The medical equipment manufacturer, which has just completed a lengthy restructuring process, is now expected to enter a new phase following the appointment of Andrew Hider, a former Danaher executive, as CEO.
Before joining Baxter, Hider had been at the helm of Canadian company ATS since 2017, where he led a series of acquisitions that tripled revenue and quadrupled operating profit, with very satisfactory returns on capital invested in this external growth strategy.
A pedigree of this kind suggests that Baxter is also likely to return to external growth. This is something the group will sorely need after a period of stagnation that has caused shareholders to lose patience in recent years.
Baxter's share price is lower today than it was ten years ago, with sales below their 2015 levels when adjusted for inflation with erratic profits throughout the period. In this context, the $5bn committed to share buybacks at much higher prices between 2018 and 2021 appears to have been ill-advised.
The difficulties facing Baxter are in some ways similar to those faced by other big names in the medtech sector, including global leader Medtronic. See Medtronic still hiding behind its status as a dividend aristocrat and Medtronic still struggling to convince.
Baxter is still digesting its mega $10.5bn acquisition of HillRom in 2022. The group subsequently sold its liver care division to Carlyle for $3.8bn, followed by its biopharma division to Warburg Pincus and Advent for $4.2bn.
The Hillrom acquisition and the smaller acquisitions that preceded it had taken the group's financial position from net cash in 2015 to net debt of nearly $12bn at the end of the last fiscal year.
The recent asset disposals will replenish cash reserves and bring solvency ratios back to less critical levels. This could lead to a rebound in valuation multiples, which are currently at historic lows.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.