Baxter on Monday announced the completion of its $10.5 billion acquisition of Hillrom, a deal meant to expand the company's digital health and connected care offerings.
CEO Joe Almeida has made the case that the Hillrom buy will enable Baxter to offer digital health products across the continuum of care including hospitals, at home and other alternate settings.
"Integrating our complementary capabilities introduces additional opportunities for growth across our broad geographic footprint and also creates remarkable new possibilities for connectivity with leading-edge digital health innovation focused on enhancing care, lowering costs and increasing workflow efficiency," Almeida said in the Monday announcement.
Baxter's plan is to expand legacy Hillrom and Welch Allyn products into new international markets. Hillrom acquired many of its digital health technologies, including a move into point-of-care diagnostics and patient monitoring devices, through its $2.05 billion acquisition of Welch Allyn in 2015.
Baxter paid $156 in cash for each outstanding share of Hillrom common stock for a purchase price of $10.5 billion. The enterprise value of the transaction, including the assumption of Hillrom's outstanding debt obligations, is approximately $12.5 billion.
Analysts initially questioned the price and strategic fit of a Baxter-Hillrom deal, the largest medtech merger so far in 2021.
Baird wrote in late August that they talked themselves into a combination given Hillrom's push into connected care, while J.P. Morgan argued Baxter has a "tall order" convincing investors "this is a more strategic vs. financial acquisition."
Evercore ISI analysts in September said the two companies "need to do work" on the integration of Baxter's infusion pump business with Hillrom's digital health products.
The combination of the two medtechs is expected to result in approximately $250 million of annual pre-tax cost synergies by the end of year three and high single-digit return on invested capital for Baxter by year five, according to the announcement. Baxter's stock was up almost 3% yesterday following the news.
