Baxter International Inc said on Monday a private-equity group, which includes Warburg Pincus and Advent International, has agreed to buy its biopharma solutions unit for $4.25 billion.
Medical device makers such as Baxter have been grappling with supply-chain shortages that began during the pandemic, while rising costs of raw materials, labor and transportation added more pressure.
Baxter announced its intent to explore alternatives for its biopharma solutions business and spin off its kidney care units in January, stating the restructuring will allow greater alignment with the company’s manufacturing footprint.
Reuters was first to report the private-equity consortium was in the lead to acquire Baxter’s biopharma solutions business.
Baxter will receive after-tax proceeds of $3.4 billion, which it intends to use to pay down the debt the company incurred when it purchased medical device maker Hill-Rom Holdings for $10.5 billion in 2021. Baxter had a market value of $19 billion and total debt of $16.6 billion, as of December 31.
Baxter estimates the transaction will reduce the company’s earnings by about $0.10 per share in the fourth quarter.
The medical device maker’s biopharma solutions unit supports drugmakers in the formulation, development and commercialization of drugs typically given by infusion or injection, such as vaccines.
Through the deal, Advent International and Warburg Pincus will gain access to Baxter BioPharma solutions’ manufacturing facilities and about 1,700 employees in Bloomington, Indiana and Halle, Germany.
Private-equity firms have increasingly been investing in the drug development sector, which was deemed as risky, by coming up with deals that compensate them for the uncertainty involved.
Through the deal with Baxter, which is expected to close in the second half of 2023, the private-equity firms hope to strengthen their presence in the contract drug manufacturing space.
By Khushi Mandowara and Bhanvi Satija / Reuters