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BERGEN BRUNSWIG ACQUIRING OWENS & MINOR’s DRUG WHOLESALING BUSINESS

Executive Summary

BERGEN BRUNSWIG ACQUIRING OWENS & MINOR's DRUG WHOLESALING BUSINESS, with annual sales volume of approximately $300 mil., in a definitive agreement announced by the two distributors on Jan. 17. The transaction involves the net assets and business of Owens & Minor's 110-year-old drug wholesale operations in Richmond and Norfolk, Va. and Wilson, N.C. but not the combination drug/medical and surgical distribution center in Ft. Lauderdale, Fla. Exact terms of the acquisition were not disclosed but Owens & Minor said the "transaction consideration will approximate $50 mil." The deal is expected to close on Feb. 29, 1992. Through the first three quarters of 1991, Owens & Minor's wholesale drug segment generated $216 mil., or 22.3%, of total sales and $2.7 mil., or 11.1%, of total operating profit. Like Bergen, Owens & Minor has a big hospital business. Owens & Minor's hospital sales account for more than half of the company's drug distribution revenues. Sales to independent community pharmacies represent about a third of the total and chains generate about 10% of Owens & Minor's pharmaceutical sales. At Orange, Calif.-based Bergen Brunswig, hospital accounts generate about 43% of drug distribution sales, independents 36% and chains 21%. The agreement does not include Owens & Minor's Glasgow, Ky.- based drug repackaging subsidiary Vangard. Nor does the deal affect the Richmond-based firm's medical/surgical distribution business. Bergen Brunswig President Robert Martini said the acquisition will allow his firm to expand its "service areas from Virginia into the mid-Atlantic states" and will benefit Bergen's health professional customers through "strengthened distribution efficiencies." Bergen Brunswig is the nation's second largest drug wholesaler with annual healthcare sales of more than $4.3 bil. in the fiscal year ended Aug. 31, 1991. Owens & Minor President & CEO G. Gilmer Minor explained that the sale will enable his firm "to clearly focus on expanding our leadership position in the medical/surgical distribution business." Minor noted that his firm's "medical/surgical business has been the largest segment and primary source of company growth and profits." Through nine months of 1991, the med/surg segment generated sales of $747.2 mil. and operating profits of $21.4 mil. Minor predicted that the enhanced focus on the medical/surgical business and the "increased financial flexibility" provided by the sale "will allow us to accelerate our growth in the medical/surgical sector and enhance our customer service quality and cost efficiency." The transaction is subject to Federal Trade Commission review before the closing date. Drug wholesaler mergers have attracted federal anti-trust attention in the past. In 1988, the Justice Department blocked McKesson's attempt to acquire Alco, and Bergen's purchase of Synergex in 1985 prompted a Justice Department review.

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