Hillrom (HRC) - Get Hill-Rom Holdings, Inc. Report shares rose Thursday after medical-products titan Baxter International (BAX) - Get Baxter International Inc. Report agreed to buy the medical technology company for $10.5 billion.
Deerfield, IL.-based Baxter is paying $156 a share. The deal value is $12.4 billion when Baxter's assumption of Hillrom’s debt and cash are included.
The purchase price represents a 26% premium to Hillrom's closing stock price on July 27. That's the last trading day prior to media reports speculating about a potential transaction.
Chicago-based Hillrom "brings a highly complementary product portfolio and innovation pipeline that will enable Baxter to provide a broader array of medical products and services,” Baxter said.
“The combination is also expected to accelerate the companies' expansion into digital and connected care solutions that are increasingly enabling patients with access to hospital-level care at home or in other care settings.”
Hillrom shares recently traded at $150.28, up 4%, and Baxter at $78.50, up 1%.
Baxter expects the combination to create about $250 million of annual pretax 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 organizations,” the company said.
“The transaction is expected to be low double-digit accretive to Baxter's adjusted earnings per share in the first full year post close, increasing to more than 20% by year three. The transaction is also expected to expand Baxter's overall adjusted Ebitda margins over the medium term.”
The transaction is expected to close by early 2022, subject to conditions including regulatory clearances and a vote of Hillrom holders.