Baxter International Inc.
During position: the third quarter, we disclosed a 9.9% stake in Baxter International Inc. making us the company’s largest shareholder. Baxter provides critical, life-saving materials to patients and physicians in over 100 countries with an emphasis on renal care and medical products.
To represent the interests of all shareholders, Third Point Partner Munib Islam joined Baxter’s board of directors in September and participated in the search process for the newly appointed CEO, Jose “Joe” Almeida. Almeida successfully led Covidien as CEO from 2011 to 2015 before selling the company to Medtronic. The agreement between Third Point and Baxter also required the company to add a second new member to the board, and we were pleased that the company attracted Michael Mahoney, the CEO of Boston Scientific (NYSE:BSX), as a new director. Mahoney helped revive Boston Scientific when it was confronted with similar opportunities and challenges.
Baxter seems to be at an inflection point for two reasons: (i) the company recently spun off Baxalta (NYSE:BXLT), its biosciences business. As our longtime investors know, breakups and spinoffs are classic opportunities and Baxter fits this mold; and (ii) we believe that the new CEO can re-invigorate the more focused, post-spin company and drive it toward industry-leading operational performance by following a similar playbook to the one he executed so successfully at Covidien.
Almeida’s international experience, cost-conscious mentality and strategic vision will be instrumental in helping Baxter accelerate its revival through consistent execution and portfolio reshaping. He has a strong track record of creating shareholder value: during his tenure as CEO from July 2011 to January 2015, Covidien shares rose nearly 140%-plus vs. the S&P 500’s 54%-plus return. Given the ample room to drive margin expansion at Baxter and the new CEO’s history of delivering consistent top quartile shareholder returns, we see Baxter as one of the most promising positions in our portfolio.
