Baxter’s $10.5B Hillrom buy on track, deal to close by early 2022

Baxter’s plan to acquire Hillrom in an all-cash deal valued at $10.5 billion appears on track. CEO Joe Almeida told investors during Thursday’s third-quarter earnings call that the Hart-Scott-Rodino Act waiting period in the U.S. expired with no issuance of a second information request from the Federal Trade Commission.

While FTC reserves its right to take further action in reviewing such acquisitions, Almeida called the waiting period expiration a “key milestone” on the road to closing the deal, which is anticipated in early 2022. Other global regulatory approvals are still needed and a Dec. 2 Hillrom shareholder meeting is scheduled to vote on the transaction — the largest medtech merger so far in 2021 — but the deal is expected to go as planned.

In the meantime, Baxter and Hillrom have created an integration management office to help combine the two companies, which Almeida said will bring together complimentary portfolios. Baxter’s decision to buy Hillrom is an effort to expand into connected care and offer digital health products across the continuum of care.

However, analysts initially questioned the price and strategic fit of a Baxter-Hillrom deal. Evercore ISI analysts last month said the two companies “need to do work” on the integration of Baxter’s infusion pump business with Hillrom’s digital health products.

Asked on Thursday’s earnings call what might be underappreciated by investors about the acquisition, Almeida said Wall Street “has missed” what Hillrom has done in the last two to three years “in terms of connecting their products and going into some very specific markets, primarily frontline care, and also the evolution of what used to be just a hospital bed or a capital purchase by the hospital to being a part of an ecosystem that goes from patient safety to patient diagnostics.”

Dive Brief:

• Baxter announced Thursday it will acquire Hillrom in an all-cash deal valued at $10.5 billion or $156 per Hillrom share. CEO Joe Almeida told investors Baxter’s decision to buy Hillrom was an effort to “augment and optimize” its connected care portfolio.
• The announcement confirmed recent media reports that the two companies were in talks. Hillrom reportedly rejected an earlier offer of $144 per share. The final per share transaction represents a 26% premium to Hillrom’s closing stock price on July 27, the last trading day prior to the first report by the press on discussions between the two medtechs.
• The deal is expected to close by early 2022 and to generate high single-digit return on invested capital for Baxter by year five. However, Evercore ISI analysts in a Thursday note called that estimate “a tad conservative — we think BAX could hit ~7% ROI by year 3.”

MedTech Dive