Baxter to spin off Renal Care and Acute Therapies, form new operating model

Baxter announced a strategic roadmap in an effort to enhance its operational effectiveness, drive toward improved long-term performance, accelerate innovation and create additional value for all stakeholders. These changes include the plan to spin off the company’s Renal Care and Acute Therapies global business units, or GBUs, into an independent, publicly traded company; a simplified commercial and manufacturing footprint to enhance underlying business performance; and further portfolio actions to improve Baxter’s capital structure, including a review of strategic alternatives for the BioPharma Solutions, or BPS, business. Baxter’s Renal Care and Acute Therapies businesses are leaders in the global kidney care industry. As an independent, publicly traded company, the new kidney care business would carry forward Baxter’s nearly 70-year legacy as a pioneer and leader in kidney disease therapies. The new business would continue to serve as a trusted partner to providers and clinicians around the world, focusing on improving outcomes for the more than one million patients it serves annually in more than 70 countries. the company is working to finalize a new operating model that it will begin to implement in parallel with its planning for the proposed spinoff of the Renal Care and Acute Therapies businesses. As part of this organizational redesign, the company expects to initiate a restructuring plan, including optimization of its manufacturing footprint. Baxter plans to provide additional detail on these efforts in the company’s fourth-quarter earnings conference call on February 9. After the completion of the reorganization and the proposed spinoff of the new kidney care company, Baxter’s businesses will continue to compete in large and growing segments, which total more than $100B in size and taken together are expected to grow approximately 3% on a compound annual basis over the next three years. On a pro forma basis, including Hillrom as if it were owned for the entire year, 2021 annual sales across these businesses were approximately $11B. Baxter will continue to be led by CEO Joe Almeida. Baxter is pursuing strategic alternatives for the BPS business, including a potential sale or other separation options. BPS is a provider of contract manufacturing services to the pharma and biotech industries with an established track record and strong reputation for quality. The Baxter board of directors authorized the company to proceed with a plan to spin off the Renal Care and Acute Therapies businesses into an independent, publicly traded company through a distribution to Baxter shareholders of common stock of a newly formed entity holding assets and liabilities comprising the Renal Care and Acute Therapies businesses. Baxter intends for the spinoff to qualify as tax-free to Baxter and its shareholders for U.S. federal income tax purposes. Baxter expects to complete the proposed spinoff in 12 to 18 months, subject to the satisfaction of customary conditions, including final approval from the Baxter board of directors, the filing and effectiveness of a registration statement on Form 10, receipt of an Internal Revenue Service, or IRS, ruling or related tax opinions from counsel, satisfactory completion of financing arrangements, consultations with works councils and other employee representative bodies, and any necessary regulatory approvals. Baxter will provide updates in due course as the proposed spinoff progresses, including detailed information on the spinoff and relevant financial information, which will be included in an exhibit to a registration statement on Form 10 to be filed with the Securities and Exchange Commission. Baxter is targeting maintenance of an investment grade credit rating. The proposed leadership, governance, capital structure, dividends and other matters for the new kidney care company will be announced at a later date. There can be no guarantee that the spinoff, the simplified operating model, or the sale of, or other strategic transaction involving, the BPS business will be completed in the manner or over the timeframes described above, or at all.