(Corrects spelling of Gambro in headline; corrects company name
in paragraph 8 to EQT instead of EQT Corp; removes ticker EQT.N
that is not associated with EQT, the private equity company)
By Debra Sherman
Dec 4 Baxter International Inc said
on Tuesday that it would buy privately held Swedish dialysis
product company Gambro AB for about $4 billion to complement its
kidney therapy portfolio.
Baxter will finance the deal, which it valued at $26.5
billion Swedish kroner, with debt and cash.
Baxter manufactures kidney dialysis equipment, drug infusion
pumps and blood therapy products. The Gambro acquisition will
round out Baxter's renal business, which accounted for almost
one-fifth of the company's 2011 revenue of $13.89 billion.
Gambro is one of the largest makers of equipment for
hemodialysis, which is generally performed in a hospital or
clinic. The dialysis from Baxter's machines is called peritoneal
and can be performed at home.
The deal marks further consolidation in the kidney dialysis
market, where Gambro and Baxter compete against rivals such as
U.S.-based DaVita HealthCare Partners Inc and Germany's
Fresenius Medical Care AG & Co KGaA.
Analyst Kristofer Liljeberg of Sweden's Carnegie investment
bank said the Gambro deal would give Baxter the No. 2 clinical
dialysis position, behind Fresenius.
"I think in the longer term, the ambition is to try to
challenge Fresenius," Liljeberg said.
However, he said, Gambro, which is owned by Swedish
investment holding company Investor AB and its partly
owned private equity company EQT, had been struggling in recent
years with slow growth and price competition.
Liljeberg said the deal was a good one for family-owned
Investor, which controls several of Sweden's top companies.
Since they bought Gambro, Investor and EQT have sold off its
clinics and a blood component business.
A GROWING MARKET
More than 2 million patients globally are on some form of
dialysis, and that has been increasing more than 5 percent
annually, in part because of the rising rates of diabetes and
Excluding special items, Baxter expects the Gambro
transaction to reduce earnings per diluted share by 10 cents to
15 cents in 2013 and be neutral or add modestly to them in 2014.
The deal is expected to close in the first half of next year.
Excluding the impact of special items and estimated
amortization of intangible assets, the company said the deal
should not affect earnings in 2013 and add 20 cents to 25 cents
a diluted share to them in 2014.
Baxter said it expected the deal to add to earnings per
diluted share, excluding special items, after 2014.
The suburban Chicago company said it expected over five
years to increase its sales by 7 percent to 8 percent, excluding
the impact of currency fluctuations, on a compound annual basis,
with earnings per diluted share, excluding special items, rising
by 8 percent to 10 percent.
"Companies like Baxter can unlock a fair amount of value
when they find strategic use for their overseas cash," said
Piper Jaffray analyst Matt Miksic.
Indeed, Baxter said it planned to finance the deal with cash
overseas. Multinational companies that have large international
sales often have difficulties moving that cash back to the
United States where they can put it to use.
(Reporting by Esha Dey in Bangalore and Debra Sherman in
Chicago, Caroline Humer in New York, and Patrick Lannin in
Stockholm; Editing by Joyjeet Das and Lisa Von Ahn)