Chris Toth, the kidney care executive vice president and group president hired when Baxter initially planned to spin off the business. Caryle and Baxter expect to complete the transaction late this year or in early 2025.
“Vantive is a strong, growing business with market-leading franchises, and 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,” Robert Schmidt, Carlyle’s global co-head of healthcare, said in a prepared statement.
Photo: Brent Lewin/Bloomberg, via Getty Images
