UPDATE 4-Baxter plans to spin off biotech business in 2015

Thu Mar 27, 2014 12:40pm EDT

(Adds Breakingviews link, updates stock price)

March 27 (Reuters) - Baxter International Inc said on Thursday it would spin off its biotechnology operations into a publicly traded company by the middle of next year and focus on its core medical technology business, sending its shares up more than 4 percent.

The move, which is similar to Abbott Laboratories' spinoff of AbbVie Inc at the beginning of 2013, is part of a trend among healthcare companies to divest businesses that are not part of their primary operations.

Baxter said its biotech business, which includes plasma-based proteins to treat hemophilia and other bleeding disorders, had 2013 revenue of $6 billion, while medical products and equipment sales were $9 billion.

That remaining products business includes intravenous fluid systems, dialysis, biosurgery and some specialty pharmaceuticals such as anesthesia and nutrition.

Chief Executive Officer Robert Parkinson will continue in his role, while Ludwig Hantson, president of its BioScience group, will lead the new, as-of-yet unnamed biopharmaceutical company.

During a conference call, analysts asked Parkinson what had changed his view about a company split, which had been speculated about in the past.

Baxter's board had been evaluating the strategy for a while, he said.

"I have been a strong advocate of the diversified healthcare model," Parkinson said, "and I will tell you there remain distinctive advantages and value drivers of that model.

"The question is when did the merits of a spinoff begin to generate more value, and it is our view today, we are at that point."

Baxter has spun off other companies in the past three decades, including Edwards Lifesciences Corp, Caremark Corp and Allegiance Healthcare Corp.

Baxter executives also said during the conference call that the company was working on the divestiture of its vaccines business. Earlier this week, Reuters reported that Baxter had hired an investment bank to explore the sale of the business, which has $300 million in sales in 2013 and had been undergoing a strategic review.

Baxter said it expected to take a one-time charge for the biotechnology spinoff but that it should not affect its financial forecast for 2014. Analysts expect earnings of $5.13 per share and revenue of $16.59 billion this year, according to Thomson Reuters I/B/E/S.

Shares of Baxter rose 4.2 percent to $74.32 shortly after midday, but ISI Group analyst Mike Craig said the gains might not hold.

"We have seen several announcements recently where an announcement of the split drives the stocks up 10 percent and quickly fades as timing sets in and market risk still exists," Craig said in a research note.

Elsewhere in the healthcare industry, Novartis AG is considering divesting some smaller businesses, which include animal health, vaccines and over-the-counter medicines, while Merck & Co Inc is selling its consumer healthcare operation. (Reporting by Caroline Humer; Editing by Jeffrey Benkoe and Lisa Von Ahn)

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Comments (1)
StockDoctors wrote:
The split of the company is quite rational given that
the medical products division wants to focus on growth where
as biopharma wants to focus on retrenching and focus on profitability.

The split will allow the two segments of business with conflicting
financing and operational needs to optimize their business independently without interfering each other.

So, the split makes sense. Can Baxter do it? Historically
speaking, Yes they can. The company has experience divesting businesses and products as well as in M&A, and given the distinct nature of the two business division, it should be a relatively risk-free split. Read full-article at the link: http://www.alphapitch.com/companies/bax

Mar 27, 2014 5:36pm EDT  --  Report as abuse
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