Baxter to spin off its $6B biopharma business in industry's latest split-up

Ludwig Hantson, president of Baxter's BioScience unit

The pharma split-up movement is spreading. Baxter International ($BAX) says it will spin off its biopharma business into a separate company, leaving its $9 billion medical products business to venture on under the Baxter name.

The as-yet-unnamed pharma business will be led by Ludwig Hantson, who is currently president of Baxter's BioScience unit. The spinoff will allow Hantson and his team the freedom to develop an independent strategy and choose which projects to invest in, Baxter said in a statement. And it will let Baxter itself focus on its growing medical products operations. For instance, the company recently snapped up Gambro, a dialysis products maker, for $4 billion, and integration is underway.

"Baxter has an established history of executing successful spinoffs," CEO Robert Parkinson Jr. said in a statement. "This decision underscores Baxter's commitment to ensuring its long-term strategic priorities remain aligned with shareholders' best interests."

The plan is akin to Abbott Laboratories' ($ABT) 2013 spinoff of its pharma business, AbbVie ($ABBV), albeit on a smaller scale. Baxter's pharma operations brought in $6 billion last year, the company says, while AbbVie is about three times that size.

Baxter CEO Robert Parkinson Jr.

But the motivations are similar. Actually, the motivations are similar to those of the other pharma companies weighing spinoffs, unit sales, and other big restructuring moves. Novartis ($NVS), Merck & Co. ($MRK), and Novo Nordisk ($NVO) are among the drugmakers looking to sell, spin off, swap or rebuild smaller business units they think would be better off on their own, or under other ownership. And like Pfizer ($PFE), which kicked off the industry breakup trend, the companies could turn these underperforming businesses into cash that can be returned to shareholders.

In Baxter's biopharma spinoff, stockholders will get shares of the new publicly traded company, via a tax-free distribution. The deal is expected to wrap up by mid-2015, provided tax authorities bless the transaction and other regulators sign on, too.

- see the Baxter statement

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