Baxter slims down again, selling kidney division to Carlyle

Baxter International has agreed to sell its kidney treatment division to private equity firm Carlyle Group in a $3.8 billion cash deal, continuing its efforts to streamline its operations and reduce debt.

The deal – which has been in preparation for well over a year – is expected to generate roughly $3 billion in after-tax proceeds and close in late 2024 or early next year. It follows the sale of Baxter's contract development and manufacturing organisation (CDMO) business BioPharma Solutions (BPS) to investment firms Advent International and Warburg Pincus last year for $4.25 billion.

The company ended 2023 with debt of more than $11 billion, down from nearly $17 billion at the end of the previous year, stemming largely from its $10.5 billion takeover of medical device and hospital equipment manufacturer Hillrom at the end of 2021.

The kidney care business – spanning dialysis machines and related supplies and services – will be renamed Vantive once the sale is concluded, said Baxter in a statement. Carlyle is buying the unit in partnership with Atmas Health, an investment firm set up by the private equity group in 2022 to focus on the medtech and life sciences sectors.

The kidney business – led by Chris Toth, who will be chief executive after the divestment – has more than 23,000 employees globally and had 2023 revenues of $4.5 billion.

Baxter recorded group sales of $14.8 billion last year, up 2%, and is targeting operational sales growth of 4% to 5% annually if the kidney care deal completes as planned.

"As a result of this proposed transaction, Baxter will emerge a more focused and more efficient company, better positioned to redefine healthcare delivery and advance innovation that benefits patients, customers, and shareholders," said Joe Almeida, chair, president, and chief executive at Baxter.

"I am confident that, under Carlyle's stewardship and Chris Toth's leadership, the Vantive team will continue to build on the business' 70-year legacy as a pioneer in kidney disease and vital organ therapies," he added.

Assuming the kidney care deal gets over the line, Baxter will have implemented its strategy – first announced in January 2023 – to narrow its focus to drug delivery, clinical nutrition, pharmaceuticals, and hospital equipment, including patient support and surgical systems.

"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," commented Robert Schmidt, Carlyle's global co-head of healthcare.

Despite the upbeat assessment of the deal, shares in Baxter fell almost 7% in the wake of the announcement, with analyst Vijay Kumar at Evercore ISI saying the price commanded for Vantive had come at the lower end of investor expectations.