03:45 PM EDT, 08/13/2024 (MT Newswires) -- Baxter International ( BAX ) has agreed to sell its kidney care segment to investment firm Carlyle Group ( CG ) in a $3.8 billion deal, the companies said Tuesday.

Baxter will receive about $3.5 billion in cash, while after-tax proceeds are estimated at $3 billion, which will be used to reduce debt, according to a statement.

At the start of last year, the medical equipment supplier outlined its intention to establish a stand-alone kidney care company, but it announced in March 2024 that it was in talks to explore a potential sale of the segment. Baxter said Tuesday that the division's sale to Carlyle would help maximize stockholder value. Its kidney care business, which will be named Vantive, generated $4.5 billion in revenue in 2023.

"As a result of this proposed transaction, Baxter will emerge a more focused and more efficient company, better positioned to redefine healthcare delivery and advance innovation that benefits patients, customers and shareholders," Baxter Chief Executive Jose Almeida said.

The company's shares were down 6.3% ahead of market close on Tuesday, while Carlyle rose 3%.

Carlyle is making the investment in Vantive in partnership with Atmas Health. Chris Toth, group president of kidney care at Baxter, will serve as Vantive's CEO, while Atmas co-founder Kieran Gallahue will be chairman.

"We are delighted to partner with the Vantive team to pursue their strategic vision through the separation from Baxter and transformation into a standalone global business," said Robert Schmidt, Carlyle's global co-head of healthcare.

The companies expect the deal to close later this year or early 2025. Following the sale, Baxter expects operational sales to grow between 4% and 5% annually. For next year, the company projects an adjusted operating margin at 16.5% on a continuing operations basis.

Baxter said it expects to fully offset stranded costs and the loss of transition service agreement income in 2027 via cost containment measures, some of which it has already started.

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