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Baxter Travenol Joins Bidding for American Hospital Supply

June 21, 1985

CHICAGO (AP) _ American Hospital Supply Co. said Friday that Baxter Travenol Laboratories has proposed a merger under which it would acquire American, which previously agreed to merge with Hospital Corp. of America.

Karl D. Bays, chairman and chief executive officer of American Hospital, said in a statement that the offer was extended in a letter he received from Vernon R. Loucks, president and chief executive officer of Baxter.

The offer includes a stock swap for 50 percent of American’s shares and a cash payment for the remainder, American Hospital’s statement said.

On March 31, American Hospital, based in Evanston, Ill., announced a definitive agreement with Hospital Corp. of Nashville, Tenn., to a merger that would create the largest health care company in the nation.

That agreement calls for a stock swap and provides for the two companies to operate independently while being owned by a holding company. American Hospital’s stockholders were to vote on the proposed merger July 3.

Hospital Corp. said it would have no comment Friday on the Baxter proposal.

Larry Feinberg, a stock analyst in New York with Dean Witter Reynolds, said a match between American Hospital and Baxter Travenol would make the most sense.

″It’s a great fit,″ he said.

Both companies make medical supplies, while Hospital Corp. is the largest for-profit hospital chain, with 420 facilities.

Trading in the stock of both companies was halted temporarily on the New York Stock Exchange on Friday pending the announcement of Baxter’s new offer.

Baxter, based in Deerfield, Ill., offered to swap 3.01 shares of its common stock per share of American for one half of American Hospital’s common stock and $50 cash per share for the remaining American stock.

However, under the terms of the agreement between American Hospital and Hospital Corp., the two corporations agreed to issue new stock if an offer by a third party was made.

In its statement, American Hospital said it was unclear how such a new issue would affect Baxter’s offer.

Feinberg said that under the agreement with Hospital Corp., American Hospital would issue 39 million new shares to Hospital Corp., which would in turn issue 29.5 million new shares to American Hospital.

Based on the existing 72.6 million outstanding shares of American Hospital, Baxter’s proposal would be valued at about $3.26 billion. But if the new shares were incliuded, the deal would be worth about $5.6 billion, Feinberg said.

″I really doubt they’re offering $5.6 billion,″ he said.

In its statement, American Hospital said Baxter would have to issue 168 million shares in the proposed acquisition, 115 percent of the number of Baxter shares currently outstanding, if the offer included the new shares.

Baxter Travenol declined to comment Friday.

In trading Friday on the New York Stock Exchange, American Hospital stock rose $2.671/2 a share to $37, Baxter fell 75 cents to $15.87 and Hospital Corp. rose 871/2 cents to $47.50.

American Hospital said the Baxter proposal would remain open for consideration until July 5.

Under its agreement with Hospital Corp., American Hospital and Hospital Corp. would operate as separate corporations under a common holding company.

Under the agreement, holders of Hospital Corp.’s 88.1 million common shares outstanding were to receive one share in the new holding company for each of their shares. Holders of American Hospital’s 72.6 million shares outstanding would receive three-quarters of a share in the new company for each share.

In 1984, Hospital Corp. had sales of $4.4 billion; American Hospital had sales of $3.3 billion; and Baxter Travenol had sales of $1.8 billion.

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