Baxter International Inc. is buying Hill-Rom Holdings Inc. for $10.5 billion in cash a month after reports that its initial bid was rejected. 

Baxter offered to acquire the medical equipment maker for $156 a share, a 7.5% premium from its close on Wednesday. The total enterprise value of the purchase, including debt, is $12.4 billion, the companies said Thursday in a statement.

The new offer comes a month after Hill-Rom rejected a $9.6 billion takeover offer from Baxter, Bloomberg News reported earlier. Hill-Rom saw Baxter’s proposal of about $144 a share as too low, according to people with knowledge of the matter. Baxter was expected to return with a higher bid, the people said.

Hill-Rom, based in Chicago, makes a range of hospital equipment including stretchers, patient monitors, operating tables and electrocardiographs, according to its website.

The deal will allow Baxter to provide a broader range of medical products and speed up its expansion into digital offerings, the companies said. They’re projecting $250 million in annual pre-tax cost savings three years after the deal.

The acquisition will boost Baxter’s adjusted earnings per share by a low double-digit percentage in its first year after closing, growing to a 20% increase in the third year, the companies said.

Baxter plans to use a combination of cash and debt to finance the deal. The company said it is committed to an investment-grade credit rating and will reduce leverage within two years after closing.

The merger is expected to close by early 2022, subject to regulatory clearance and the approval of Hill-Rom shareholders.

Medical device and supply companies have been consolidating as they seek to sell a wider range of products to their hospital clients. Large deals such as Medtronic Plc’s $43 billion acquisition of Covidien Plc and the $25 billion purchase of St. Jude Medical Inc. by Abbott Laboratories have prompted other firms to pursue scale through acquisitions.

Baxter also issued a long-term financial outlook for its business as an independent entity, not reflecting the acquisition. It said sales will grow by 4% to 5% compounded annually through 2024, adjusted operating margins would increase by at least 300 basis points in that period, and earnings would grow by low double-digits compounded annually.

Baxter’s lead financial adviser is Perella Weinberg Partners LP, with J.P. Morgan and Citi also advising and financing. Sullivan & Cromwell LLP is Baxter’s legal adviser.

Hill-Rom is advised by Goldman, Sachs & Co., BofA Securities, and Wachtell, Lipton, Rosen & Katz.