W.R. Grace Favors New Suitor Fresenius Over Baxter
W.R. Grace Inc. embraced a bid by Germany’s Fresenius for its renal dialysis unit without completely slamming the door on Baxter International Inc. or other bidders.
Grace executives took pains Monday to emphasize the superiority of the Fresenius bid over a $3.8-billion proposal last week from Baxter, valuing Fresenius’ offer Monday at $4 billion to $4.5 billion.
For its part, Baxter said it’s waiting to judge the reaction of Grace shareholders and, for now at least, isn’t readying a counterproposal. Deerfield, Ill.-based Baxter said it will elaborate on its plans today during a conference call set to discuss its fourth-quarter results.
“There’s some possibility of undoing the Fresenius agreement, if Baxter comes back with a better offer,” said Grace director James Frick, an educational consultant. However, the Fresenius offer is very good for both companies, he said. “This is the direction the board is going, subject to shareholder approval.”
Wall Street seemed to frown on Baxter’s position. In trading on the New York Stock Exchange, Baxter fell $1.50 to $41. Meanwhile, Grace rose 62.5 cents to $69.875 on the NYSE, and Fresenius’ U.S. unit rose 50 cents to $22 on the American Stock Exchange.
The combination of Grace’s National Medical Care unit, the nation’s largest kidney dialysis provider, and Fresenius’ dialysis unit would create a formidable competitor--Grace said it would be the world’s largest dialysis company. Dialysis is a process that cleanses wastes from the blood of people with damaged kidneys.
Grace shareholders would wind up with 44.8% of the company, which would be called Fresenius Medical Care and have revenue of $3 billion a year.
Fresenius USA Inc., the U.S. unit, is a manufacturer and distributor of medical products and systems for the treatment of kidney failure. It would become a subsidiary of Fresenius Medical Care. Fresenius and its shareholders would own 55.2% of the new company.
Boca Raton-based Grace is a leading global supplier of flexible packaging and specialty chemicals and a leading provider of specialized health-care services.
Grace Chairman Albert Costello said the transaction should be complete by the third quarter of this year. National Medical would borrow $2.3 billion for the deal.
Grace rejected Baxter’s latest proposal for several reasons, Costello said. He said he questioned whether the $3.8-billion bid would in fact be tax-free. Also, Grace wanted the new company to be separate and publicly traded, rather than remain a unit of a larger company, as Baxter proposed.
One issue for bidders has been a federal probe of National Medical. The federal government has issued criminal subpoenas in its examination of the company.
