Bankers Trust New York Corp. is arranging roughly $400 million of financing for Bain Capital Inc.'s purchase of Baxter International Inc.'s diagnostics business.
Baxter, based in Deerfield, Ill., announced Monday that it agreed to sell the diagnostics unit for $448 million, of which $400 million will be paid in cash.
Baxter put the unit on the auction block earlier this year as pan of a broad restructuring that was announced last November.
The health care company initially was said to be seeking anywhere from $700 million to $1 billion for the diagnostics unit. Early in the auction process, a number of potential bidders dropped out, in part because the price seemed too rich, according to banking sources.
Kohlberg Kravis Roberts & Co., the New York buyout firm, continued to maintain interest in the unit, though it's not clear whether KKR ever submitted a bid.
A spokeswoman for KKR declined to comment.
The exact mix of financing for Bain, a venture capital firm in Boston, has not been worked out, but probably will consist of both bank debt and junk bonds. The decision on the final shape of the financing, which will be driven by conditions in the bond market, is expected to be made within several weeks. Bankers Trust would lead any bond offering, according to an executive at the bank.
Bankers Trust has led bank and bond deals for several other Bain deals, including Duane Reade, a drug-store chain in New York, and the Waters Chromatography division of Millipore Corp.
Bain reportedly plans to use the Baxter unit as the base from which it will build a bigger diagnostics business through a series of smaller, add-on acquisitions.
While Bain has been successful with such leveraged buildups in the past, the practice carries some risk for lenders because some cash flow will be diverted from debt repayment, according to a banker who has an interest in participating in the Bankers Trust-led loan syndicate for the Baxter diagnostics deal.
As part of the sale agreement, Baxter will retain distribution rights to the diagnostics products in the United States for five years. Some bankers have expressed concern that the diagnostics unit will continue to be wedded to the struggling Baxter after it is purchased by Bain.