Baxter International Inc. shares swooned after the company announced a plan to split off its biggest unit, kidney care, and its operating chief resigned.
(Bloomberg) — Baxter International Inc. shares swooned after the company announced a plan to split off its biggest unit, kidney care, and its operating chief resigned.
The spinoff will become an independent publicly traded company within the next 12 to 18 months, Baxter said Friday in a statement. Baxter is also pursuing strategic alternatives for its BioPharma Solutions business that provides contract manufacturing services to the pharma and biotech industries, including a possible sale or separation.
Separately, Baxter said Chief Operating Officer Giuseppe Accogli resigned Jan. 4, effective immediately, after more than 15 years with the company. Shares of the Deerfield, Illinois-based company fell as much as 9% as of 11 a.m. in New York, touching their lowest intraday level since February 2017.
Negative investor reaction to the separation plan is understandable “as it’s much larger, more complex, and reduces visibility over a longer timeframe,” Keybank Capital Markets analysts Matthew Mishan and Brett Fishbin said in a note.
The moves follow a trend of breaking up diversified health-care companies to focus on their most profitable activities, typically the development of new drugs. Johnson & Johnson earlier this week submitted its plan to spin off its consumer health business, and General Electric Co.’s former medical-equipment division began trading as a separate company on Wednesday.
Baxter said Friday that simplifying its operations should save money and create a more resilient supply chain. The remaining business will be focused on hospital solutions and connected care.
Renal care is Baxter’s biggest division by sales, accounting for about 25% of third-quarter revenue. It is being spun off with acute therapies, a smaller business that brought in about 4% of sales in the quarter.
“Kidney care does not have much channel overlap with hospital products and the split does make sense,” Evercore ISI analysts led by Vijay Kumar said in a note.
Perella Weinberg Partners LP and JPMorgan Chase & Co. are serving as financial advisers to Baxter. Sullivan & Cromwell LLP is its legal adviser.
–With assistance from Bre Bradham.
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