Analyst: Gambro buy a good use of Baxter's cash

Published: December 6, 2012 6:00 am ET

Related to this story

Topics Medical, Mergers & Acquisitions

DEERFIELD, ILL. (Dec. 6, 12:40 p.m. ET) — Buying Lund, Sweden-based Gambro for $4 billion, including assumed debt, is a good way for Deerfield-based Baxter International Inc. to use its offshore cash, analyst Danielle Antalffy, with Boston-based health investment bank Leerink Swann LLC, said in a research note on Dec. 4, after the deal was announced.

Baxter’s offshore cash accounts for more than two-thirds of its $3 billion in cash, Antalffy noted. With $1.6 billion in annual revenue, Gambro is a leading manufacturer of equipment and products for hemodialysis, or HD, one form of the transfusion treatment for patients with kidney disease. Baxter, with annual revenue of $13.8 billion, was a pioneer in that field but changed its focus to peritoneal dialysis, or PD, another transfusion therapy, which patients can give themselves at home. HD is usually performed in a clinic or hospital.

Gambro acquisition not without challenges

Some “yellow flags” could complicate the Gambro acquisition, which should be a positive transaction for Baxter, according to a research note issued by Chicago-based investment firm William Blair & Co. LLC. “Gambro has reported relatively flat growth over the past several years,” analyst Ben Andrew wrote, “and we believe it will take at least a year after closing before growth reaccelerates.”

Another cause for concern is the recent weak quarter by the world’s top dialysis product manufacturer, Bad Hamburg, Germany-based Fresenius Medical Care AG, which blamed poor sales on the economy. Overall, the deal should strengthen Baxter’s position in a growing kidney treatment market, bumping its renal revenue to 25 percent of sales, from 20 percent, and generating an estimated $300 million in annual cost synergies by 2017, he said. The yellow flags “are not impossible to overcome, and we believe Baxter will be able to do so over time as they cross-fertilize products from both companies across their combined geographic footprint,” the Blair report said.

Expansion into Europe is a question

Moody’s Investors Service Inc. said Dec. 4 that it placed Baxter’s longer-term A3 debt rating on review for a possible downgrade. “The size of the transaction and company’s plan that this will be funded with $3 billion of additional debt creates concern,” according to a news release. “Furthermore, we believe a significant portion of Gambro’s sales are derived from Europe, which is currently undergoing greater contraction due to austerity measures.” Standard & Poor’s Financial Services LLC warned of a possible downgrade last week.


Comments

Analyst: Gambro buy a good use of Baxter's cash

Published: December 6, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

Bankruptcy court confirms GSE reorganization plan

July 29, 2014 4:01 pm ET

The U.S. Bankruptcy Court in Wilmington, Del., has confirmed the reorganization plan for geomembranes maker GSE Environmental Inc.    More

Unipex Group buys Ferguson Chemical Innovation

July 29, 2014 1:57 pm ET

Chemical distributor Unipex Group Inc. announced July 29 that it had purchased Ferguson Chemical Innovation, a Brampton, Ontario-based supplier of...    More

Image

Universal Polymer beefing up capabilities through acquisition

July 29, 2014 12:04 pm ET

Universal Polymer & Rubber Ltd. is growing again and adding to its capabilities, this time via another acquisition and a plant expansion.    More

Image

Reynolds considering sale of Closure Systems International unit

July 29, 2014 10:32 am ET

Packaging giant Reynolds Group Holdings Ltd. has put its closures business under review.    More

Image

Carbon black supplier Orion begins trading on NYSE

July 29, 2014 11:29 am ET

Orion Engineered Carbons S.a.r.l. has priced the initial public offering of 19.5 million common shares at a price to the public of $18 per share.    More

Market Reports

Plastics Recyclers Data Report & Directory

This exclusive MS Excel database contains all the companies from Plastics News' ranking of top North American Recyclers and Brokers by reprocessed volume and also includes a directory with materials processes, services offered and company contact information. Data is based on primary research by PN editorial staff.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

More Events