Baxter chairman & CEO Joe Almeida says he’s prepared to pull the trigger on a major acquisition worth as much as $7.5 billion, but any deal has to pass the healthcare giant’s M&A criteria.
Speaking with analysts earlier this week during a conference call to discuss Deerfield Park, Ill.-based Baxter’s 1st-quarter results, Almeida said that the transformation begun after he took the reins at the beginning of last year puts the company in position to execute a deal.
“We’re open to the tuck-ins, and we’re doing them, and we’re working very hard to get even more opportunities. We have a good pipeline in our pharmaceutical business between partnership and some tuck-ins and even in our advanced surgery, our biosurgery business,” he said, according to a Seeking Alpha transcript. “With the performance of the company and the work that [CFO] Jay Saccaro and [VP of transformational change] Cathy Skala have done in our business transformation process and how quick we are integrating and simplifying our back office, I feel more confident that Baxter could do a 20%, 25% of our market cap deal without a problem, okay? It doesn’t mean that we’re going to do it, but my confidence has increased in the management of the company in really pulling off something that would be a good deal for our shareholders in terms of bringing synergies to the bottom line and a good accretion to the top line.”
With a total market capitalization of $29.94 billion as of this morning, that works out to a deal value of roughly $6 billion to $7.5 billion.
A move of that scale would put Baxter in the same company as acquisitive peers like cross-town rival Abbott (NYSE:ABT), which paid $25 billion for St. Jude Medical and is set to buy Alere for $5.3 billion. Other recent deals of note include Cardinal Health (NYSE:CAH) buying a portion of Medtronic‘s (NYSE:MDT) patient monitoring & recovery business for $6.1 billion, Fresenius (ETR:FRE) paying $4.75 billion for generic drugmaker Akorn (NSDQ:AKRX) and the $24 billion merger of Becton Dickinson (NYSE:BDX) and C. R. Bard (NYSE:BCR).
Almeida said any potential deal would 1st have to fall within the 4 pillars of Baxter’s business: Renal, critical care, pharmaceuticals and advanced surgery.
“[Y]ou have to think about what are the major prerequisites for something to get into the funnel. And 1 of them is be within those 4 pillars I mentioned before,” he explained. “The 2nd thing is to make sure there is category of leadership in the products that people make and sell. Then once you pass through those broad lenses, it’s about what can Baxter do to be a better owner for that business.”
Any deal would also have to offer synergies in distribution and sales & marketing to take advantage of Baxter’s scale in the healthcare market – “We are in every hospital in this country,” Almeida noted.