BERGEN BRUNSWIG’s $475 MIL. PRICE TAG FOR DURR-FILLAUER INCLUDES $100 MIL. PREMIUM OVER FIRST OFFER AND ESTIMATED $13 MIL. - PLUS PAYOUT TO CEO WILLIAMSON
Bergen Brunswig's winning bid for Durr-Fillauer is $100 mil. above Bergen's initial July 7 offer of $26 per share and includes a phase-out agreement for the Durr-Fillauer executive who arranged the initial merger deal with Cardinal Distribution. Bergen Brunswig's two-month quest for Durr-Fillauer ended Sept. 8 when the two drug wholesalers announced a "definitive merger agreement" that calls for Bergen to pay $475 mil. in cash, or $33 per share, for the estimated 14.4 mil. of Durr-Fillauer shares outstanding on a fully-diluted basis. Under a tender offer initiated by Bergen, approximately 5.5 mil. shares of Durr- Fillauer had been tendered as of Sept. 1. The offer has been extended to Sept. 16. The price for Durr escalated as a result of the bidding between Bergen and Cardinal. Although Durr-Fillauer management initially expressed its preference for a deal with Cardinal, the Dublin, Ohio-based wholesaler decided to bow out after increasing its offer to $30.50 in stock. Cardinal was paid a break-up fee of $15.9 mil. on Sept. 4. The merger will give Bergen a substantial presence in the Southeast with the addition of Durr-Fillauer's six distribution centers in Alabama, Mississippi, Louisiana, Florida and North Carolina ("The Pink Sheet" July 13, p. 16). Bergen met with representatives of the Florida, Alabama and Louisiana attorneys general Aug. 25 to discuss requests by the three states for information regarding potential anti-competitive effects of the merger. Bergen does not anticipate any antitrust violations but has the right to terminate its agreement if it cannot conduct business in any of those states. As part of the final agreement with Durr-Fillauer, Bergen is assuming the golden parachute commitments to D-F Chairman and CEO William Williamson. Williamson -- who initially discouraged Bergen's advances with the warning "Don't mess up my deal" [with Cardinal] -- will end his involvement with the company when the merger is complete. In addition to over $12 mil. for his 366,387 shares of Durr-Fillauer stock, Williamson will receive payments of at least $1 mil. As part of a Durr-Fillauer "change in control compensation agreement," Williamson is entitled to three times his annual salary, or approximately $900,000. Williamson additionally will receive $125,000 for signing a non-solicitation agreement. Finally, Williamson is entitled to "all payments due" to him under his retirement policy. According to D-F's April proxy statement, that policy entitles Williamson to $1.5 mil. over the next 10 years. Two other execs -- President and Chief Operating Officer Charles Adair and Durr Drug President and Chief Operating Officer M.W. Cotton -- also signed non-solicitation agreements with Bergen. Adair and Cotton may continue in their roles, although no contracts have been signed, Bergen said. Williamson's agreement applies primarily to soliciting former Durr Drug customers and employees and leaves him more latitude to compete with Durr Medical in the hospital/surgical supply business. The debt incurred by Bergen as a result of the deal could be significantly reduced by the quick sale of Durr-Fillauer's medical and surgical supply segment, Durr Medical, which has annual sales of $241.4 mil. A Sept. 8 amendment to Bergen's tender offer states: "Although no final decision has been made, Bergen Brunswig intends to explore promptly the disposition of Durr Medical." In recent years, Bergen has been divesting non-drug businesses. One potential buyer for Durr Medical is Owens & Minor, which sold its drug wholesaling business to Bergen earlier this year and has been focusing on its med/surg operations. Bergen noted in its initial tender offer that the company "was contacted by and held preliminary discussions with a potential third party purchaser" of Durr Medical. Durr-Fillauer reorganized its drug and medical supply businesses into separate entities earlier this year.
Sign in to continue reading.
New to Pink Sheet?
Start a free trial today!
Register for our free email digests: