Full Press Release Details
Baxter: Lauren Russ, (224) 948-5353
Hillrom: Howard Karesh, (312) 819-7268
Baxter: Clare Trachtman, (224) 948-3020
Hillrom: Mary Kay Ladone,
BAXTER TO ACQUIRE HILLROM,
EXPANDING CONNECTED CARE AND MEDICAL INNOVATION GLOBALLY
Transaction valued at $156.00 per Hillrom Share for an
All-Cash Purchase Price of $10.5 Billion
DEERFIELD, ILL., and CHICAGO, Sept. 2, 2021 Baxter International Inc. (NYSE:BAX), a leading global medical products company, and
Hillrom (NYSE: HRC), a global medical technology leader, today announced that the companies have entered into a definitive agreement under which Baxter has agreed to acquire Hillrom for $156.00 per share in cash for a total equity value of
approximately $10.5 billion and a total enterprise value of approximately $12.4 billion, including the assumption of debt.
Hillrom brings a highly complementary product portfolio and innovation pipeline that will
enable Baxter to provide a broader array of medical products and services to patients and clinicians across the care continuum and around the world, facilitating the delivery of healthcare that is patient- and customer-centered and focused on
improving clinical outcomes. 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
Baxter and Hillrom share a common vision for transforming healthcare to better serve all patients
and providers, said Jos (Joe) E. Almeida, Baxter s chairman, president and chief executive officer. 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.
John Groetelaars, Hillrom s president and chief executive officer, said, We are proud of the steps we have taken to transform
Hillrom into a medical technology leader with an innovative portfolio of connected care solutions. Today s milestone announcement represents a win-win for all stakeholders. Patients and caregivers will
benefit from enhanced capabilities across the continuum of care, our shareholders will receive a significant and immediate premium for their investment, and our employees will benefit from being part of a larger, stronger company with accelerated
growth opportunities. 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. With our shared patient-centric cultures, we look forward to seamlessly
bringing our two companies together.
The Baxter-Hillrom combination will expand access to Hillrom s portfolio globally; broaden the presence of the combined companies across
sites of care; accelerate and strengthen the combined organization s digital transformation; and is expected to generate compelling financial returns for Baxter s shareholders.
Key benefits of the acquisition include:
Transaction Highlights
Upon completion of the transaction, Baxter will pay $156.00 in cash for each outstanding share of Hillrom common stock for a purchase price of
$10.5 billion. Baxter will also assume Hillrom s outstanding debt and cash, for a total enterprise value of $12.4 billion. 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 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. This estimate excludes any benefit from potential new revenue growth opportunities resulting from the combination of
the two organizations.
The transaction is expected to be low-double-digit accretive to
Baxter s adjusted earnings per share (EPS) 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 (ROIC) expected by year five.
Baxter will finance the
transaction through a combination of cash and fully committed debt financing. At closing, Baxter estimates that it will have net leverage of approximately 4.2x net debt to pro forma1 adjusted
EBITDA of the combined companies (as estimated by Baxter management). Baxter is committed to an investment grade credit rating and deleveraging to 2.75x net leverage within two years of closing.
Approvals and Timing
The Boards of Directors of both companies have unanimously approved the acquisition. The transaction is subject to the approval of Hillrom
shareholders and the satisfaction of customary closing conditions, including regulatory approvals. The transaction is expected to close by early 2022.
Baxter Long-term Financial Guidance and 2021 Investor Conference Update
As a result of the proposed acquisition, Baxter s 2021 Investor Conference, originally scheduled for Sept. 20, will be rescheduled to a
date following the transaction s completion. This will allow Baxter to provide an updated strategic and financial outlook inclusive of the combined organizations.
In the interim, Baxter is issuing long-term financial guidance as a standalone entity. Baxter expects sales to grow 4-5%, compounded annually from 2021 to 2024 based on current foreign exchange rates. Over this period, Baxter anticipates expanding its adjusted operating margin by 300 basis points or more. On an adjusted basis,
Baxter expects to deliver earnings growth of low double digits compounded annually over the same period. This Baxter standalone guidance does not reflect any impact from the proposed acquisition.
Perella Weinberg Partners LP is
acting as lead financial advisor to Baxter. J.P. Morgan and Citi are also serving as financial advisors to Baxter and have committed to provide fully committed financing. Sullivan & Cromwell LLP is serving as legal advisor to Baxter.
Goldman, Sachs & Co. LLC is serving as lead financial advisor and BofA Securities is serving as financial advisor to Hillrom. Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Hillrom.
A special webcast for
investors and media regarding the proposed acquisition can be accessed live from a link on Baxter s website at www.baxter.com beginning at 7:30 a.m. CDT on Sept. 2, 2021. A live link to the webcast will also be available on
Hillrom s website at www.hillrom.com.
Every day, millions of patients and caregivers rely on Baxter s leading portfolio of critical care, nutrition, renal, hospital and
surgical products. For 90 years, we ve been operating at the critical intersection where innovations that save and sustain lives meet the healthcare providers that make it happen. With products, technologies and therapies available in
more than 100 countries, Baxter s employees worldwide are now building upon the company s rich heritage of medical breakthroughs to advance the next generation of transformative healthcare innovations. To learn more, visit
Hillrom is a global medical technology leader whose 10,000 employees have a single purpose: enhancing outcomes for patients and their
caregivers by Advancing Connected Care . Around the world, our innovations touch over 7 million patients each day. They help enable earlier diagnosis and treatment, optimize surgical
efficiency and accelerate patient recovery while simplifying clinical communication and shifting care closer to home. We make these outcomes possible through digital and connected care solutions and collaboration tools, including smart bed systems,
patient monitoring and diagnostic technologies, respiratory health devices, advanced equipment for the surgical space and more, delivering actionable, real-time insights at the point of care. Learn more at hillrom.com.
Non-GAAP Financial Measures
This press release contains financial measures that are not calculated in accordance with U.S. GAAP. The
non-GAAP financial measures include the following forecasted items: adjusted EPS accretion, pro forma net leverage, ROIC, adjusted operating margin expansion, and adjusted earnings growth. The company defines
adjusted EPS accretion as the increase in its adjusted EPS (i.e., diluted EPS excluding special items, net of the related income tax effects) resulting from the proposed Hillrom acquisition. The company defines pro forma net leverage as total debt
less cash and cash equivalents following completion of the proposed Hillrom acquisition divided by the trailing-twelve month (TTM) adjusted EBITDA (i.e., income before interest, taxes, depreciation, amortization, and special items) of the combined
companies as if the results of Baxter and Hillrom had been combined since the beginning of that TTM period. The company defines ROIC as free cash flow (i.e., operating cash flow less capital expenditures) derived from Hillrom divided by the
enterprise value of Hillrom at the date of acquisition. The company defines adjusted operating margin expansion as the increase in its adjusted operating income (i.e., operating income excluding special items) as a percentage of revenue. The company
defines adjusted earnings growth as the percentage increase in its adjusted net income (i.e., net income excluding special items, net of the related income tax effects).
Special items include intangible asset amortization, business optimization charges,
acquisition and integration expenses, expenses related to European Medical Devices Regulation, investigation and related costs and a tax matter. These items are excluded because they are highly variable or unusual and of a size that may
substantially impact the company s reported operations for a period. Additionally, intangible asset amortization is excluded as a special item to facilitate an evaluation of current and past operating performance and is consistent with how
management and the company s Board of Directors assess performance.
measures may enhance an understanding of the company s operations and may facilitate an analysis of those operations, particularly in evaluating performance from one period to another. Management believes that
non-GAAP financial measures, when used in conjunction with the results presented in accordance with U.S. GAAP and the reconciliations to corresponding U.S. GAAP financial measures, may enhance an
investor s overall understanding of the company s past financial performance and prospects for the future. Accordingly, management uses these non-GAAP measures internally in financial planning, to
monitor business unit performance, to evaluate the company s ability to service its debt, and, in some cases, for purposes of determining incentive compensation. Management uses pro forma non-GAAP
measures to evaluate the financial results of Baxter and Hillrom on a combined basis. This information should be considered in addition to, and not as substitutes for, information prepared in accordance with U.S. GAAP.
The company is unable to present a quantitative reconciliation to the most directly comparable U.S. GAAP measures for the non-GAAP financial measures used in this press release without unreasonable effort as certain items that impact these measures, such as the potential impact of future business or asset acquisitions or dispositions,
including the acquisition of Hillrom, intangible asset impairments, restructuring actions, developments related to gain or loss contingencies, or unusual or infrequently occurring items that may occur during the remainder of 2021 or in future years,
have not yet occurred, are sometimes out of the company s control and cannot be predicted.
Cautionary Language Regarding Forward-Looking
Baxter Forward-Looking Statements
This release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995, each as amended, concerning Baxter s financial results, business development activities, capital structure, cost savings initiatives, R&D pipeline, including
results of clinical trials and planned product launches, and financial outlook for 2021 2024 for standalone Baxter and the combined companies.
Forward-looking statements provide current expectations of future events and include any statements that do not directly relate to any historical or
Actual results could differ materially from those discussed in the forward-looking statements, as a result
of factors, risks and uncertainties, not under the company s control, including, but not limited to: (i) conditions to the consummation of the Hillrom acquisition, including Hillrom s shareholder approval of the proposed acquisition,
may not be satisfied or the regulatory approvals required for the proposed acquisition may not be obtained on the terms expected or on the anticipated schedule; (ii) successful integration of Hillrom with the company and the realization of
anticipated benefits of the acquisition (including anticipated synergies and net leverage targets) within the expected timeframes or at all; (iii) the occurrence of any event, change or other circumstance that could give rise to the termination
of the merger agreement between the parties to the Hillrom acquisition; (iv) potential adverse reactions to the Hillrom acquisition by the company or Hillrom s strategic partners; (v) the impact of global economic conditions
(including potential trade wars) and public health crises and epidemics, such as the ongoing coronavirus (COVID-19) pandemic, on the company and its customers and suppliers, including foreign governments in
countries in which the company operates; (vi) the demand for and market acceptance of risks for new and existing products (including the impact of reduced hospital admission rates and elective surgery volumes); (vii) product development risks
(including any delays in required regulatory approvals); (viii) product quality or patient safety concerns; (ix) the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies;
(x) accurate identification of and execution on business development and R&D opportunities and realization of anticipated benefits (including the acquisitions of Cheetah Medical, Seprafilm Adhesion Barrier and PerClot Polysaccharide
Hemostatic System and specified rights to Caelyx/Doxil in territories outside the U.S., and Transderm Scop); (xi) loss of key employees or inability to identify and recruit new employees; (xii) breaches or failures of the company s
information technology systems or products, including by cyberattack, unauthorized access or theft; (xiii) future actions of national and foreign regulatory and governmental authorities, including Food and Drug Administration, the Department of