Baxter International Inc., the U.S. maker of blood products and intravenous drugs, agreed to buy Swedish kidney-dialysis competitor Gambro AB for $2.8 billion to expand its dialysis-equipment business.
Gambro had about $1.6 billion in sales last year, Deerfield, Illinois-based Baxter said today in a statement. Gambro is jointly controlled by Sweden’s EQT Partners AB and Investor AB, the investment firm controlled by Sweden’s billionaire Wallenberg family. Including net debt, the deal is valued at $40.2 billion, Gambro said in a statement.
Baxter and Gambro had been negotiating for almost a year, a person familiar with the talks said last month. The deal broadens Baxter’s kidney division, which had been undersized compared with its other businesses, said Matt Miksic, an analyst with Piper Jaffray Cos. in New York. It also provides the company a way to use overseas cash, Miksic said.
“We like the deal,” Miksic said in a telephone interview today. “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.”
Treatment with dialysis is growing at more than 5 percent annually along with rates of diabetes and high blood pressure, with more than 2 million people in the world currently on some form of dialysis, Baxter said in the statement. Baxter is the world’s second-largest provider of kidney dialysis after Bad Homburg, Germany-based Fresenius Medical Care AG, according to a Fresenius annual report. Gambro ranks third.
Baxter fell 0.7 percent Monday to close at $65.80. The shares gained 4.1 percent Nov. 23 for the biggest gain in a year after the Wall Street Journal reported the companies were in talks on a deal.
Excluding one-time items, the transaction is expected to trim per-share profit by 10 to 15 cents in 2013 and be neutral or add to profit in 2014, Baxter said in the statement.
Renal products accounted for about 18 percent of Baxter’s $13.9 billion in revenue last year, according to data compiled by Bloomberg. The purchase is Baxter’s largest in at least 20 years, eclipsing its $965 million acquisition of Immuno International AG in 1996, the data show.
Baxter, founded in 1931 as the first maker of commercially prepared intravenous solutions, according to its website, has risen 33 percent this year, giving the company a market value of about $36.1 billion. Baxter had about $3.2 billion in cash and near-cash items at the end of September.
JPMorgan Chase & Co. acted as Baxter’s financial adviser, while Kirkland & Ellis LLP was legal adviser, the company said.
Gambro was bought by Investor and EQT, a private-equity firm backed by the Wallenberg family, in 2006. The two investors sold some businesses and invested in Gambro after sales took a hit from the U.S. Food and Drug Administration’s decision in 2006 to ban some of its dialysis monitors because of production flaws.
Gambro last year sold its CaridianBCT blood-machine unit for $2.63 billion, including debt, to Terumo Corp., Japan’s largest medical-device maker.
Baxter has completed four acquisitions this year, according to data compiled by Bloomberg, with the largest being its $325 million purchase of Synovis Life Technologies Inc. for its line of soft-tissue repair products.
There have been more than 900 takeovers in the medical products industry globally over the past five years, totaling $65 billion, according to data compiled by Bloomberg. The median buyers paid in a survey of more than 40 similar deals was about 12 times earnings before interest, taxes, depreciation and amortization. Across 70 comparable takeovers, the median was about three times revenue.