Baxter International Inc said on Tuesday it would buy privately held Swedish kidney dialysis product company Gambro AB for about $4 billion, a tie-up that would make it No.2 in the dialysis market.
Baxter, whose shares fell nearly 1 percent, will finance the acquisition with cash and debt.
The deal marks Baxter's biggest acquisition since Chief Executive Robert Parkinson took the helm in 2004.
Baxter manufactures kidney dialysis equipment, drug infusion pumps and blood therapy products.
The Gambro acquisition will round out Baxter's renal business, which accounted for almost one-fifth of the company's 2011 revenue of $13.89 billion.
Gambro, based in Lund, Sweden, is one of the largest makers of equipment for hemodialysis, which is generally performed in a hospital or clinic.
Baxter's machines are used for peritoneal dialysis which can be done at home.
The need for dialysis is linked to the epidemic of obesity and diabetes and is attracting more investors.
Billionaire Warren Buffett has more than a 10 percent stake in competitor DaVita HealthCare Partners Inc.
Gambro's sales have been flat to weaker in recent years, undermined partly by capacity constraints, but Baxter executives voiced confidence during a conference call with analysts that the business can be turned around.
"It is a big market and it is going to continue to grow for a long time.
There are only so many kidney transplants available in the world," Parkinson told analysts.
Hemodialysis removes waste products from the blood when the kidneys fail.
Another method is peritoneal dialysis, a treatment for severe chronic kidney disease that uses the patient's own membrane inside the body as a filter to clear waste.
The third treatment option is a kidney transplant.
"At the end of the day, this is an acquisition that is not dependent on any one pathway for value creation.
It is not dependent on a major new product launch or technological advancement, and is not dependent on commercial assumptions that are overly optimistic.
This is an acquisition that is dependent on execution," he said.
"This is something we know we can do and do well.
" He said the planned acquisition did not represent a change in the direction for the company, which has invested in stem cell research and a treatment for Alzheimer's disease.
Shares of Baxter fell 0.9 percent to $65.
22 on Tuesday on the New York Stock Exchange.
Some analysts said they were concerned by the price tag and that the company said on its conference call it will issue $3 billion in new debt