Baxter Travenol Sweetens Its Offer for AHS

Baxter Travenol Laboratories said Thursday that it has improved its offer to acquire American Hospital Supply by guaranteeing American’s shareholders $50 a share, either in cash or Baxter securities.

Baxter’s announcement marked its latest attempt to merge with American and prevent American’s previously approved merger with Hospital Corp. of America of Nashville, Tenn.

American’s directors Tuesday unanimously rejected an earlier offer from Baxter, saying the long-range benefits to shareholders would be greater if the company merged with HCA under a definitive agreement reached March 31.

American, based in Evanston, Ill., issued a statement late Thursday saying that the latest offer asks it “to breach its contractual obligations with HCA.” Karl D. Bays, chairman and chief executive of American, said in a statement that the proposal “is a last-ditch effort by Baxter in its attempt to spoil a proposed transaction with HCA.”

To Review New Offer

He added that Baxter “is a company which has not performed well. The management of American believes that the poor performance of Baxter has made it a target company willing to abandon good business sense to try to keep American from becoming, with its partner HCA, the premier health-care company. The management and board of American take a dim view of Baxter’s business prospects.” He said the new proposal would be reviewed.

Baxter officials could not be reached for comment on American’s statement.

Baxter’s new offer was basically the same as its original, offering $50 a share for American’s outstanding common shares, half in cash and half in stock. But Baxter amended the offer to include shares of preferred stock and guaranteed the value of its shares at $50 each.

The offer was made in a letter sent Thursday from Vernon R. Loucks Jr., Baxter’s president and chief executive, to Bays. The letter was made public by Baxter.

“Our objective is to offer your board of directors a clear choice between $50 and the $35 value of the HCA transaction,” the letter said.

“I feel we have eliminated any legitimate concerns which your directors or financial advisers should have about the value of the securities portion of our offer,” it said. “The value of the offer is no longer subject to uncertainty.”

Loucks also said the $50 value was guaranteed even if American and HCA completed the exchange of new shares of stock under a provision of their merger agreement designed to eliminate a third-party offer.

His letter said there would be “no downward adjustment of the consideration offered to your current stockholders if you effect the share exchange with HCA.”

American said Tuesday that it rejected Baxter’s proposal because American’s shareholders might receive substantially less than the equivalent of $50 in Baxter’s stock if the exchange of stock between American and HCA was completed.

American also had said that a merger with Baxter would leave the company heavily in debt, dilute shareholder earnings and raise potential antitrust violations.

But in a statement Wednesday, Loucks said that a combined Baxter-American corporation would have a debt-to-capital ratio of less than 45% and that Baxter already had said it would divest any operations that raised antitrust concerns.