The battle for control of American Hospital Supply Co. continued yesterday when Baxter Travenol Laboratories Inc. revealed that it has lined up $2.5 billion in credit from major banks that could be used in the takeover fight.
Baxter, which said it will hold a special board meeting today, made a surprise bid of more than $3.5 billion for American last Friday. American unanimously rejected that bid Tuesday. Earlier this year, American agreed to be acquired by Hospital Corp. of America, a proposal that will be put to a vote by shareholders of both companies next month.
While Wall Street analysts say they believe that Baxter's bid of about $50 a share is worth more than the HCA proposal, valued at about $36 a share, American contends that the proposed merger with HCA is in the company's long-run best interest. American also has said the Baxter bid, which includes both stock and cash, is worth less than the $50 a share claimed by Baxter.
HCA, the nation's largest for-profit hospital chain, has said it could significantly reduce costs by acquiring American, the nation's largest provider of hospital supplies.
Baxter, best known for supplying hospitals with intravenous solutions, said yesterday that it has informed American that it would structure its bid so that it would be worth $50 a share to all stockholders. The company also said that if American's financial adviser has asserted that the HCA offer is fair to American stockholders from a financial point of view, then its $50-a-share offer would presumably be even more fair.
"When you cut through all the rhetoric, the real issue is how a $35 offer can possibly be a better deal for American stockholders than a $50 offer," Baxter President and Chief Executive Officer Vernon R. Loucks Jr. said yesterday. "We believe Baxter's proposal made last week has irrefutable financial logic for both Baxter and American stockholders."
HCA had revenue of $4.2 billion and net income of $296.8 billion last year, while American had revenue of $3.5 billion and net income of $237.8 billion. Baxter, a smaller company, had $1.8 billion in revenue and $29.1 million in net income.
Under the terms of the proposed merger between HCA and American, each American share would be converted into three-quarters of a share of a new holding company that would own HCA and American. Each HCA share would represent one share of the new holding company's stock.
"The hospital industry stopped growing, so these companies are trying to do something innovative," said Sanford C. Bernstein analyst Kenneth Abramowitz. "The key issue is what will happen with the shareholder votes next month."