Hill-Rom to acquire medical supplies firm for $2 billion

Hill-Rom Holdings Inc. has agreed to buy closely held Welch Allyn Inc. for $2.05 billion to expand in the market for medical supplies.

Welch Allyn shareholders will get $1.63 billion in cash and 8.1 million new shares of Hill-Rom stock, the companies said Wednesday in a written statement.

The acquisition lets Hill-Rom, a maker of hospital supplies for wound care and respiratory health, delve further into the market for diagnostic supplies for physicians and emergency responders. The combined companies expect to generate more than $500 million a year in adjusted earnings.

Hill-Rom said the transaction will reduce annual costs by $40 million by 2018. The company said it will keep a “substantial presence” in Skaneateles Falls, New York, where Welch Allyn is based, and in Tijuana, Mexico, where the acquired firm has operations.

Goldman Sachs Group Inc. provided financial advice to Hill- Rom, and Winston & Strawn LLP was the legal counsel.

Welch Allyn’s financial adviser is Barclays Plc, and Cravath, Swaine & Moore LLP offered legal advice.

Hill-Rom stock shot up 9.2 percent Wednesday morning, to $57.21 per share.