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Baxter Weighs Sale of Two Kidney-Care Businesses

·3 min read

(Bloomberg) -- Baxter International Inc. is considering divesting two units within its flagship renal-care business, according to people familiar with the matter, as it looks to refocus following its largest-ever acquisition last year.

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The Deerfield, Illinois-based medical-device company is working with advisers on potential sales of its renal-care services and hemodialysis businesses, the people said, asking not to be identified because the information isn’t public.

The units are expected to be valued at well under $1 billion in total and could attract interest from private equity firms, the people said.

The renal-care services business, which operates international dialysis clinics, generates about $250 million in annual revenue, one of the people said. The hemodialysis business, which makes machines that filter blood, generates about $1 billion in annual revenue but isn’t profitable, they said.

Considerations are at an early stage and Baxter may opt to keep the businesses, the people said.

A representative for Baxter declined to comment.

The divestitures make sense, according to JPMorgan Chase & Co. research analysts led by Robbie Marcus.

“It’s better late than never to exit additional markets that are low-growth,” they said in a research note Tuesday. “We’re hopeful that this will be the first in a series of portfolio rationalizations that the company undertakes over the coming years.”

Selling them would be in line with the company’s plan to shift its portfolio to higher-growth markets.

Both units sit within Baxter’s renal-care business, which generated about one-third of the company’s $12.8 billion in sales last year, according to Baxter’s most recent annual report. The unit sells dialysis machines for kidney failure, infusion pumps and other health-care products.

The moves would also help Baxter raise cash and pay down debt following its $10.5 billion purchase last year of Hill-Rom Holdings Inc., which gave it a range of hospital equipment including beds, stretchers and operating tables. Baxter issued $7.8 billion in bonds to fund that deal and has said it aims to sharply reduce indebtedness by 2024.

Chief Executive Officer Jose Almeida hinted in July that the company could pursue divestitures without specifying which ones.

“Baxter has some businesses that fall outside our main area of vision so we’re looking at those,” Almeida said during the company’s second-quarter results call. “Portfolio management is something very actively on our minds.”

Baxter fell 2.8% to close at $58.13 in New York trading Tuesday, giving the company a market value of about $29 billion.

Sales fell across most of Baxter’s major product segments in the first half of the year due to currency fluctuations and difficulty getting certain parts due to supply chain constraints, it said when reporting second-quarter earnings.

Renal-care sales fell 3% year-over-year to about $1.8 billion while pharmaceuticals, clinical nutrition and acute-therapies revenue also fell, the company said.

(Adds analysts’ comment starting in seventh paragraph)

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