Sometimes the parts are worth more than the whole–and the market thinks that’s the case with Baxter International (BAX), which has surged after it announced that it plans to split into two companies.
REUTERS The Wall Street Journal has the details on Baxter’s plans:
Baxter International Inc. said it plans to create separate, independent health-care companies, one focused on developing and marketing biopharmaceuticals and the other on medical products.
Baxter’s biopharmaceuticals business posted revenue of roughly $6 billion last year and includes treatments for hemophilia and other bleeding disorders, immune deficiencies as well as chronic diseases. The remaining company will focus on Baxter’s medical products, which had sales of more than $9 billion in 2013.
Baxter’s shares were up as much as 15% in per-open trading but are now up less than a third of that. ISI Group’s Mike Craig considers the reason why:
Timing of the transaction completion is mid 2015, following final approval of the BoD, receipt of favorable opinion on tax free status from IRS, shareholder approval, & all regulatory approvals. As a point of interest we have seen several announcements recently where an announcement of the split drives the stocks up 10% and quickly fades as timing sets in and market risk still exists. recent examples [Hertz (HTZ), FMC Corp (FMC), Agilent (A), Noble (NE), CBS (CBS)]. I would expect the stock to fade hard from these levels
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Shares of Baxter have gained 4.9% to $73.49 today at 10:46 a.m. today, while FMC Corp. has risen 1.2% to $77.28, Noble has advanced 1.7% to $32.29, CBS Corp has dropped 1% to $61.32 and Agilent is off 0.3% at $55.
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