Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, November 29, 1995                   TAG: 9511290065
SECTION: BUSINESS                    PAGE: B-6   EDITION: METRO 
SOURCE: Associated Press
DATELINE: CHICAGO                                LENGTH: Medium

HOSPITAL SUPPLIER TO BECOME 2

A global medical technology company will keep the Baxter name and will include products such as kidney dialysis equipment, heart valves, blood collection and storage gear, intravenous fluids and pumps and biotechnology.

The yet-to-be-named counterpart will be spun off in a distribution of new shares to current Baxter stockholders. That company will include Baxter's hospital instrument business such as scalpels and syringes and will provide products and services to help health maintenance organizations, hospitals and other health care providers manage their costs.

``What we have really done in creating these two companies is to keep the international expansion and the technical leadership in one company, and to separate health-cost management - and begin to focus on it - in a second company,'' said Vernon Loucks Jr., Baxter chairman and chief executive. ``We believe this is the right move at the right time, not only for our shareholders but also for our customers and for our employees.''

Wall Street agreed. Baxter stock gained $2.871/2 a share to close at $41.371/2 on the New York Stock Exchange.

Solomon Brothers analyst Eli Kammerman said the move makes sense because many companies in high-technology fields need to focus on expanding without distraction.

``I would expect management in both companies to focus on the key missions for each business, and it should also improve competitive standing,'' Kammerman said.

The new Baxter will be headed by Loucks. The other company, which Baxter calls its cost-management business, will be led by Baxter Executive Vice President Lester B. Knight.

The industry's profits have been under pressure for several years because of demands for lower health insurance premiums from big corporations.

Mergers have allowed drug companies, health maintenance organizations, hospitals and others to cut costs and diversify in order to preserve their profits.

By creating a new company focused on cost containment, Baxter hopes to capitalize on this cost-reduction trend

Harry M. Kramer, Baxter's chief financial officer, said he thinks the split will boost stock prices and growth rates. Both companies should do $5 billion in annual sales, with the new Baxter having a pretax profit margin from its regular business operations of about 15 percent. The other company would have an operating margin of about 6 percent, he said.