Baxter ($BAX) had scarcely completed its July separation from therapeutics business Baxalta when it suddenly became a target for activist investor Third Point in early August. Last month, Baxter offered an olive branch to the hedge fund by adding two new directors to its board, one of them from the firm.
Now it's up to even more dramatic efforts by cutting $130 million in annual costs via a 5% reduction of its non-manufacturing workforce. It's also bringing on former Covidien chairman, President and CEO José Almeida as its new chairman and CEO as of Jan. 1; he will start work immediately as an "executive officer" in the interim. Current Baxter chairman and CEO Robert Parkinson will retire from these roles as of Jan. 1 and will then assume the title of chairman emeritus.
Baxter shares plummeted when Third Point first became vocal in early August, but have been recovering since as the company works to please this vocal shareholder and to gain its equilibrium as an independent public company focused on renal and hospital products.
"We're executing a three-pronged strategy to accelerate profitable growth, focused on rebasing our cost structure, optimizing our existing products and services through rigorous portfolio management, and finally, expanding our offering of high valued differentiated products through execution of our robust new product pipeline," summed up Parkinson on the company's strategy, which was initially laid out at a May investor meeting.
Baxter said the job cuts were part of the completion of its integration of Gambro, which it acquired in late 2013 for $4 billion. Roughly one-third of the workforce reduction is from eliminating open positions. And about two-thirds of the reductions are outside the U.S. and "spread around the world fairly evenly," Parkinson said.
There could be more big moves from Baxter in the offing--major acquisitions.
"Going forward we expect M&A to be a key component of our strategy to accelerate profitable growth," said Parkinson on the call. "Over the next 12 months as we enhance our balance sheet and progress on our post-spin margin improvement initiatives, we will have significant flexibility to evaluate opportunities that are more transformative in both scope and scale, but still align with our business model and leverage our broad channel strength and geographic presence."
- here are the earnings and CEO announcements
- and here is the Oct. 27 call transcript