Signup for our free newsletter:

Biotech to Purchase Major Competitor

Written By Brian Hicks

Posted December 5, 2012

Baxter International Inc. (NYSE: BAX) is set to buy Gambro AB for $2.8 billion, a move that expands the biotech’s kidney-equipment specialization.

Baxter is the world’s second-largest manufacturer of dialysis equipment, and Gambro is one of its main competitors.

Last year, Gambro posted $1.6 billion in sales, and it is currently controlled by Swedish EQT Partners AB and Investor AB (STO: INVE-B). Negotiations between the two had been going on for nearly a year.

Bloomberg cites Piper Jaffray analyst Matt Miksic:

“We like the deal,” Miksic said in a telephone interview today. He recommends buying Baxter shares. “The renal division is a little bit undersized relative to some of their other businesses; this balances that a bit and gives it a little more weight.”

Dialysis is a booming market. Treatments are increasing at more than 5 percent yearly, as diabetes and high blood pressure become leading health problems.

In the dialysis market, Baxter comes in second behind Germany’s Fresenius Medical Care AG (NYSE: FMS); Gambro brings up the third spot.

According to the biotech company, the deal means per-share profit will decrease by 10-15 cents in the coming year, with recoveries posted the following year. The deal will be funded with $1 billion in overseas cash and $3 billion in new debt, Bloomberg reports.

Baxter had $13.9 billion in revenue last year, and renal products constituted 18 percent of that. This year, the company has risen 3 percent.

As of the end of September, Baxter held $3.2 billion in cash and near-cash items.

Baxter was down 0.49 percent to $64.45 on Wednesday morning.