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Baxter's (BAX) Vantive Divestiture to Aid Its Operational Sales
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Baxter International, Inc. (BAX - Free Report) recently announced that it has entered into a definitive agreement to divest its Vantive Kidney Care segment to Carlyle, a global investment firm, for $3.8 billion.
In January 2023, Baxter announced its intention to create a standalone kidney care company intended to improve future performance and create value for all stakeholders. In March 2024, Baxter announced that it was in discussions to explore a potential sale of the Kidney Care segment.
Following an analysis of the financial implications of various separation scenarios, Baxter’s board and management concluded that selling the business to Carlyle would optimize value for its stockholders and position the company and Vantive for long-term success, with more flexibility to allocate funds to opportunities aimed at accelerating their respective growth objectives.
Baxter intends to use after-tax proceeds from the transaction to reduce its debt, consistent with its stated capital allocation priorities.
More on the Divestiture News
Baxter’s Vantive is a leader in global kidney care, which offers products and services for peritoneal dialysis, hemodialysis and organ support therapies, including continuous renal replacement therapy. The business has more than 23,000 employees globally and had revenues of $4.5 billion in 2023.
Under the terms of the definitive agreement, which are subject to certain closing adjustments, Baxter is likely to receive approximately $3.5 billion in cash with net after-tax proceeds currently estimated to be approximately $3 billion. With Carlyle’s global investing platform spanning across Americas, EMEA, and Asia, it is in a unique position to collaborate its regional teams with Vantive to work toward securing the success of the business, its personnel, as well as its customers and their ultimate patients worldwide.
Moreover, Carlyle’s investment in Vantive is made in partnership with Atmas Health, a collaboration among three industry executives founded in September 2022 to focus on acquiring and building a market-leading healthcare business. Over the past decade, Carlyle has been a prominent private equity investor in the medtech space, having made investments in diagnostic and medical technology businesses worth more than $40 billion in enterprise value.
The transaction is expected to close in late 2024 or early 2025, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions.
Baxter’s Financial Expectations Following Divestiture
Following the completion of the pending sale of the Kidney Care segment, Baxter is planning to focus on its growth area and achieve an operational sales growth between 4% and 5% annually, driven by innovation and continued market expansion.
For 2025, the company anticipates an adjusted operating margin of approximately 16.5% on a continuing operations basis, which reflects an anticipated 100 basis point negative impact due to stranded costs. These costs are likely to be offset by the anticipated transition service agreement income and the manufacturing supply agreement following the completion of the divestiture of the Kidney Care segment.
Baxter is likely to continue prioritizing capital allocation and expects direct investments toward higher-growth, higher-return opportunities to drive incremental value. To support these efforts, the company is likely to continue to focus on deleveraging and expects to reach its investment-grade target of below 3X by the end of 2025, after utilizing proceeds from the sale of Kidney Care to repay outstanding debt, which may include repayment of its new bridge facility.
Baxter also expects to post financial schedules reflecting the Kidney Care segment as a discontinued operation for certain historical periods prior to the release of its third-quarter 2024 earnings results.
Notable Developments
In July, Baxter announced the launch of its Helion Integrated Surgical System in Thailand. This innovative system leverages advanced operating room integration to simplify the complexities of surgical environments. By enhancing operating room efficiency and enabling surgical teams to stay focused and connected, the Helion system represents a significant advancement in medical technology.
Price Performance
In the past six months, BAX’s shares have lost 15.7% against the industry’s rise of 0.6%. The S&P 500 has gained 8.3% in the same time frame.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% growth.
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Baxter's (BAX) Vantive Divestiture to Aid Its Operational Sales
Baxter International, Inc. (BAX - Free Report) recently announced that it has entered into a definitive agreement to divest its Vantive Kidney Care segment to Carlyle, a global investment firm, for $3.8 billion.
In January 2023, Baxter announced its intention to create a standalone kidney care company intended to improve future performance and create value for all stakeholders. In March 2024, Baxter announced that it was in discussions to explore a potential sale of the Kidney Care segment.
Following an analysis of the financial implications of various separation scenarios, Baxter’s board and management concluded that selling the business to Carlyle would optimize value for its stockholders and position the company and Vantive for long-term success, with more flexibility to allocate funds to opportunities aimed at accelerating their respective growth objectives.
Baxter intends to use after-tax proceeds from the transaction to reduce its debt, consistent with its stated capital allocation priorities.
More on the Divestiture News
Baxter’s Vantive is a leader in global kidney care, which offers products and services for peritoneal dialysis, hemodialysis and organ support therapies, including continuous renal replacement therapy. The business has more than 23,000 employees globally and had revenues of $4.5 billion in 2023.
Under the terms of the definitive agreement, which are subject to certain closing adjustments, Baxter is likely to receive approximately $3.5 billion in cash with net after-tax proceeds currently estimated to be approximately $3 billion. With Carlyle’s global investing platform spanning across Americas, EMEA, and Asia, it is in a unique position to collaborate its regional teams with Vantive to work toward securing the success of the business, its personnel, as well as its customers and their ultimate patients worldwide.
Moreover, Carlyle’s investment in Vantive is made in partnership with Atmas Health, a collaboration among three industry executives founded in September 2022 to focus on acquiring and building a market-leading healthcare business. Over the past decade, Carlyle has been a prominent private equity investor in the medtech space, having made investments in diagnostic and medical technology businesses worth more than $40 billion in enterprise value.
The transaction is expected to close in late 2024 or early 2025, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions.
Baxter’s Financial Expectations Following Divestiture
Following the completion of the pending sale of the Kidney Care segment, Baxter is planning to focus on its growth area and achieve an operational sales growth between 4% and 5% annually, driven by innovation and continued market expansion.
For 2025, the company anticipates an adjusted operating margin of approximately 16.5% on a continuing operations basis, which reflects an anticipated 100 basis point negative impact due to stranded costs. These costs are likely to be offset by the anticipated transition service agreement income and the manufacturing supply agreement following the completion of the divestiture of the Kidney Care segment.
Baxter is likely to continue prioritizing capital allocation and expects direct investments toward higher-growth, higher-return opportunities to drive incremental value. To support these efforts, the company is likely to continue to focus on deleveraging and expects to reach its investment-grade target of below 3X by the end of 2025, after utilizing proceeds from the sale of Kidney Care to repay outstanding debt, which may include repayment of its new bridge facility.
Baxter also expects to post financial schedules reflecting the Kidney Care segment as a discontinued operation for certain historical periods prior to the release of its third-quarter 2024 earnings results.
Notable Developments
In July, Baxter announced the launch of its Helion Integrated Surgical System in Thailand. This innovative system leverages advanced operating room integration to simplify the complexities of surgical environments. By enhancing operating room efficiency and enabling surgical teams to stay focused and connected, the Helion system represents a significant advancement in medical technology.
Price Performance
In the past six months, BAX’s shares have lost 15.7% against the industry’s rise of 0.6%. The S&P 500 has gained 8.3% in the same time frame.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
BAX carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and ABM Industries (ABM - Free Report) . While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 41.1% compared with the industry's 34.8% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 3.7% so far this year compared with the industry’s 10.2% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 24.1% so far this year compared with the industry’s 11.9% growth.