HCA Cancels $100 Million in Purchases From Baxter

Hospital Corp. of America said Monday that it is canceling planned purchases of nearly $100 million in medical supplies from Baxter Travenol Laboratories as the two companies continue battling over which--if either--will merge with American Hospital Supply.

Nashville, Tenn.-based HCA--the nation’s largest for-profit hospital chain with 420 facilities--said it delivered 90 days’ notice in writing to Baxter Travenol on Monday to terminate its purchase agreement with the company because of Baxter’s “intervention” in HCA’s planned merger with American Hospital of Evanston, Ill.

Under the agreement, HCA would have purchased from Deerfield, Ill.-based Baxter Travenol intravenous solutions and needles worth about $20 million during the rest of this year and $80 million in 1986 and 1987, or a total of about $100 million in supplies, said Victor L. Campbell, HCA’s vice president of investor relations.

Latest Salvo

It was the latest salvo in the nearly monthlong battle between HCA and Baxter Travenol to merge with American Hospital--which markets more than 130,000 medical products to hospitals. It came after Baxter announced late last month that it had lined up $2.5 billion in credit from 21 banks to pursue its merger bid.

“I wouldn’t call it (the canceled contract) retaliatory,” Campbell said, “but obviously it was in response to what’s been going on.”

Baxter offered $50 a share for 50% of American Hospital’s 72.6 million shares and securities of equal value for the remaining shares. The proposal was rejected by American Hospital directors on June 25.

Under a proposed merger agreement with HCA that was announced April 1, American Hospital shareholders would receive stock in a new holding company, Kuron Corp., valued at about $36.20 for each of their shares. Shareholders have yet to approve the merger agreement, and meetings at which they were to vote have been postponed indefinitely.

Battle a Standoff

HCA’s battle with Baxter appears to be at a standoff, and analysts say it will remain that way until the two companies can muster the necessary two-thirds vote required by Illinois state law.

“If the vote were held today, it would be voted down,” said Randall Huyser, a health-care analyst at Montgomery Securities, a San Francisco-based investment house. “As long as Baxter looms out there as a serious threat, it’s going to be difficult to get the two-thirds vote.”

What’s more, Huyser predicted that the canceled agreement would have little effect on Baxter’s earnings.

He said that the industry’s competitive bidding kept profit margins extremely low and that the HCA contract was sought by Baxter largely for its value in helping Baxter maintain its leading position in the intravenous market.