Baxter selling CMO unit to Advent and Warburg for $4.25 billion

Private equity firms Advent International and Warburg Pincus have agreed to buy Baxter International's contract manufacturing unit for $4.25 billion.

Why it's the BFD: Corporate divestitures have become increasingly important for private equity, as sponsor-to-sponsor sales have stagnated. Also on the rise are club deals, given difficulties in securing leveraged financing at attractive rates.

Details: Baxter will receive $4.25 billion in cash, with after-tax proceeds estimated at around $3.4 billion.

• The transaction is expected to close in the second half of this year, pending regulatory approval.
• For the fourth quarter, Baxter estimates the deal will dilute about 10 cents per share to the company’s earnings.
• Perella Weinberg Partners and Sullivan & Cromwell were financial and legal advisors to Baxter, respectively.
• Moelis and Truist Securities were financial advisors and Cleary Gottlieb Steen & Hamilton and Ropes & Gray were legal advisors to Advent and Warburg Pincus.

Catch up fast: Baxter's CMO division drew interest from strategics including Celltrion and Thermo Fisher Scientific, plus private equity firms KKR and Carlyle.

• Proceeds will help Baxter pay down debt, which grew from its $10.5 billion acquisition of medical device maker Hillrom in 2021.

Look ahead: Baxter announced plans in January to spin off its renal care and acute therapies units over the next 12 to 18 months.

Why it matters: Corporate divestitures have become increasingly important for private equity, as sponsor-to-sponsor sales have stagnated. Also on the rise are club deals, given difficulties in securing leveraged financing at attractive rates.

Details: Baxter will receive $4.25 billion in cash, with net after-tax proceeds estimated at around $3.4 billion.

• The transaction is expected to close in the second half of this year, pending regulatory approval.