Baxter International last week disclosed that it offered to acquire National Medical Care, the kidney dialysis unit of W.R. Grace, in a deal valued at $3.8 billion.
However, Deerfield, Ill.-based Baxter acknowledged that Grace has rebuffed its requests to begin negotiating a deal.
When Grace officials didn't reply to a letter Baxter sent Jan. 31 outlining the proposal, Baxter released its plan to the public. The company hoped stockholders would pressure the Grace board to seriously consider the Baxter deal, according to Harry Kraemer, Baxter's senior vice president and chief financial officer.
Officials at Boca Raton, Fla.-based Grace said they would discuss their plans for NMC early this week. NMC's stock price shot up $6.12 to $68 in New York Stock Exchange trading on Feb. 2 after Baxter released the terms of its takeover offer.
Baxter's proposal included a $2 billion payment to Grace-composed of a cash dividend, notes and assumed debt-along with $1.8 billion in Baxter common stock. The transaction would be structured as a tax-free spin-off of Waltham, Mass.-based NMC to Grace shareholders, followed by a tax-free merger of NMC and a Baxter subsidiary.
Kraemer said that in proposing to combine the complementary renal businesses, Baxter's goal is to offer a complete package of dialysis products and services to managed-care organizations.
When rumors circulated that the two companies were discussing NMC's sale two months ago, Grace confirmed it was talking with many parties about selling the unit and that it had not abandoned the proposed spin-off. However, Grace didn't name any suitors.
Baxter also said it would assume up to $100 million in possible financial liability related to a federal investigation of the Grace unit. NMC received five subpoenas from HHS in mid-October 1995. At that time Grace delayed its previously announced plans to spin off the unit to stockholders.
After Baxter spins off its cost management company, its renal division will account for 25%, or $1.3 billion, of the company's remaining medical specialty business. If the deal with NMC were to go through, Baxter's renal business could account for almost half, or $3.3 billion, of the company's total medical specialty sales of $7 billion.