Owens & Minor knocking on Baxter's back door with Stuart Medical buy. (Owens and Minor Inc.; Baxter Healthcare Corp. Hospital Supply Div.; Stuart Medical Inc.)

An aggressive move initiated by Stuart Medical in December to merge with Owens & Minor combines the number two and three medical-surgical supply distributors into a new company that is only a few major deals away from overtaking distribution industry leader Baxter Hospital Supply, McGaw Park, Ill. Increasing competition and the demand for lower margins on delivered supplies prompted Stuart Medical, Inc., Greensburg, Pa., to approach Owens & Minor as its buyer in an offensive move before being swallowed by another competitor or taken over by a company seeking entry into the distribution market. Under the agreement, Owens & Minor, Inc., Richmond, Va., will buy Stuart for $40.2 million in cash and $115 million in stock, as well as refinance Stuart's $140 million in debt. The deal includes Stuart's recent acquisition of Midwest Hospital Supply Co., Indianapolis, a distributor with revenues of about $50 million. Owens & Minor and Stuart expect the acquisition to be completed around April, upon approval by shareholders and the U.S. Justice Department. Headquarters for Owens & Minor will remain in Richmond.

Completion of the deal leaves the industry with only two nationwide med-surg distributors. Executives at Owens & Minor and Stuart are confident that the Justice Department will approve the deal since the combined distribution centers of the two companies have limited overlap and the acquisition increases the competition between the number one and two market players. To avoid …