What happened

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

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.