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Executive Summary

CARDINAL UPS ANTE FOR ALL OF DURR-FILLAUER TO $363 MIL. in stock under what the two wholesalers termed a "definitive" merger agreement, announced July 17. The companies said they expect the transaction to be completed "in September," pending shareholder approval, regulatory approval and "the transaction being treated as a pooling of interests and a tax-free reorganization." Cardinal's offer of $30.50 worth of Cardinal stock for each Durr-Fillauer share represents a 17% increase over Bergen Brunswig's July 7 cash tender offer of $26 per share. Durr- Fillauer's board of directors has recommended that the company's stockholders reject the Bergen Brunswig offer, Cardinal and Durr- Fillauer said. Under the merger agreement, the final amount of Cardinal stock to be issued for Durr-Fillauer's 11.9 mil. outstanding shares is dependent on Cardinal stock's average market price during a period of 20 consecutive trading days that ends five business days before the first meeting of either Cardinal or Durr-Fillauer shareholders to consider the deal. If the price of Cardinal stock, as calculated by the specified formula, is between $28.50 and $31, Durr-Fillauer shareholders will receive $30.50 worth of Cardinal stock per share. If Cardinal stock is priced under $28.50, shareholders "will receive a maximum of 1.0702 shares of Cardinal stock" for each Durr- Fillauer share. If the price of Cardinal shares is above the $31 ceiling, shareholders will receive "a minimum of .9839 shares" of Cardinal stock. To counter Bergen Brunswig's bid for all of Durr-Fillauer's businesses, Cardinal's new offer includes the purchase of Durr- Fillauer's med/surg subsidiaries -- Durr Medical Corp. and Durr- Fillauer Orthopedic Inc. Cardinal's initial acquisition proposal, announced June 2, was for Durr Drug alone and was valued at $166.5 mil. in Cardinal stock ("The Pink Sheet" June 8, p. 9). In a July 17 press release, Cardinal Chairman and CEO Robert Walter portrayed the wholesaler's latest offer for Durr-Fillauer as an opportunity for "Cardinal to expand further into the medical-surgical supply business," particularly in the northeastern U.S. He cited Cardinal's James W. Daly Inc. subsidiary as a source of "extensive operating knowledge" in the med/surg business. Bergen Brunswig may not be out of the bidding war; a lawsuit seeking court action on 12 separate permanent injunctions and declaratory judgements filed by Bergen in Delaware chancery court on July 7 is still pending, although the suit's status in light of Cardinal's new offer is unclear. The suit asks the court to require Durr-Fillauer' board to recommend Bergen's offer and to disseminate information on both offers to shareholders. In addition, a July 17 letter from Bergen Brunswig to Durr- Fillauer's board of directors states that Bergen has received "a written commitment from Continental Bank N.A. to provide all the financing" for its $310 mil. offer. The letter also warns Durr- Fillauer against "entering into any type of 'lock-up' or similar arrangement with Cardinal...or increasing the break-up fee which may become payable to Cardinal...which would be designed or would have the effect of placing additional obstacles and impediments in the path of our offer." In explaining Cardinal's follow-up offer for Durr-Fillauer, Walter cited "similar business philosophies and a close relationship from previous joint ventures between the two companies." These include the hospital pharmacy information network AccuNet and the National PharmPak drug repackaging business. Durr-Fillauer Chairman and CEO W. A. Williamson, Jr., said the deal with Cardinal would allow Durr-Fillauer stockholders "to maintain equity interests in each of its lines of business." Upon the acquisition, Durr-Fillauer's stockholders "would own approximately 40% of the combined company," the announcement states.

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