The new buy out of the Swedish company related to kidney dialysis product, Gambro AB for approximately four billion dollars by Baxter International Inc is likely to put the latter in second position in the dialysis market.
Baxter is likely to finance the acquisition using cash, overseas operations and debt. The shares of Baxter dropped by almost one percent and the new acquisition will round out its renal business. T
he company, Baxter deals with kidney dialysis equipment, drug infusion pumps and blood therapy products. The dialysis machine is used for peritoneal dialysis which can be performed at home. Gambro, the Swedish company is one of the largest makers of equipment used for hemo-dialysis which can be performed at home and in clinics.
Although sales of Gambro have fallen in recent years partly due to capacity constraints, the executives of the company seemed confident to turn around the business. Parkinson said that this acquisition is not dependent on any one pathway for value creation. He said that it is independent of new product launch, technological advancement and over-optimistic commercial assumptions. He also said that the acquisition is dependent only on execution and did not represent any change in the direction for the company.
Some analysts have raised concern over the price tag in this acquisition. After the deal goes through, the competition in renal market will be against companies like DaVita from US and Fresenius Medical Care AG and Co KGAa from Germany which is currently the biggest player in the market related to hemo -dialysis.
Excluding special items, Baxter expects that the new acquisition will reduce the earnings per diluted share by 10 to 15 cents in the coming year and become neutral or add modestly in 2014. The deal is expected to be closed in the first half of 2013. The financial adviser for Baxter for this deal is J.P. Morgan, while Goldman Sachs is the financial adviser for Gambro.