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Why Shares of Hill-Rom Holdings Jumped Today

By Jason Hawthorne – Jul 28, 2021 at 4:40PM

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Reports of a bid for the company have lifted the stock. But there is no deal yet.

What happened

Shares of medical equipment maker Hill-Rom Holdings (HRC) closed up more than 7% today after reports that the company has rejected a takeover bid from Baxter International (BAX -0.53%) of $144 per share. 

So what

Baxter is hoping to add to its portfolio of equipment such as dialysis machines and IV pumps. The company has only grown about 3% annually since spinning off its treatments for rare diseases in 2015. Hill-Rom hasn't done any better, increasing sales by just over 2% per year in the same period. More impressively, it's increased net income 11% annually over that period.

Hill-Rom is also seeing positive results from its transformation initiative. It has been investing in new products, information technology, and geographic expansion -- namely in China. That's likely the momentum Baxter is trying to capture. 

A hospital bed in a hospital room.

Image source: Getty Images.

Now what

Even after the announcement, shares of Hill-Rom are trading for $134, about 7% below the supposedly rejected bid. There are no guarantees that a deal will happen, but Hill-Rom seems to be in the more powerful bargaining position. The stock is already up 35% this year compared to just 2% for Baxter.

It also knows that its would-be acquirer needs a deal. Baxter tried to buy Omnicell last December before abandoning the effort a few months later. If Hill-Rom does accept an offer, don't be surprised if it is significantly above today's price.

Jason Hawthorne has no position in any of the stocks mentioned. The Motley Fool recommends Hill-Rom Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Hill-Rom Holdings Stock Quote
Hill-Rom Holdings
HRC
Baxter Stock Quote
Baxter
BAX
$56.00 (-0.53%) $0.30
Omnicell Stock Quote
Omnicell
OMCL
$52.05 (1.96%) $1.00

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