Transaction terms and conditions
Baxter International (BAX) announced the acquisition of Claris Injectables on December 15, 2016. The deal is valued at $625.0 million, which will be financed through cash, debt, or a combination of both. The deal is expected to be accretive to earnings and close by the second half of 2017.
Value to shareholders
The deal is expected to be accretive to Baxter’s revenue growth as well as EBITDA (earnings before interest, tax, depreciation, and amortization). It’s estimated to be modestly accretive to adjusted EPS (earnings per share) in 2017 and increasingly accretive after that. Baxter also expects to realize a double-digit ROIC (return on invested capital) by the fifth year.
The injectables business of Claris Lifesciences comprises 70.0%–80.0% of its total sales. The company’s managing director owns about 50.0% of its shares. The remaining 50.0% is held by the public, and 22.0% of that is owned by institutional investors.
Claris Lifesciences plans to repatriate around 85.0% of the generated funds to the company’s shareholders through dividends or share buybacks. The company is also considering delisting the company.
Claris Injectables has a successful 15-year history, with about 50.0% of its sales generated from the United States. It has strong EBITDA margins of 30.0%–35.0%. The company also has a decent history of dividend payouts to its shareholders.
Pfizer (PFE), Novartis (NVS), and Mylan (MYL) are some of Baxter International’s major competitors in the injectables market. You can invest in the Vanguard S&P 500 ETF (VOO) to participate in the growth potential of Baxter International.