- Baxter International Inc BAX has agreed to acquire Hill-Rom Holdings Inc HRC for $156.00 per share in cash, slightly higher than the earlier anticipated $150.
- Related Content: Baxter In Advanced Talks For $10B Hill Rom Buyout
- The deal values HRC's equity at approximately $10.5 billion and a total enterprise value of roughly $12.4 billion, including the assumption of debt.
- The purchase price represents a 26% premium to Hillrom's closing stock price on July 27, the last trading day before media reports speculating about a potential transaction.
- Baxter expects the combination to result in approximately $250 million of annual pre-tax cost synergies by the end of year three.
- 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 and deliver strong cash flow generation with a high single-digit return on invested capital expected by year five.
- Baxter will finance the transaction through a combination of cash and debt financing. As of June 30, cash and cash equivalents stood at around $3.1 billion (See June 10Q here).
- At closing, Baxter estimates that it will have net leverage of approximately 4.2x net debt to pro forma adjusted EBITDA of the combined companies.
- The transaction is expected to close by early 2022.
- Price Action: HRC stock is up 3.82% at $150.06, and BAX stock is up 1.55% at $78.80 during the premarket session on the last check Thursday.
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