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

Sigma's Packworx center geared at helping customers solve problems

September 29, 2014 3:41 pm ET

Sigma Stretch Film has opened a training center to help customers find the best solution to using the packaging films.    More

Image

Early decision on 3-D motion technology goes to National Graphics

September 29, 2014 2:29 pm ET

Even without super powers, technology firm National Graphics Inc. has won a decision in a patent challenge vs. a rival company.    More

Image

Clariant extends reach into Asia with acquisition

September 29, 2014 9:54 am ET

Clariant International Ltd. is buying VitaPac (HK) Industrial Ltd., a Hong Kong-based company which produces desiccant packets for the healthcare...    More

Image

Global giant Foxconn to make, sell molding machines

September 26, 2014 2:48 pm ET

For years, Taiwan's Foxconn Technology Group has been the world's largest contract manufacturer for electronics, with more than 1 million employees...    More

Image

Nypro Healthcare continues to grow following Jabil acquisition

September 26, 2014 1:59 pm ET

Nypro Healthcare's newest medical device manufacturing facility offers 200,000 square feet of carefully configured Class 8 clean room molding and asse...    More

Market Reports

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 million dollar plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our industry analysis highlights macro industry trends and micro trends faced by companies that do business in Mexico. The report also provides key industry statistics and forecasts to anticipate future industry expansion.

Learn more

Plastics Caps & Closures Market Report

The annual recap of top trends and future outlook for the plastics caps & closures market features interviews with industry thought leaders and Bill Wood’s economic forecast of trends in growing end markets. You will also gain insight on trends in caps design, materials, machinery, molds & tooling and reviews of mergers & acquisitions.

Learn more

Injection Molders Market Report & Ranking 2014

This special package contains our 132-page 2014 Market Report on the Injection Molding segment and our exclusive 2014 RANKINGS database of 500+ Injection Molders for a discounted package price.

Learn more

Upcoming Plastics News Events

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

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

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events