Dive Brief:
- Baxter International has reached an agreement to sell its biopharma solutions business for $4.25 billion to private equity firms Warburg Pincus and Advent International, the companies announced on Monday.
- Reuters had reported on Sunday that the companies were in “advanced talks,” after the duo outbid other private equity firms and medical device companies.
- Baxter plans to use the after-tax proceeds, estimated at $3.4 billion, to reduce its debt.
Dive Insight:
Baxter’s biopharma solutions business, which provides contract manufacturing and other support services for pharmaceutical companies, reported $644 million in revenue last year. It’s expected to generate roughly $600 million in revenue in 2023, the companies said in a statement.
Under Advent and Warburg’s ownership, it will operate as an independent contract development and manufacturing organization. The two private equity firms will acquire biopharma solutions’ manufacturing facilities, and roughly 1,700 employees in Indiana and Germany.
Advent Managing Partner John Maldonado said in a statement that the partnership can “unlock multiple opportunities for growth and help the business realize its full potential,” by serving large customers, including Baxter, with specialized, end-to-end capabilities as a standalone company.
CEO José Almeida said in an April earnings call that Baxter had seen “significant interest” in the biopharma solutions unit.
In a research note sent Monday before the sale was announced, KeyBanc analyst Matthew Mishan said he was “not too surprised” that multiple companies were interested in the unit, given its financial profile, but noted the $4 billion valuation reported by Reuters exceeded KeyBanc’s estimates of $2.1 billion to $3.2 billion.
“Overall, we are encouraged BAX seems to be moving quickly through this strategic alternative process and may be yielding a positive outcome that could accelerate its debt reduction,” Mishan wrote.
Stifel analyst Rick Wise wrote that the deal announcement “alleviates concerns over Baxter’s ability to meet sizable near-term debt payments,” adding that the company will use the proceeds to reduce its roughly $16 billion in outstanding debt.
In December 2021, Baxter acquired medical device maker Hillrom for $12.7 billion, in a transaction that was largely funded by debt, according to Fitch Ratings.
