Rumblings of a potential deal surfaced earlier this week, leading to a massive rise for Hillrom’s stock. The expectation was that the companies would reach a deal by midweek so long as talks didn’t fall apart. Those reports saw Hillrom valued at about $150 per share, with estimates of a $10 billion deal.
According to a news release, Baxter agreed to acquire Hillrom at $156 per share in cash for a total equity value of approximately $10.5 billion, with the purchase reaching a total enterprise value of approximately $12.4 billion, including the assumption of debt. The purchase price represents a 26% premium to Hillrom’s closing stock price on July 27, 2021, the last trading day prior to media reports speculating on the potential transaction.
Baxter anticipates approximately $250 million in annual pre-tax cost synergies by the end of year three as a result of the acquisition, with expectations for the deal to be low double-digit accretive to the company’s adjusted EPS in the first full year after closing, increasing to more than 20% by year three.
The boards of directors for both companies unanimously approved the acquisition, with the transaction now subject to the approval of Hillrom shareholders and the satisfaction of customary closing conditions, including regulatory approvals. The companies expect the transaction to close by early 2022.
In acquiring Hillrom, Baxter expects the company’s product portfolio and innovation pipeline to enable it to provide a broader array of medical products and services to patients and clinicians across the care continuum. A major part of the deal involves accelerating the companies’ expansion into digital and connected care solutions to enable patients to access hospital-level care at home or in other care settings.
“Baxter and Hillrom share a common vision for transforming healthcare to better serve all patients and providers,” Baxter chairman, president & CEO José (Joe) E. Almeida said in the release. “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’re very excited to welcome the Hillrom team to Baxter and to join together to advance our mission to save and sustain lives.”
Hillrom president & CEO John Groetelaars noted that the deal represents a “win-win for all stakeholders” with patients and caregivers set to benefit from enhanced capabilities through the deal and shareholders receiving “a significant and immediate” premium on their investment.
Employees will also benefit from becoming a part of a larger, stronger company with accelerated growth opportunities, Groetelaars noted.
“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,” Groetelaars said. “With our shared patient-centric cultures, we look forward to seamlessly bringing our two companies together.”