Ares Management Corp. ( ARES ) and HPS Investment Partners are spearheading a $3 billion credit facility to finance Carlyle Group Inc.’s potential acquisition of Baxter International Inc.’s kidney-care division.

This debt package includes a $2.5 billion unitranche loan and a $450 million revolver.

Oaktree Capital Management is also involved in the financing, and smaller lenders may participate after signing.

Also Read: Medical Devices Giant Baxter Secures FDA Approval For New Infusion Pump System.

The financing terms suggest an interest rate five percentage points above the Secured Overnight Financing Rate, placing the division Vantive’s leverage at 4.2 times pro-forma earnings.

Despite the financing setup, an acquisition agreement hasn’t been finalized, and the deal remains uncertain.

As per the WSJ report, Carlyle is in exclusive talks to acquire Baxter’s Vantive in a deal valued at over $4 billion, including debt. The companies began exclusive negotiations in late June.

Baxter had announced plans to spin off Vantive in the second half of this year, intending to separate its acute therapies and renal care business.

In 2023, Baxter reported that Vantive generated approximately $4.5 billion in revenue.

The Bloomberg report added that the complexity of business carveouts often hinders banks from competing on such deals, allowing private equity sponsors to step in.

The $1.7 trillion private credit market enables direct lenders to secure significant deals, positioning them against banks for financing opportunities.

This deal would mark at least the third collaboration between Ares and HPS on healthcare division carveouts.

Previously, they, along with other lenders, committed $4.8 billion to the acquisition of Catalent Inc. and provided $1.95 billion in financing for the buyout of Baxter’s contract medical manufacturing unit.

Baxter considered selling its kidney-care operations in 2022, following its $10.5 billion acquisition of Hill-Rom.

Price Action: BAX stock is up 0.40% at $35.41 at last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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