Baxter to buy Hillrom for $10.5bn

November 2021 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

November 2021 Issue

Baxter International has agreed to acquire global medical technology company Hillrom for $156 per share in cash for a total equity value of approximately $10.5bn and a total enterprise value of approximately $12.4bn, including the assumption of debt. The purchase price represents a 26 percent premium to Hillrom’s closing stock price on 27 July 2021, the last trading day prior to media reports speculating about a potential transaction.

The boards of directors of both companies have unanimously approved the acquisition. The transaction is subject to the approval of Hillrom shareholders and the satisfaction of customary closing conditions, including regulatory approvals. The deal is expected to close by early 2022. Baxter will finance the transaction through a combination of cash and fully committed debt financing.

Baxter expects the combination to result in approximately $250m of annual pre-tax cost synergies by the end of year three. This estimate excludes any benefit from potential new revenue growth opportunities resulting from the combination of the two organisations.

The companies say their combined portfolio, particularly with respect to therapeutic delivery, monitoring, blood purification, diagnostics and communications, will accelerate digitally enabled connected healthcare. The acquisition will boost Baxter’s adjusted earnings per share by a low double-digit percentage in its first year after closing, growing to a 20 percent increase in the third year, the companies said in a statement.

“Baxter and Hillrom share a common vision for transforming healthcare to better serve all patients and providers,” said José E. Almeida, chairman, president and chief executive of Baxter. “Patients increasingly want to receive their care at home or nearby, while hospitals and other care providers are increasingly using digital health technologies to expand access, improve quality and lower costs. Baxter and Hillrom are uniting to meet the challenges of a rapidly evolving global healthcare landscape, while also creating significant value for all the stakeholders we serve.”

“We are proud of the steps we have taken to transform Hillrom into a medical technology leader with an innovative portfolio of connected care solutions,” said John Groetelaars, president and chief executive of Hillrom. “Today’s milestone announcement represents a win-win for all stakeholders. Patients and caregivers will benefit from enhanced capabilities across the continuum of care, our shareholders will receive a significant and immediate premium for their investment, and our employees will benefit from being part of a larger, stronger company with accelerated growth opportunities. Baxter is the ideal partner to enhance our global reach and realize the true potential of our vision to accelerate medical innovation around the world. With our shared patient-centric cultures, we look forward to seamlessly bringing our two companies together.”

Hillrom has completed a number of acquisitions in its own right in recent years. In 2019, the company bought Voalte, a communications tool vendor, for $180m. In 2021, the company also acquired some of the assets of EarlySense, a contact-free continuous monitoring technology company.

The medical device industry has seen a number large consolidation deals of late, including Medtronic Plc’s $43bn acquisition of Covidien Plc and the $25bn purchase of St. Jude Medical Inc. by Abbott Laboratories. A consortium of private equity groups led by Blackstone, Carlyle and Hellman & Friedman also agreed to acquire a majority stake in Medline for about $34bn, including debt.

In August, Hillrom is believed to have rejected a $9.6bn takeover offer from Baxter as it considered the proposal of around $144 per share as too low.

Richard Summerfield