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THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d)
OF REGULATION S-T
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
February 29, 1996
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Date of Report
BAXTER INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-4448 36-0781620
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(Commission file number) (IRS Employer Identification No.)
One Baxter Parkway, Deerfield, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 948-2000
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(Page 1 of 7 pages)
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Item 5. Other Events.
On February 22, 1996, the Registrant issued a press release; the text of
which is attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BAXTER INTERNATIONAL INC.
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(Registrant)
By: /s/ A. Gerard Sieck
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A. Gerard Sieck
Secretary
Date: February 22, 1996
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FOR IMMEDIATE RELEASE:
MEDIA RELATIONS CONTACTS: Jill Carter, (847) 948-4555
Mary Thomas, (847) 948-2815
INVESTOR RELATIONS CONTACTS: Jessica Fisher, (847) 948-4639
Neville Jeharajah, (847) 948-2875
Mike Pascale
Abernathy MacGregor Scanlon, (212) 371-5999
BAXTER WITHDRAWS OFFER FOR GRACE'S NMC UNIT
DEERFIELD, Ill., February 22, 1996 -- Baxter International Inc. (NYSE:BAX)
announced today that it has withdrawn its offer to purchase the National Medical
Care, Inc. (NMC) unit of W.R. Grace & Co. (NYSE:GRA) in a transaction that would
have been valued at $3.8 billion. Grace has announced plans to merge NMC with a
unit of Fresenius AG.
In a letter delivered today to Albert J. Costello, chairman, president and
chief executive officer of Grace, Vernon R. Loucks Jr., chairman and chief
executive officer of Baxter, said, "We have made a fair offer for NMC, which is
substantially more favorable to the Grace shareholders than the Fresenius
proposal. We will not increase our offer. Since Grace management continues to
refuse to discuss our proposal and has determined to go forward with the
Fresenius transaction, we hereby withdraw our proposal of January 31, 1996."
Baxter International, through its subsidiaries, is the leading manufacturer
and marketer of health-care products and services to health-care providers in
nearly 100 countries. The company concentrates research-and-development
programs in biotechnology, cardiovascular medicine, renal therapy and related
medical fields.
# # #
NOTE: A copy of letter sent to Albert Costello from Vernon Loucks is attached.
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February 22, 1996
Mr. Albert J. Costello
Chairman, President and Chief Executive Officer
W.R. Grace & Co.
One Town Center Road
Boca Raton, Florida 33486-1010
Dear Al:
In my letter of January 31, 1996, I set forth a
proposal for the acquisition of National Medical Care,
Inc. and its related businesses ("NMC"). Our Board of
Directors recently met and reviewed the status of that
proposal and your proposed transaction with Fresenius
AG.
We firmly believe that our proposal is clearly more
favorable to Grace shareholders than the Fresenius
transaction. I can't understand why you and your
management have not reached the same conclusion.
Baxter's stock component of $1.8 billion exceeds by
more than $500 million the value of the American
Depository Receipts ("ADRs") to be issued by Fresenius
Medical Care AG ("FMC") and the contingent Grace
preferred stock included in the Fresenius transaction.
We and our financial advisors believe that the ADRs
offered to the Grace shareholders will trade at less
than 20 times projected 1996 earnings of $145 million -
no more than $1.3 billion in total, even if FMC
achieves what appears to be rather aggressive
projections of future earnings. We also believe that
the ADRs will trade at a discount to market
comparables when the market considers that:
- The ADRs represent a minority interest in a
German company controlled by three German
shareholders
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Mr. Albert J. Costello
February 22, 1996
Page 2
- Liquidity of the ADRs may be impaired by their
minority float and the lack of any trading
history
- FMC will have at least $2.5 billion in debt
- FMC will have contingent exposure to
substantial asbestos, environmental and
other liabilities related to the Grace
chemical business
In fact, so many recipients may seek to sell FMC stock
that there may be a severe shortage of buyers.
At current dividend rates, if the Grace shareholders
receive Baxter stock, the Grace shareholders would
receive in excess of $40 million more in dividends in
1997 than the dividends FMC is expected to pay.
Furthermore, any FMC dividends will be subject to the
German withholding tax on dividends. Baxter on a
comparison of the present value of the future dividend
streams under the two offers, Baxter's offer could be
at least $500 million more in value for the Grace
shareholders than the Fresenius proposal.
Baxter's non-stock component of $2 billion is superior
to the offer by Fresenius. After the combination of
Baxter and NMC, Grace shareholders will own
approximately 15% of Baxter stock. Therefore, Grace
shareholders will be getting $1.7 billion in cash
value, taking into account the 15% ownership.
Fresenius proposes to pay Grace $2.3 billion.
However, the Grace shareholders will own 44.8% of FMC
and therefore only receive 55.2% or $1.3 billion of
cash value.
Baxter's treatment of the OIG liabilities is more
favorable to the Grace shareholders (unless the OIG
liabilities exceed $160 million), since Grace
shareholders will bear 44.8% of those liabilities from
the first dollar under the Fresenius transaction.
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Mr. Albert J. Costello
February 22, 1996
Page 3
We also believe that the two-tier governance structure
of FMC as a German company is more cumbersome. The
company will be subject to German corporate law,
including requirements concerning approval of
extraordinary transactions and Board representation of
labor union members pursuant to German co-
determination laws. This could hamper the ability of
FMC to act expeditiously and could further drag the
value of the ADRs.
The current structure proposed by Baxter of a spin-off
of NMC followed by a merger of NMC and a Baxter
subsidiary is superior to the "Morris Trust"
transaction contemplated by Grace and Fresenius.
Under a Morris Trust structure, FMC would have
contingent exposure to substantial asbestos,
environmental and other liabilities related to the
Grace chemical business because of FMC's merger with
Grace. Even though the chemical business will be spun
out prior to the merger of Grace and Fresenius, any
liabilities that reside with Grace will be merged into
FMC by operation of law.
We have made a fair offer for NMC, which is
substantially more favorable to the Grace shareholders
than the Fresenius proposal. We will not increase our
offer. Since Grace management continues to refuse to
discuss our proposal and has determined to go forward
with the Fresenius transaction, we hereby withdraw our
proposal of January 31, 1996.
Sincerely
/s/ Vernon R. Loucks Jr.