Baxter (NYSE:BAX) said it plans to separate its medical products and pharmaceuticals businesses into independent companies, following in the footsteps of rivals Abbott (NYSE:ABT) and Covidien (NYSE:COV).
"Baxter has an established history of executing successful spinoffs, and we have continued to evaluate the separation of these two businesses in response to diverging business dynamics and the rapidly changing macro-environment," said Robert Parkinson Jr., chairman & CEO of the Deerfield Park, Ill.-based healthcare titan, in prepared remarks. "This decision underscores Baxter’s commitment to ensuring its long-term strategic priorities remain aligned with shareholders’ best interests, while improving our competitive position and performance, enhancing operational, commercial and scientific effectiveness and creating value for patients, healthcare providers, and other key stakeholders."
Baxter said the spinout will create a pair of "well-capitalized independent companies with strong balance sheets, investment grade profiles, and disciplined approaches to capital allocation."
The split, expected to close in mid-2015, is slated to be a tax-free distribution of stock in the pharma business to BAX shareholders, according to a press release. Parkinson will lead the medical products business, which will keep the Baxter brand; BioScience division president Ludwig Hantson will lead the new pharma business, according to the release. The move is not expected to affect Baxter’s guidance this year, the company said.
The medical products business, which puts up sales of about $9 billion, will include the Gambro dialysis business Baxter acquired for $4 billion last year.
"The medical products company will focus on strengthening its market leadership through geographic expansion and increased penetration, leveraging its extensive hospital presence and global footprint, developing comprehensive solutions to improve patient outcomes and safety, and enhancing profitability through a more streamlined and flexible cost structure," according to the release. In a separate announcement, Baxter said medical products president Robert Davis resigned effective today.
The strategy for the biopharm business, which logs annual sales of roughly $6 billion, is aimed at "improving diagnosis, treatment and standards of care across a wide range of bleeding disorders and chronic diseases, enhancing capacity to meet growing demand for biotherapeutics, leveraging expertise into new emerging therapeutics through acquisitions and collaborations, and developing a robust new product pipeline focused on new and effective treatments that address unmet medical needs," Baxter said.
The move continues a trend among diversified healthcare conglomerates. In 2011, Abbott announced its plans for a similar split, saying it would carve out its pharma operation as a new, publicly traded company later named AbbVie (NYSE:ABBV). Later that year, Covidien said it would also divest its own pharmaceuticals division as Mallinckrodt plc (NYSE: MNK). And late last year, Kimberly-Clark (NYSE:KMB) shares hit a 52-week high on the news of its plan to spin out its medical device and health products division as a separate public company called K-C Health Care.