Baxter sticking to its offer for W. R. Grace's dialysis unit It asks shareholders to reject German suitor


DEERFIELD, Ill. -- Baxter International Inc. said yesterday it doesn't plan to raise its $3.8 billion bid for W. R. Grace & Co.'s kidney dialysis unit or get involved in a proxy fight.

"We believe that our offer for National Medical Care Inc. is clearly superior for Baxter shareholders and Grace shareholders," said Harry Kraemer Jr., Baxter's chief financial officer.

He called on Grace shareholders to reject a $4 billion offer from Germany's Fresenius AG and pressure their board into starting negotiations with Baxter.

"If the shareholders end up with some influence, there's a 98 percent probability this deal will occur," Mr. Kraemer said. "If not, I don't believe it has more than a 40 percent chance of happening."

Baxter shares rose $1.375 to $42.375 today on volume of 5.11 million shares, six times the three-month daily average of 866,200. Grace shares rose 12 1/2 cents to $70.

Baxter also cautioned that it won't keep its offer open for very long. "We won't wait forever," Mr. Kraemer said. "It's not fair to the Baxter shareholders."

He said Baxter's offer could close about three months earlier than Fresenius' because it is simpler.

Last Wednesday, Baxter offered $1.8 billion in new Baxter common stock, $1.275 billion in cash, assumption of $425 million in expected debt and a $300 million loan for Grace's National Medical Care Inc. unit.

On Sunday, Grace's board approved a counterproposal from Fresenius to create the world's biggest kidney dialysis unit.

The Fresenius proposal calls for W. R. Grace to spin off National Medical and merge it into Fresenius Medical Care, a new company based in Germany. Grace shareholders would own 44.8 percent of the new company. The rest would be owned by Fresenius' shareholders.

Grace shareholders would receive $2.3 billion in cash tax-free from the spinoff, to be used to repurchase up to 20 percent of its stock outstanding and pay down debt. Grace shareholders also would receive preferred stock linked to the new company's performance and keep some health-care assets worth about $200 million.

The $2.3 billion cash that Fresenius has offered, Mr. Kraemer said, would come from debt that would be held by the new company, which Grace shareholders would partly own.

"Baxter isn't asking the shareholders to hold onto any 'stub,' or residual interest," he said.

Mr. Kraemer also said Baxter stock is likely to be more liquid, or readily changeable into cash, than shares of the Fresenius Medical.

"You'd be getting a minority interest in a German company, holding what would probably be relatively illiquid ADRs (American Depositary Receipts)," he said. "And Fresenius Medical will be a highly leveraged company."

Grace's own financial advisers have confirmed that the Baxter transaction would be tax-free to Grace shareholders, Mr. Kraemer said.

Baxter said it isn't counting on any cost savings to justify its purchase of National Medical Corp., just additional revenue. It said the acquisition would dilute Baxter's earnings by about 5 percent in 1996 and start adding to earnings six quarters after it closed. Baxter's long-term growth rate also would be boosted by 2 percent to 3 percent.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.