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BERGEN's $40 MIL. DIVESTITURE OF MEDICAL/SURGICAL UNIT

Executive Summary

BERGEN's $40 MIL. DIVESTITURE OF MEDICAL/SURGICAL UNIT to a private investor group will focus the wholesaler more closely on its core drug distribution business. "The benefits of this restructuring should provide an opportunity to further improve performance in the company's other lines of business," Chairman Emil Martini, Jr., declared in a Nov. 9 press release. For the most recent fiscal year (ended Aug. 31), Bergen Brunswig Medical Supply generated revenues of $247 mil., down from $271 mil. in fiscal 1986, and accounted for about 7% of the parent company's total $3.4 bil. volume. While Bergen's medical/surgical business grew about 10% in fiscal 1986, the division's operating earnings dropped from $6 mil. to $5 mil. Led by New York investor Polyvios Vintiadis, the purchasing group will include "key management" from Bergen Brunswig Medical Supply, including current President Paul Jordan. Vintiadis, a principal in the firm Morgens, Waterfall, Vintiadis & Co., indicated in a separate Nov. 9 release that the acquisition would be the first of several future health care investments. "This is the platform for building a national medical supply company," he said, noting that acquisitions are planned in other regions to complement the West Coast presence. Bergen's medical/surgical business grew as a by-product of the ongoing consolidation in the wholesale drug industry. In a series of acquisitions that ended about 18 months ago, the company increased its total revenues by 50%. Between the 1984 and 1985 fiscal years, medical/surgical sales rose nearly 50% to $246 mil., primarily as a result of the acquisition of Synergex in January 1985. That $79 mil. purchase added over $60 mil. in medical/surgical sales as well as $270 mil. in drug volume. Debt financing for the deal, expected to close in January 1988, is being supplied by Bankers Trust Company. Bergen Brunswig, which expects to record a gain on the sale, reported $15.9 mil. in net earnings for fiscal 1987, an increase of 14%. In addition to the drug wholesale operation, Bergen also distributes a line of consumer electronic products and video software through its Commtron subsidiary. Commtron revenues reached $440 mil. in fiscal 1986, up 40% from the previous year.

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