In a bid to stake a dominant position in the growing global market for kidney dialysis equipment, Baxter International on Tuesday said it agreed to buy Swedish Gambro AB for about $4 billion, the biggest acquisition in the Deerfield-based company’s 82-year history.
Baxter has long eyed Gambro, the world’s third-largest manufacturer of dialysis equipment, to help it round out its kidney business, which has focused in recent years on peritoneal dialysis, a form of treatment that can be performed at a patient’s home. Privately held Gambro, with roughly $1.6 billion in annual sales, manufacturers equipment for a type of dialysis that is performed in a hospital or health clinic called hemodialysis.
More than 2 million people worldwide receive some form of dialysis, a figure that is growing by a rate of more than 5 percent a year, Baxter said Tuesday in a statement.
Baxter Chief Executive Robert Parkinson told analysts in a conference call that the acquisition would allow it to grow Gambro’s business in emerging and high-growth markets in countries like Brazil and China, where many patients with kidney failure go untreated.
“This is a big market; it’s going to continue to grow for a long time,” Parkinson said. “We’re seeing the incident rate of end-stage renal disease in emerging markets start to accelerate as a result of lifestyle choice, sedentary lifestyle, diet and so on. This is the kind of market you want to be in.”
Baxter will fund the deal with $1 billion in cash generated by the company’s overseas operations and roughly $3 billion in new debt. Analysts praised the deal as an astute use of cash generated overseas. Baxter, Abbott Laboratories and other multinationals have resisted re-patriating cash held in foreign currencies as a way to avoid paying U.S. taxes for bringing it back into the country.
“Strategically, we think the deal makes sense,” Deutsche Bank analyst Kristen Stewart said in a note to clients.
Morgan Stanley’s David Lewis also lauded the deal, saying the “strategic rationale is sound, and longer term this will create a stronger, more diversified business.”
Baxter said the deal will help the company achieve $300 million in annual sales by 2017 through combined manufacturing and marketing initiatives.
Shares were trading down 46 cents, or 0.7 percent, at $65.34, Tuesday afternoon. Baxter shares jumped 4.1 percent on Nov. 23 after the Wall Street Journal reported the companies were considering a deal.
Baxter manufactured its own line of hemodialysis equipment until 2005, when it shifted its focus to peritoneal dialysis. It continued to distribute hemodialysis products made by other manufacturers.
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