Baxter Travenol Laboratories Inc. sweetened its $3.6 billion takeover bid for American Hospital Supply Corp. yesterday by guaranteeing that American stockholders would receive $50 a share if Baxter's proposal is adopted.
Baxter said it is now offering $50 a share in cash for half of American's outstanding stock and $50 a share in Baxter stock for the other half. Baxter said it would ensure that the stock portion of the offer is worth $50 a share by having the investment bankers advising both companies actively involved in structuring the bid.
American, which rejected a surprise bid by Baxter earlier this week, agreed to be acquired by Hospital Corp. of America in early April. Under 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, making the offer worth about $36 a share to American stockholders.
American and HCA shareholders are scheduled to vote on that proposal next month. But Wall Street analysts say it is unlikely that the plan will be approved by American stockholders since HCA's offer appears to be worth significantly less than the Baxter proposal.
Earlier this week, American rejected Baxter's initial bid, saying that a merger with HCA was in the long-run best interest of the company. American also said the initial Baxter bid was worth less than the $50 a share claimed by Baxter.
American Chairman Karl Bays yesterday called the new offer "a last-ditch effort by Baxter in its attempt to spoil a proposed transaction with HCA." Bays criticized Baxter, saying the company has been poorly run and, as a result, may become the target of a takeover bid.
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. HCA had revenue of $4.2 billion and net income of $296.8 million last year, while American had revenue of $3.5 billlion and net income of $237.8 million. Baxter, best known for supplying hospitals with intravenous solution, is a smaller company; it had revenue of $1.8 billion and net income of $29.1 million last year.
American's merger agreement with HCA includes a special provision, designed to discourage a proposal from a third party like Baxter, that allows American to issue 39 million new shares to HCA, which would then issue 29 million shares to American. The stock swap was designed to discourage an outside bidder by increasing the cost of acquiring American.
Baxter, looking for a way to block the impact of that stock swap, said yesterday that if the share exchange between American and HCA takes place, Baxter would exclude the 39 million shares of American held by HCA from its offer. Baxter said it would then simply swap the 29 million HCA shares issued to American in exchange for the American shares held by HCA.
Baxter said its new offer has eliminated any legitimate concerns American directors may have regarding the value of its takeover bid.
"Our objective is to offer your board of directors a clear choice between $50 and the $35 value of the HCA transaction," Baxter said in a letter to American.
" . . . We hope that your board will take the appropriate time to study fully the terms of our improved offer and properly take into account all relevant considerations, including the views expressed by American stockholders as to the merits of our offer in contrast to the pending HCA transaction," the letter continued.
"For this reason, we will not consider this offer as rejected by your board until a decision is made after your stockholders have voted on the HCA transaction at the upcoming meeting scheduled for July 12, 1985, or that transaction is terminated. We will therefore keep this offer open until July 15, 1985, and we will extend it further if you are required in good faith to postpone your stockholder's meeting."