$3.8B for Vantive’s $4.5B Revenue – Behind Carlyle’s Dialysis Deal News | 26 Aug 2024
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Spotlight
Back to Baxter.
Baxter International first announced plans to spin off its kidney care unit in January 2023, the company's largest business unit. Given that, Baxter was keen to find the right price for the newly dubbed spinoff firm, Vantive.
The firm was prepared to take Vantive private. Then, the Carlyle Group came in.
The two entities struck a deal for Carlyle to acquire Vantive for $3.8 billion, $3.5 billion in cash. Vantive generates $4.5 billion of annual revenue, though Forbes estimates $4 billion as Vantive’s fair-market value or 10x EBITDA. Carlyle’s deal likely represents a 9.5x EBITDA, then – slightly higher than the industry average.
The deal is expected to close in late 2024 or early 2025.
Carlyle’s health kick
Carlyle currently has 37 healthcare-related assets in its portfolio, though this acquisition marks the firm’s first kidney care investment in decades. That’s despite Anthony Welters, former chairman of kidney care company Somatus, being on Carlyle’s board.
Healthcare has been an important vertical for Carlyle, with Steve Wise, former global head of healthcare, being promoted to co-head of private equity, Americas in June.
Additionally, Carlyle created Atmas Health, an operational partnership funded by Carlyle, in 2022. The partnership is led by long-time industry executives Kieren Gallahue, Jim Hinrichs, and Jim Prutow, whose collective experience will be “leveraged to build real value” in Carlyle’s healthcare portfolio, according to Gallahue.
Both Gallahue and Hinrichs are ex-Care Fusion, a med tech company acquired by BD in 2015, while Prutow is a former partner at PwC specializing in healthcare M&A due diligence.
No time to flatline
This partnership with Atmas will be an important strategy for growth, as Gallahue will serve as Vantive’s chairman to oversee the asset along the way.
“We look forward to working together to build upon Vantive’s track record of patient-focused innovation and create long-term value in this next phase of the company’s development,” Gallahue stated in a press release on the transaction.
PE carve-outs typically prove to be difficult when it comes to replacing the business functions that were formally centralized. However, there is evidence that the strategy can succeed in the healthcare space – KKR, for example, sold Capsugel to Lonza for a whopping $5.5 billion in 2016, a firm which it carved out from Pfizer for $2.38 billion in 2011.
There are also strong tailwinds in the kidney care space. Baxter claimed that Vantive will operate in markets totaling $15 billion and believes it can grow at a rate between 4% and 5%. This is something that is mirrored in Vantive’s competitors – DaVita, for instance, increased its 2024 profit forecast this month due to an uptick in dialysis demand.
Carlyle did not respond to request for comment.